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More Foreclosures About to Hit the Market

Plus, Inventory of homes for sale is unusually rising in late September and 6 more handpicked RE insights.

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Estimated read time: 2 minutes 44 seconds.

Macro Trends

US Home Prices Remain Strong on a Worldwide Basis link

  • The global housing market experienced a slump since mid-2022, with central banks worldwide raising rates, impacting home price growth. However, U.S. home prices have shown resilience, with a maximum drop of 4%, and are currently above their 2020 peak.

  • New Zealand witnessed the most significant boom and subsequent slump, with home prices rising by 46% from January 2020 to March 2022 and dropping by 13% by June 2023. In contrast, the U.S. and Canada saw increases of 41% and 37%, respectively, before experiencing milder declines.

  • The exclusive use of long-term, fixed-rate mortgages in the U.S. has contributed to the stability of its housing market. This approach disincentivizes borrowers from selling, maintaining a low housing inventory and a skewed supply-demand balance, especially during high-interest rate periods.

Mortgage Rates Officially Hit New Multi-Decade Highs link

  • The average lender is now offering a top tier 30yr fixed rate over 7.5%, the highest in at least 22 years. This is after several lenders released negative/upward revisions to rate sheets, crossing above the multidecade ceiling.

  • The average borrower, not considered "top tier", is seeing even higher rates, assuming an adjustment for discount points. Many loans are being quoted with points currently, making the note rate a bit lower.

Real Estate Trends

Older Multifamily Properties Getting Above-Average Rent Growth link

  • Older multifamily properties, specifically those built before 2010, have experienced an average of 4.6% annual rent growth over the past decade, surpassing the 3.4% of post-2010 assets. This is attributed to their lower average rents and higher potential for growth in high-demand housing markets.

  • These older properties exhibit less volatility in rent growth, being less susceptible to external shocks like recessions, and their rent growth tends to outpace the long-run market average of 2.7% after the first decade of their lifecycle, peaking between 3.5% and 4.0% in the third decade.

  • Despite the higher rent growth, older properties come with their own set of challenges, including the need for more capital expenditures and the lack of modern amenities, which may affect tenant attraction and retention. However, if priced with adequate risk adjustment, they can be a lucrative investment, potentially outperforming the overall market average in the long term.

Home Inventory is Climbing Even Faster Than Last Year link

  • The available inventory of homes for sale is unusually rising in late September, growing even faster than the previous year, with new listings still running 9-10% fewer each week compared to last year. This rise is attributed to a demand-driven slowdown as buyers anticipate a drop in mortgage rates to make purchases more affordable.

  • The article reveals a notable drop in demand with no surge in supply, as mortgage rates continue to rise, affecting consumer sensitivity. Currently, there are 528,000 single-family homes on the market, a 1.8% increase from the previous week, reflecting a reaction to the highest mortgage rates in over two decades.

  • The weakening demand is starting to impact pricing, with 37% of the market experiencing price cuts, more than any recent year except the last. This indicates fewer offers and potential sales price weakness in the 4th quarter, with the median price of single-family homes in the US now at $440,000, down 1% from the previous week.

More Foreclosures About to Hit the Market Possibly link

  • Serious mortgage delinquencies are at their lowest since June 2006, with 448,000 homeowners having not paid their mortgage in 90 days or more. This is a 25% decline from the previous year.

  • Early-stage delinquencies have been increasing for three consecutive months, indicating that we may be nearing the bottom of delinquency rates. However, Black Knight clarifies that it expects the overall delinquency rate may rise, not serious delinquencies.

  • The states with the highest percentage of seriously delinquent borrowers are in the Southeast: Mississippi, Louisiana, Alabama, Arkansas, and Georgia. Despite this, rising home prices have provided homeowners with an equity cushion, potentially allowing them to avoid foreclosure by selling their homes.

Something I found Interesting

What $4,000 a Month in Rent Can Get You in 10 U.S. Cities link

  • New York, NY: Cozy studio apartment in the West Village for $3,985 per month.

  • Milwaukee, WI: 3-bedroom penthouse with panoramic views for $3,900 per month.

  • Scottsdale, AZ: Newly renovated 3-bedroom home with in-ground swimming pool for $3,700 per month.

  • Las Vegas, NV: Contemporary loft with artistic flare for $4,000 per month.

  • Columbus, OH: Classic 4-bedroom home with tons of space for $3,500 per month.

  • Atlanta, GA: Modern and sleek four-bedroom home for $4,000 per month.

  • Miami, FL: High rise living with rooftop pool for $4,000 per month.

  • Denver, CO: Charming home in prime location for $3,700 per month.

  • Austin, TX: Pet-friendly living in East Austin for $4,000 per month.

  • Boise, ID: Entire ranch with indoor swimming pool for $4,000 per month.

That's all, folks. If you enjoyed today's issue, please reply (it helps with deliverability)

Cheers,

Vidit

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