Maybe in 2025?

Posted on December 4, 2023 by grim

From Fast Company:

U.S. home prices to hold firm in 2024 even if a mild recession hits, Fannie Mae says

Fannie Mae economists expect U.S. economic growth to decelerate, leading to a mild recession in 2024, according to the latest forecast released this week by Fannie Mae.

“The economy is now slowing from the otherwise robust first estimate of third quarter growth,” wrote Doug Duncan, Fannie Mae’s chief economist. “The slowdown in employment gains has continued, and stress is growing on consumers’ ability to sustain their high levels of spending—unsurprising results that we attribute to the often-lagged economic effect of monetary policy tightening.”

But here’s the thing: While Fannie Mae expects the U.S. economy is likely to slip into a mild recession next year, it doesn’t project that national home prices will fall in 2024.

Fannie Mae’s forecast model expects U.S. home prices to finish 2023 up 6.7% followed by a 2.8% gain in 2024. Then in 2025, Fannie Mae expects a slight 0.4% dip.

Earlier this year, when Fannie Mae revised its 2023 home price forecast from negative to positive appreciation, it pointed to a lack of supply that has shielded national home prices from declining. That suggests a belief that a mild recession wouldn’t materially change that dynamic.

While Fannie Mae doesn’t expect a significant mortgage rate drop next year, it anticipates that rates will continue to drift down, reaching 7.1% by the end of 2024 and 6.8% by the end of 2025.

“Housing has been and continues to be under serious affordability pressure, resulting in recessionary-level home sales activity. While many current owners with low mortgage rates will likely continue to be discouraged from listing their homes, we expect mortgage rates to trend modestly downward in 2024, which should help kickstart a gradual recovery in home sales into 2025,” wrote Duncan.

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate | 95 Comments

Uh Oh

Posted on December 1, 2023 by grim

From CNBC:

Pending home sales drop to a record low, even worse than during the financial crisis

Pending home sales, a measure of signed contracts on existing homes, dropped 1.5% in October from September.

They hit the lowest level since the National Association of Realtors began tracking this metric in 2001, meaning it’s even worse than readings during the financial crisis more than a decade ago. Sales were down 8.5% from October of last year.

Because the index measures signed contracts, it is the most recent indicator of housing demand. It reflects the buyers who were out shopping in October, which was when the popular 30-year fixed mortgage rate briefly shot higher than 8%.

Rates have since pulled back to around 7.3%, according to Mortgage News Daily. The realtors continue to say it’s not just high rates but still very low supply of homes for sale that is deflating activity.

“Recent weeks’ successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied,” Lawrence Yun, chief economist for the NAR, said in a release. “Multiple offers, of course, yield only one winner, with the rest left to continue their search.”

Pending sales fell in all regions month to month except in the Northeast. They fell most steeply in the West, which is where homes are most expensive. Sales were down everywhere compared with a year ago.

Tight supply and still-strong demand have kept pressure on home prices, which not only continue to hit new highs but appear to be accelerating in their gains.

The Realtors noted that sales of homes priced above $750,000 have been increasing simply because there is more supply on the high end of the market.

Posted in Crisis, Economics, Housing Bubble, Mortgages, National Real Estate | 111 Comments

NYC Metro sees strong price increase in September

Posted on November 30, 2023 by grim

From MarketWatch:

Home prices continued ascent in September despite soaring mortgage rates: Case-Shiller

Home prices showed no signs of slowing in September despite the record-high mortgage rates that rendered housing unaffordable for many Americans, according to the latest S&P CoreLogic Case-Shiller Indices report.

Nationwide, home prices rose by 0.3% in September and now stand 3.9% above its year-ago level. The 10-city composite gained 4.8% and the 20-city composite increased 3.9% – the indices measure home prices in major metros across the country. Both indices posted a 0.7% month-over-month increase in September.

Home prices now stand 6.6% above where they started the year despite rising mortgage rates. The September Case-Shiller tracks July, August and September when mortgage rates climbed steadily from 6.8% at the beginning of July to 7.3% by the end of September. At the same time, housing inventory has remained low. Existing home sales dropped 2% in September to a 13-year low, according to research from Realtor.com.

“Speeding up of annual home price growth reflects much of the pent-up demand that exists in the housing market amid very low inventories,” CoreLogic Chief Economist Dr. Selma Hepp said in a statement. “Nevertheless, home prices are feeling the weight of high mortgage rates, which will slow the rate of price growth in the coming months. Still, despite the dramatic increase in the cost of homeownership, home prices have risen 6.4% this year – meaningfully beyond expectations given the rise in borrowing costs.”
…
Detroit, San Diego and New York led the way for the fastest-growing cities in the U.S. Detroit reported the highest year-over-year growth, with an annual increase of 6.7%. San Diego and New York followed with gains of 6.5% and 6.3%, respectively.

