The residential real estate market is HOT.
Builders are now officially bullish. The National Association of Homebuilders’
confidence index jumped 5 points to 55. Anything above 50 means that sentiment is
bullish (things are expected to improve). The last time builders were bullish was July
2022. [NAHB]
And after seeing the housing starts for May, we understand why. Housing starts
jumped 22% MoM to 1.63 million (annualized), the highest figure since April 2022. The
construction industry is on pace to complete >1.5 million units this year, which would be
the highest total since 2007. [Census Bureau]
Wait! Why are builders getting so bulled-up again? #1: Because overall demand is
strong. Not 2021 strong, but still impressive. #2: Because the low inventory of existing
homes for sale is pushing buyers towards new homes. #3: Because the price of some key
building materials (like lumber) have come down.
With this in mind, it’s no surprise that the share prices of the big builders (D.R.
Horton, Pulte Group, Lennar Corp, Toll Brothers) are all at record highs. The share
prices of the big brokers, meanwhile, are not.
Existing home sales for May were basically flat MoM at an annualized pace of 4.3
million units sold. This isn’t a terrible result considering that 30-yr mortgage rates moved
from near 6% to over 7% during April/May AND that inventory is so low. [NAR]
Look a bit deeper, and what you see is a residential real estate market that is
HOT. Median days on market fell to 18 in May. There was an average of 3.3 offers per
home sold. 31% of homes sold above their listing price. 25% of buyers waiving their
inspection contingency. [NAR]
Average 30-year mortgage rates stayed near 7%. While we would have hoped for a
decrease (the Fed’s ‘skip’, much lower headline CPI and PPI), hawkish Fed commentary
and some ghastly inflation figures (and central bank response) in Europe kept rates high.
[Mortgage News Daily]
National rent growth slowed to 3.7% YoY in April. That’s about the same as the
average annual rent growth during 2011–2019. We’re back to normal, in other words.
Last year at this time, rent was growing at 14% YoY. [CoreLogic]
New jobless claims were 264,000 for the second week in a row. While unemployment
remains extremely low by historical standards, we’re clearly past the inflection point.
[BLS]
Home prices are moving’ on up.
Home prices are on the rise. They may still be down year-over-year, but they’re
increasing month-over-month.
What ‘locked in’ looks like.
We all know that millions of Americans got new loans (or refinanced old ones) at very
low rates during the pandemic. Recent data from Redfin makes it very clear why so many
would-be sellers are staying put.
o 60% of mortgage holders have been in their homes 4 years or less
o 91.8% of mortgage holders have rates below 6%
o 82.4% have rates below 5%
o 62.0% have rates below 4%
o 23.5% have rates below 3%!
That said, sometimes people got to move: marriage, jobs, kids, divorce. As we saw earlier
this year, whenever 30-yr mortgage rates approach 6%, we get a massive demand boost.
They Said It
“It’s too early to say that price declines have bottomed out. Prices may have room to fall
because mortgage rates could still rise. The Federal Reserve just signaled that it is likely
to continue raising interest rates this year. That could further hamper homebuyer demand
and cause home prices to fall in the near term, though the drops would be minimal. We’re
unlikely to see double-digit price declines like we did during the 2008 housing
crisis.” — Daryl Fairweather, Redfin’s Chief Economist
If you are looking to either purchase a home or sell your home, give me a call and we can
go over what may be right for you.
Mary Cockburn/505-639-2090/MaryCockburn.Realtor@gmail.com
