shifting tides
Issue 87 - June 3rd, 2022
The times are changing in the real estate market, but I want to make my opinion super clear: we are not heading towards a housing crash, and I do not believe we are in a housing “bubble” on a macro level at all.
News media loves to stir the pot on “calling the next crash in housing” and that we are heading towards a “2008 meltdown” and whatever other non-sense they can conjure to get clicks up on their content.
Here are 4 reasons I think what I think backed up by data and numbers and not just speculation on what I think will happen…
A cool down in housing prices is not the same thing as a market crash! I actually think that the unprecedented rise in housing prices over the last 24 months had created a very unstable and unsustainable housing market with historically low inventory levels. A slow down in price growth will be beneficial for the health of the market and allow inventory levels to get back in line.
Housing inventory would need to skyrocket for a bubble to pop! U.S. Existing Home inventory sits at historic lows as inventory fell below 1 million for the first time on record at the tail end of 2021. Currently, the housing supply sits at ~2 months (the amount of time it would take to fully-deplete the current inventory level at the rate of the ongoing rate of monthly home sales). In comparison, in the 2008 timeframe this mark stood at ~10 months (5x current levels), which set the stage for price declines.
Foreclosure rates are nowhere near the levels seen in 2008. Many of those calling for a housing crash pointed toward a potential wave of homes that would fall into foreclosure following the lapse of moratoriums that were implemented during the COVID pandemic. Additionally, from a quality of originations standpoint, home buyers over the last decade have checked in with a meaningfully higher credit score in comparison to the lead up to the Financial Crisis in part do stricter lending standards. This makes the market materially different from '08, which was dominated by “adjustable rate" loans that destroyed homebuyers ability to repay.
Increased supply later this year will balance out the market in a healthy method. Economists from Zillow believe that the U.S. housing market is passing an inflection point this spring and is on its way to more balanced market conditions. According to Zillow’s report, U.S. home inventory levels are set to actually grow on a YOY basis in late 2022, something that has not taken place since September 2019. This expected inventory growth will help bring more supply to the market while cooling-off home prices in a more natural fashion.
Newsworthy Links To Share
Pulley raises $4.4M to shorten construction permit process (TechCrunch)
Side lays off 10% of workforce, cites 'volatility': The San Francisco-based startup had been on an IPO track but expanded "faster than we could train, support and develop everyone," according to a company email. (Inman)
Amazon's new apparel store is the latest headwind for the mall sector: Amazon's new 30K-square foot store at a mall in Glendale, California is attracting attention as something different from the retail giant. (Seeking Alpha)
Keller Williams parent company CEO Carl Liebert is leaving (Inman)
Dreaded Commute to the City Is Keeping Offices Mostly Empty: It isn’t the office that workers heading into the city despise. It’s the commute. The Covid-19 pandemic led to a surge in remote work, emptying out office towers as more people worked from home. Cities with longer commutes have taken the biggest economic hit, while urban areas where people live closer to work have a higher return-to-office rate, according to The Wall Street Journal’s analysis of U.S. Census Bureau data and building-access company Kastle Systems.
(WS)Billionaire Walmart Heir Rob Walton Sells Aspen Land for $30.8 Million (WSJ)
PROPERTY HIGHLIGHT: 1833 W Buttermilk Rd, Aspen,CO for $13.2 million - Located just 4 miles from Aspen, this coveted West Buttermilk sanctuary sits on 36.5 acres and is now available for the first time in over 40 years. Unobstructed views of Mt. Sopris, Snowmass Ski Area and Owl Creek, with easy access to winter and summer recreation trails. Build up to 15,000 sq. ft. with TDR's to create your dream home, or move directly into the existing remodeled home. Don't miss this rare opportunity to live our your dream at this exclusive and peaceful property. (Zillow)