September’s worst-performing cities were Las Vegas, Phoenix and Portland. Las Vegas saw the most significant year-over-year decline, with prices dipping 1.9%. Phoenix and Portland followed with a decrease in growth of 1.2% and 0.7%, respectively. 

Posted in Economics, Housing Bubble, National Real Estate | 37 Comments

$75k or $525k?

Posted on November 28, 2023 by grim

Ohhhhh, Millennials… From the Messenger:

Millennials Say Over $500K Would Buy Them Happiness: Report

Each generation has a different idea of the cost of happiness. For millennials, more than $500,000 annually would be the key.

In a survey conducted by The Harris Poll, 2,034 Americans ages 18 and older were asked about the secrets to financial happiness. Financial services company Empower released the results Monday, which determined the average person believes having $1.2 million is needed to attain financial happiness.

The average person would need a salary of about $284,164 every year to be happy, according to the survey, but the results did vary by generation.

Boomers said they needed the least amount of money, asking for an annual salary of $124,000 and a net worth of $999,945. They were followed by Gen Z, who sought a $128,000 salary and a net worth of $487,711.

Gen X respondents said they wanted a $130,000 salary and a net worth of $1,213,759, per the survey. Millennials said they needed the most, asking for $525,000 annually and a net worth of $1,699,571.

Women reported needing less than half of what men said they would need, asking for an annual salary of $183,000 compared to $381,000 for men.

Some researchers say millennials are not wrong. Nobel Prize recipient Daniel Kahneman co-authored a 2023 study that found that earning up to $500,000 a year can improve a person’s happiness.

But others disagree. Nobel Prize recipient Angus Deaton found in a 2010 studythat happiness can only be improved by money up to a $75,000 salary. After that point, he said that money had little impact on happiness.

Posted in Crisis, Demographics, Economics, Humor | 138 Comments

Three’s Company is cool again

Posted on November 27, 2023 by grim

From CNBC:

Gen Z, millennials are ‘house hacking’ to become homeowners in a tough market. How the strategy can help

Gen Z and millennials are “hacking” the housing market as high prices and interest rates make affordability difficult.

The term “house hacking” refers to the practice of renting out a portion of your home or an entire property for an additional stream of income.

Almost 4 in 10, 39%, of recent homebuyers say the practice represents a “very” or “extremely” important opportunity, according to a new report by housing market site Zillow. That share is up eight percentage points in the past two years.

Younger generations are especially keen on the idea. In Zillow’s survey, more than half of millennial, 55%, and Gen Z home buyers, 51%, expressed positive views on house hacking.

Zillow polled more than 6,500 recent homebuyers between April 2023 and July 2023. Respondents were adults who moved to a new primary residence they purchased in the past two years.

The additional income from house hacking can “help make those dreams of homeownership penciled into reality, given that there’s so many affordability constraints on the current market,” said Manny Garcia, senior population scientist at Zillow. 

Posted in Crisis, Demographics, Housing Bubble, National Real Estate | 30 Comments

Return to normal in the spring?

Posted on November 26, 2023 by grim

From HousingWire:

What will lower mortgage rates do to spring housing inventory?

Lower mortgage rates tend to take housing supply off the market and demand has been picking up lately as rates have fallen. However, the recent drop in housing inventory has more to do with seasonality factors than lower mortgage rates. 

Higher mortgage rates did push inventory higher during the seasonal period when it would normally be declining. However, seasonality tends to rule the day eventually. The question now is what will inventory look like in the spring if mortgage rates keep falling?

Now that mortgage rates have fallen from a bit over 8% toward 7.32%, we can see the immediate impact as purchase application data was positive for the third straight week. Last week, it was up 4%, making the year-to-date count 21 positive prints versus 23 negative prints and one flat week.

The rule of thumb is that it’s a material difference if we get 12-14 weeks of a positive trend. Last year, we had three months of a positive data run as rates fell from 7.37% to 5.99%. So for now, three weeks of positive purchase applications is a small but important step in the right direction.

