• Zero Flux
  • Posts
  • Where housing prices are booming (and faltering)

Where housing prices are booming (and faltering)

Plus, The US housing market is headed for the largest sales slowdown since 2011 and 6 more handpicked RE insights.

Want to unsubscribe? Scroll to the bottom of the email to see the link.

Please note: I send an email every weekday at 6:45 ET, so if you don’t see the email in your inbox in the future, please check other folders.

It would mean a lot if you could reply (even with a ‘Hi’ or any feedback) to this email. When people respond, it creates a positive loop and ensures proper email delivery in the future.

Estimated read time: 3 minutes 34 seconds.

Macro Trends

Economic Watch: Fed Holds Rates Steady link

  • The Federal Reserve maintained the federal funds rate at a range of 5.25% to 5.50% and confirmed the continuation of balance sheet reductions.

  • A shift in the Federal Open Market Committee's stance indicates a potential rate hike this year, with expectations to decrease rates twice in 2023, contrasting with their previous forecast of four reductions.

  • The Fed's updated outlook for 2023 reveals a stronger GDP growth prediction (2.1% vs 1.0% previously), a decrease in unemployment projections (3.8% vs. 4.1%), a slight rise in headline inflation (3.3% vs. 3.2%), and a drop in core inflation (3.7% vs. 3.9%) by the end of the year.

The US housing market is headed for the largest sales slowdown since 2011, Fannie Mae says link

  • US home sales are predicted to plummet to 4.8 million this year, the most significant drop since 2011, with only a slight improvement to 4.9 million expected in 2024.

  • The surge in mortgage rates, reaching an average of 7.18% over the past week, has led to the highest borrowing costs since 2001, severely impacting demand.

  • Despite robust consumer spending, current trends appear unsustainable. Real personal consumption expenditures increased by 0.6% in July, but real disposable personal income decreased by 0.2%.

Real Estate Trends

Weekly mortgage demand increases, driven by a strange surge in refinancing link

  • Despite a rise in mortgage rates, demand for refinances surged unexpectedly. Refinance applications jumped 13% last week, even though they are typically inversely related to mortgage rates.

  • The average contract interest rate for 30-year fixed-rate mortgages increased slightly to 7.31% from 7.27%. This rise might be prompting borrowers to refinance now, fearing even higher rates in the future.

  • Purchase applications also saw a 2% increase from the previous week. However, they were 26% lower compared to the same week a year ago, indicating ongoing challenges in the housing market due to higher rates and limited inventory.

Where housing prices are booming (and faltering): New Report link

  • Western states like Idaho, Wyoming, and Utah are experiencing declines in housing markets, while markets in the Midwest and Northeast are on the rise. Vermont leads with an 8.52% growth in the CoreLogic House Price Index.

  • While Western states are seeing drops in median rental prices, the Southeast has witnessed significant increases. For instance, Arkansas reported a 37.42% rise, South Carolina a 23.77% gain, and Florida a 20.5% increase.

  • Foreclosure trends show a mixed picture: the West, including North Dakota, Idaho, and Utah, saw surges over 30%, while the Southeast, led by Arkansas, observed an almost 19% decline. However, states like Pennsylvania, Maryland, and Kentucky also reported noticeable foreclosure increases.

The Stunning Disconnect Between Retail Space Demand and New Supply link

  • Retail is booming for most store types, leading to rising rents, but there's a significant shortage of space to meet this demand.

  • The U.S. retail outlook for 2Q 2023 shows an average occupancy rate of 95.4% for retail centers nationwide, with development being less than 0.3% of the total inventory.

  • Net absorption surged by 12.6% quarter-over-quarter to 10.8 million square feet, while deliveries decreased by 5.1%. Only 11.9 million SF began construction in 1Q 2023, marking the lowest since 2005.

Interestingly Wages are Outpacing the Rent Growth link

  • U.S. wage growth has surpassed effective apartment rent growth for nine consecutive months, with wages increasing by 5.3% compared to rents at 0.3% through August 2023.

  • Rent growth is slowing down due to a significant rise in new apartment construction, with rent growth in 2021-22 almost doubling that of wage growth. However, this disparity is expected to diminish, possibly disappearing by the end of 2024.

  • Improved affordability in the rental market is anticipated to expand the demand pool. The rent-to-income ratio reached a ten-year peak earlier this year at 23.1%, but it's predicted to drop below 23% by the year's end.

In case you were wondering

America’s Most Expensive ZIP Codes Of 2023 link

  • The ZIP code 94027 in Atherton remains the most expensive in the U.S., with its median home value for August 2023 just below $7.5 million. In June 2022, it peaked at over $8.21 million.

  • Fisher Island's ZIP code 33109 is the second priciest, accessible only by boat or aircraft. It's also the wealthiest city in Florida.

  • Beverly Hills' iconic 90210 is the third most expensive ZIP code. Its home values peaked in June 2022 at nearly $5.89 million, with the 12-month average home value around $5.36 million.

Location Specific

These are the 10 most affordable US cities to live in atm, according to Bank of America link

  1. Cumberland, Maryland: Median home price of $145,400 with a 4.6% change, 2022 affordability value of 288.2, and a -7.7% change in affordability value.

  2. Decatur, Illinois: Median home price of $133,400 with an 8.6% change, 2022 affordability value of 283.4, and a -28.4% change in affordability value.

  3. Peoria, Illinois: Median home price of $156,600 with an 11.5% change, 2022 affordability value of 275.2, and a -25% change in affordability value.

  4. Springfield, Illinois: Median home price of $162,600 with a 5% change, 2022 affordability value of 268.1, and a -20.1% change in affordability value.

  5. Elmira, New York: Median home price of $144,500 with a -2.6% change, 2022 affordability value of 243.8, and a -20.5% change in affordability value.

  6. Binghamton, New York: Median home price of $160,000 with a 2.7% change, 2022 affordability value of 237.8, and a -17.1% change in affordability value.

  7. Bloomington, Illinois: Median home price of $239,000 with a 9% change, 2022 affordability value of 236.8, and a -19.3% change in affordability value.

  8. Waterloo, Iowa: Median home price of $171,500 with a -1.5% change, 2022 affordability value of 235.4, and a -15.5% change in affordability value.

  9. Youngstown, Ohio: Median home price of $157,300 with a 9.8% change, 2022 affordability value of 232.6, and a -21.7% change in affordability value.

  10. Davenport, Iowa: Median home price of $179,800 with a 12.6% change, 2022 affordability value of 231.9, and a -24.2% change in affordability value.

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

Cheers,

Vidit

P.S. Want to sponsor? Details here.

Subscribe for free to keep reading

This content is free, but you must be subscribed to Zero Flux to continue reading.

Already a subscriber?Sign In.Not now

Join the conversation

or to participate.