rising rates don't matter
Issue 77 - March 25th, 2022
Over the last few weeks, I have gotten this question many times: “Do you think rising rates will help improve housing inventory later this year?”
My quick answer is NO, and I don’t even stop and think about it to come to that conclusion.
The housing inventory levels in America are some of the lowest in history, and this is not just a result of the weird economic and supply chain issues caused by Covid. The current market housing shortage, in my opinion, all started back in the 2008 downturn.
Leading up to the 2008/2009 crisis, homebuilders were laying down new homes at a record pace as the market kept accelerating. As the market tanked, and we entered one of the worst housing markets ever, a lot of homebuilders around the country went out of business. They also never ever returned to the business to keep the new home inventory at a healthy pace in America.
The low rate environment of the last decade has made the housing market continue to slowly boom and then the boredom and mass migrations into housing markets all over the country during Covid put even more fuel on the fire.
We are now at an unhealthy level of housing inventory in America in cities all over the country. In some markets where we are seeing insane job growth, this might make sense, but in other hardly growing job markets the booming house prices can only be attributed to my logic above.
Real estate agents are either making tons of money right now or zero; there is really not an in between. Some buyer’s agents make 10-15 offers on homes for one clients and never WIN one - imagine how much of a beat down that would be right now?
The true winners right now are builders with lots to keep building and agents who can get listings. If you can win listings right now, you can literally send out a text message and get 10+ offers on a home in some areas especially in Texas.
We also have the FOMO buyers entering the market right now who “want to grab a house before rates rise and prices keep rising”! This is adding even more pressure to an already unstable market.
I really don’t think we will see a solid slowdown in the American housing market anytime soon and possibly 24-36 months once supply levels catch up. We may not see the insane acceleration in pricing like we did over the last 12 months but super low “days on market” and quick sales will continue for the foreseeable future!
Happy house hunting!
Newsworthy Links To Share
Hot market: Opendoor , the largest of the so-called iBuyers, is flipping homes for 17% gains on average. Like its iBuying competitors, Opendoor buys a home, makes light repairs, and puts the house back on the market. To turn a profit, iBuyers have to predict how long it will take to sell a home and what a good flip looks like. (CRE Daily)
Redfin launches rental search, building off $608M acquisition of RentPath (GeekWire)
Alterra Worldwide is selling 100 million tokenized shares to build a 24-story, 374-unit Class A multifamily residential high-rise known as Tower 27. Shares will be asset-backed ERC-20 tokens on the Ethereum (ETH) blockchain. The $237 million tower should be completed in 2024 and may house an influx of 20,000 new tech workers brought in by nearby Google and Adobe expansions in Silicon Valley. (CRE Daily)
Mortgage refinance demand plunges 14%, as interest rates spike higher (CNBC)
Transactly has purchased 360 Home Connect, which is based in Dallas and Austin, Texas, as part of its push into the home connections business. (St. Louis INNO)
Investment firm scoops up entire iconic Manhattan street for just $32M: A historic Manhattan street that boasts past occupants like Marlon Brando, poet E.E. Cummings and writer Theodore Dreiser has been scooped up in its entirety by an investment firm in a modest $32 million deal. The purchase took place earlier this month — when investment firm Firebird Grove purchased 11 townhouses on Patchin Place, a gated cul-de-sac in Greenwich Village, from Morgan Holding Capital, according to the Real Deal. (NY Post)
This month in 1954, the Northland Center, considered the beginning of the suburban mall opened in Southfield Michigan. It was anchored by Hudson’s department store, had 80 other retail locations, 8,344 parking spaces, and six sculptures including Marshall Fredericks’ Boy and Bear. It cost $25 million and boasted 18 million shoppers annually at its peak. In 1975 it was enclosed but lost tenants and subsequently shoppers over the next few decades. By 2015 Macy’s the former Hudson cut bait and later that year the city of Southfield bought the 125 acres for $2.4 million and the Southfield Public Arts the sculptures. The Boy and Bear now live at the Southfield Public Library. It and ten other works were purchased for $500,000.
Lennar to spin off real estate tech investments into its own company: through LENx division, homebuilder has invested in a portfolio of two dozen companies including Opendoor, Blend Labs, Divvy Homes and Doma (Inman)
These Charts Show Why Most Millennials Couldn’t Buy Homes at 24 (Bloomberg)