The 10-year yield ended the week roughly flat. Mortgage rates started the week at 7.38% and ended at 7.32%; it was a light holiday trading week, so we shouldn’t make too much of it. Instead, let’s look at the future: If the 10-year yield can break under 4.34% with some kick from bond buyers, we have an excellent shot at getting under 7%. 
…
As we head toward the end of the year and start the countdown to Christmas, it looks certain that I will not have even one week of the kind of inventory growth I was hoping for when mortgage rates got above 7.25%. I was looking for at least a few weeks of inventory growth between 11,000-17,000, and it has yet to happen — even when mortgage rates got to 8%. 

Posted in Economics, Housing Bubble, National Real Estate | 10 Comments

Will real estate end 2024 lower?

Posted on November 25, 2023 by grim

From Business Insider:

Home prices are poised to drop as the frozen housing market thaws, 2 top experts say

House prices may be headed lower, dealing a blow to sellers but providing relief to buyers, two experts say.

“The only way out of the box, the only way to get sales back up is mortgage rates have to come down, incomes have to continue to improve, we have to avoid a recession, and I suspect we’ll have to see some house price declines at some point here,” Moody’s chief economist, Mark Zandi, told Yahoo Finance this week.

Redfin CEO Glenn Kelman made a similar call in a Fox News interview this week. Asked about Morgan Stanley’s latest forecast of a 3% drop in home prices next year, he replied that a decline “seems not just possible, but likely.”

The housing market ground to a halt this year, as the Federal Reserve’s inflation-fighting hikes to interest rates have boosted mortgage rates to two-decade highs.

Homeowners who locked in much cheaper rates have balked at selling up and paying heftier monthly payments for their next place. Meanwhile, prospective buyers have been priced out, and many are waiting for rates to fall instead of settling for a worse home than they wanted.

“Housing’s taken it on the chin, particularly demand,” Zandi said. He pointed to new data showing annualized sales of previously owned homes fell below 3.8 million units in October, the lowest figure in 13 years. “You have to go back to the teeth of the financial crisis to find sales that low,” he said.

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 27 Comments

Tippy Top?

Posted on November 22, 2023 by grim

From CNBC:

Home sales fell to a 13-year low in October as prices rose

Sales of previously owned homes were 4.1% lower in October compared with September, running at a seasonally adjusted annualized rate of 3.79 million units, according to the National Association of Realtors.

It was the slowest sales pace since August 2010. Analysts were expecting a smaller drop, to 3.9 million units. Sales were down 14.6% year over year.

The October sales count is based on closings from contracts likely signed in August and September. The average rate on the 30-year fixed mortgage had dropped to near 7% at the end of August, but then began rising sharply, jumping over 8% by mid-October. Rates have since retreated somewhat.

“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said Lawrence Yun, NAR’s chief economist. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.”

At the end of October there were 1.15 million homes for sale, down 5.7% from a year earlier. This is about half as many homes as were available for sale pre-Covid. At the current sales pace, that represents a 3.6-month supply. a six-month supply is considered a balanced market between buyer and seller.

Tight supply kept pressure under prices. The median price of an existing home sold in October was $391,800, an increase of 3.4% from a year ago ($378,800). Prices rose in all regions of the country. These annual price increases have been getting larger for four straight months. Roughly 28% of homes sold above list price.

“While circumstances for buyers remain tight, home sellers have done well as prices continue to rise year-over-year, including a new all-time high for the month of October,” Yun said. “In fact, a typical homeowner has accumulated more than $100,000 in housing wealth over the past three years.”

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 79 Comments

Industrial is hot hot hot

Posted on November 21, 2023 by grim

From the Daily Record:

Large East Hanover industrial park sells for whopping $217.5 million

In what is being touted as New Jersey’s biggest industrial real estate deal of the year, 1.2 million square feet of light industrial space in East Hanover was sold earlier this month to a real estate investment fund for nearly $218 million. 

JLL Capital Markets announced that it represented owner Urban Edge Properties in the $217.5 million sale of the seven-building portfolio to an investment fund managed by Morgan Stanley Real Estate Investing, and its operator and manager, New Jersey-based Saxum Real Estate.

The property is fully occupied by 13 tenants, according to JLL’s sale announcement.

“This was a remarkable transaction for both the seller and the buyer,” said JLL sales team member Jose Cruz. “The experience and financial wherewithal, collectively, was instrumental to getting a deal of this size done in the current environment.”

Posted in Economics, New Jersey Real Estate | 76 Comments

Where NJ makes it’s money

Posted on November 20, 2023 by grim

From Statista:

Real value added to the gross domestic product of New Jersey in the United States in 2022, by industry 

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 71 Comments

Free and Clear

Posted on November 18, 2023 by grim

From Daily Mail:

Mortgage-free America! Share of US homes owned outright rises to an all-time high thanks to ageing boomers paying off their record-low deals

The share of US homes that are owned outright has increased by 5 percent over ten years to an all-time high.

Last year, almost 40 percent of Americans owned their homes but a decade prior, in 2013, that number was just 34 percent, according to US Census Bureau data cited by Bloomberg.

The trend is being driven by an aging population who enjoyed relatively low mortgage rates and have had opportunities to refinance them as they aged, the outlet reported. 
…
The number of mortgage-free single-family homes increased by 7.9 million between 2012 to 2022, to 33.3 million, according to the Census Bureau data analyzed by Bloomberg. 

And of the 84.6 million owner-occupied homes in 2022, almost 33 percent were owned by people 65 or older.

That was an increase of 4.6-percent, or 2.8 million, from 10 years earlier.

Posted in Demographics, Economics, National Real Estate | 23 Comments

Somebody’s not happy

Posted on November 17, 2023 by grim

From the NYT:

The Fed Has Put Our Housing Market in Jeopardy

The Federal Reserve’s relentless attack on inflation is jeopardizing our housing market. The resulting damage is not only having an impact on a critical engine of economic growth but is also, ironically, undermining the war against inflation as well.

Resolving an unusual problem requires an unusual solution. The Fed should immediately reverse course and buy mortgage securities to help moderate consumer mortgage rates. It can keep selling Treasury bonds if it so chooses. This will allow the Fed to raise non-housing interest rates, if necessary, while also allowing the housing market to resume functioning normally again.

As fears of Covid waned and the engines of the economy restarted with a bang, concerns about runaway inflation prompted the Fed to embark on one of the most extreme changes in prevailing interest rates in history. The central bank raised its key federal funds policy interest rate to a level about 22 times what it was previously in less than 18 months. Only during the rapid inflation of the late 1970s, when the Fed under its chairman Paul Volcker raised the effective federal funds rate to nearly 20 percent in 1980, has an increase come even close. (And that Fed only roughly doubled rates, not increased them 22-fold.)

In normal times, higher Treasury rates, which make mortgages more expensive, divert household income to mortgage payments and away from other purchases, dampen home buyer demand and, ultimately, lower home prices. Lower home prices reduce homeowners’ wealth, further lowering their spending. And home purchases are such a powerful component of the overall economy — think of everything a new homeowner might need — that making it harder to buy homes helps cool off the rest of our $27.6 trillion economy.

The problem is, these aren’t normal times. Recently, the average interest cost on a 30-year, fixed-rate mortgage neared 8 percent.Less than two years ago, it was about 3 percent, and most homeowners refinanced then or at earlier lows around 2016. The jump in rates has been so unusually large and came on so unusually fast that many homeowners who may want to move suddenly cannot do so because even downsizing could result in a substantially higher monthly mortgage payment. As a result, the U.S. owner-occupied housing market is now experiencing both a mobility and an inventory crisis.

In September, the pace of existing-home sales fell below four million on an annualized basis to a level unseen since the early 1990s, other than during the Great Recession and the pandemic lockdowns. With so few homes being put on the market for sale, the normal effect of higher interest rates — a gradual reduction in home prices and dampening of associated inflation — is simply not able to happen.

There’s more: When owner-occupied homes aren’t made available for sale, and prices therefore can’t adjust downward, more people are forced to rent. And with more households dumped into the rental market, rental prices rise — which is what they have been doing in recent months, defeating the Fed’s effort to beat inflation.

With residential rent making up approximately 33 percent of total and 42 percent of core Consumer Price Index inflation, excluding volatile food and energy prices, the cost of housing has been driving inflation for nearly all of 2023 (and remains potent regardless of what Tuesday’s Consumer Price Index data for October may suggest). In September, if housing prices had not risen, core inflation for the month would have been zero.

It is an irony that the Fed’s effort to tamp down inflation is causing an increase in core inflation measures. And while the Fed is chasing its own tail, other avenues for controlling inflation have weakened considerably as a result of the unique circumstances surrounding the pandemic.

Posted in Crisis, Demographics, Economics, Housing Bubble, Mortgages, National Real Estate | 75 Comments

Tech’s outsized impact on real estate speculation

Posted on November 16, 2023 by grim

From Realtor.com:

Reassessing the ‘Amazon Effect’ on Home Prices in One U.S. Metro Area

Seattle-based Amazon’s announcement that it would be building a second headquarters in Northern Virginia boosted home prices and sales, albeit temporarily, according to a new report.

The finding is based on an analysis by Bright MLS, a real-estate database company. In “Five Years Later: Amazon’s Impact on the Local Housing Market,” Bright MLS analyzed closed sales and price trends and trends in for-sale listing descriptions in the greater Washington, D.C., region over an 18-month period.

The authors found that after Amazon announced that it was building its secondary headquarters, dubbed HQ2 during an exhaustive and high-stakes search process, in Arlington, Va., in November 2018, home prices rose faster and houses sold faster in Arlington than in neighboring areas.

“The announcement itself did prompt a spike in real-estate values,” Lisa Sturtevant, chief economist at Bright MLS, told MarketWatch. “But it was pretty short-lived.”

The Bright MLS report answers some of the questions that arose when Seattle-based Amazon first selected Arlington for its second corporate campus.

The news immediately stirred predictions that housing prices would shoot up as a result of the tech giant’s presence, especially because Amazon said it would ultimately create 25,000 jobs with an average salary of $150,000.

The report shows that Amazon had an effect on local real estate, but not necessarily a lasting one.

“Amazon HQ2 did have a transitory impact on the housing market and did give home prices a shot in the arm,” the report stated.

Amazon pushed back on the main findings of the report.
…
Prices of single-family homes rose by an average of 17% in the “National Landing” market—which comprises ZIP Codes 22202 in Arlington and 22305 in Alexandria—between the last quarter of 2018 when HQ2 was announced and the first quarter of 2020, Bright MLS found.

But home prices were only up by 10% nationwide over the same time period.

A separate 2019 report by Realtor.com found that home prices had risen 17.3% in the six months after Amazon’s announcement. That was considerably higher than the increase in the national median list price during that time, which was 5.5%.

“Housing demand picked up in Arlington, Va., after the announcement of HQ2,” Hannah Jones, senior economic analyst at Realtor.com, told MarketWatch.

She noted that demand for midpriced homes, listed at between $300,000 and $750,000 in particular, increased, which meant that buyers were finding fewer affordable homes for sale in the immediate aftermath of the HQ2 announcement.

“Home sales picked up directly after the announcement,” Jones added, “but limited affordable inventory stifled sales growth. Sale prices climbed over the year following the announcement.”

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate | 43 Comments

Better move fast

Posted on November 15, 2023 by grim

From NJ 1015:

Homes are selling fastest in these two NJ counties

It’s like a Six Flags Great Adventure ride that never ends. One without too many lows that keeps just bringing you higher and higher into the clouds. Well, as far as price anyway.

That’s what New Jersey’s real estate market is like. Buyers want to get off the ride while sellers never want it to end.

Not only is the lack of available inventory of homes for sale affecting prices but it’s also created a situation where homes can be sold far faster than before.

When I listed my home last fall with Rob Dekanski of Remax 1st Advantage the closing took some time because of the buyer’s situation, but the actual process from day it was listed until we had a signed deal? Six days. And for thousands over asking price.

According to a story on nj.com, the statewide average is 39 days for the month of October. But keep in mind that accounts for home sales from listing to closing date or being taken off the market, not just a deal being made.

So that’s fast. But where are homes selling the fastest?

Union County
29 days

Passaic County
29 days

Morris County
31 days

Somerset County
32 days

Camden County
32 days

Posted in Housing Bubble, New Jersey Real Estate | 93 Comments

Alpine back on top

Posted on November 14, 2023 by grim

From NJ.com:

These 5 N.J. zip codes are among the priciest in the country

A record five New Jersey zip codes made the list of the top 100 priciest places to buy a home in the U.S., according to an annual study by Property Shark, a real estate data company.

They are: Alpine with a $2.9 million median sales price; Avalon at $2.29 million; Sea Girt at $2.24 million; Deal at $2.1 million; and Short Hills with a $1.92 million median sales price.

Alpine reclaimed its title as the most expensive zip code in New Jersey after being unseated by Deal last year. Alpine had a 35% increase in the median sales price, according to Property Shark, landing it as the 28th most expensive zip code nationwide.

That’s the highest Alpine has appeared on the list of 100 priciest zip codes. Its previous high was No. 33 in 2018.

Alpine, a 9-square mile town in Bergen County, can frequently be found on lists of expensive homes. It had the highest priced home sale in New Jersey last year, when a 12 bedroom, 19 bathroom, 30,000-square-foot home sold for $27.5 million. And it has the fifth most expensive home on the market in New Jersey right now.

Posted in Demographics, Economics, New Jersey Real Estate | 86 Comments