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Mortgage rates are falling at the fastest pace since the 2008 housing-market crash

Plus, 2023 Has Been The Least Affordable Year for Homebuying on Record and more RE insights

Welcome to Zero Flux - A daily real estate newsletter of 5-10 market trends handpicked from > 100 sources, including paywalls.

No opinions, just data and facts.

Let’s begin

Macro Trends

US Company Layoffs Jump, House Advances Bill To Boost Transformer Supply, Jobless Claims Rise link

  • Recent data indicates a significant increase in company layoffs across the United States. This trend reflects the challenging economic conditions, with businesses cutting costs and reducing workforce numbers.

  • The U.S. House of Representatives has advanced a bill aimed at boosting the supply of transformers. This legislative move is part of broader efforts to strengthen national infrastructure and address supply chain issues.

  • There has been a noticeable rise in jobless claims, signaling a shift in the labor market. This increase points to growing economic uncertainties and potential challenges in the employment sector.

Real Estate Trends

Mortgage rates are falling at the fastest pace since the 2008 housing-market crash link

  • The 30-year fixed mortgage rate has seen a significant drop, falling to 7.17% from 7.37% in just one week. This decline marks a 69 basis point tumble since late October, the sharpest five-week drop since late 2008.

  • Mortgage refinance applications surged by 14% in the latest week, showing a year-over-year increase for the second consecutive week. This uptick in refinancing activity could indicate that 2023 might have been the lowest point in this cycle for refinance applications.

  • Despite the falling mortgage rates, there hasn't been a corresponding increase in home buying demand. Applications for purchasing homes decreased by 0.3% during the week and were 17% lower compared to the previous year, attributed to high prices and limited housing inventory.

2023 Has Been The Least Affordable Year for Homebuying on Record—But 2024 Is Looking Up link

  • In 2023, a median U.S. income earner had to spend a record 41% of their earnings on monthly housing costs, up significantly from 31% in 2021. This increase is attributed to high mortgage rates and elevated home prices, making it the least affordable year in recent history.

  • The least affordable markets were Anaheim and San Francisco, with over 80% of typical local income needed for housing costs. In contrast, Detroit and Pittsburgh were the most affordable. Austin, Texas, was unique as the only market more affordable in 2023 than in 2022.

  • Looking ahead to 2024, housing affordability is expected to improve. Predictions include a decrease in home prices and mortgage rates, potentially easing the financial burden for homebuyers.

Homeowner Equity Insights – Q3 2023 link

  • U.S. homeowners with mortgages saw their equity increase by $1.1 trillion year over year in Q3 2023, marking a 6.8% gain. This significant equity boost is attributed to steady home price increases and a slowdown in home sales activity, which positively impacted the national loan-to-value ratio.

  • The number of mortgaged properties with negative equity decreased by 7.7% from Q2 2023, now representing only 1.8% of all mortgaged properties. This decline in negative equity, also known as being "underwater," indicates a healthier housing market with fewer homeowners owing more than their property's worth.

  • The average U.S. homeowner gained approximately $20,000 in equity over the past year, with states like Hawaii, California, and Massachusetts experiencing the largest gains. However, some areas like New York, Texas, Utah, and Washington, D.C., saw annual equity losses, highlighting regional disparities in the housing market recovery.

Opportunities

Single-Tenant Supply Sees a Big Jump in Q3 link

  • The single-tenant net lease (STNL) market experienced a significant increase in supply in the third quarter of 2023. The number of properties listed on the market rose from 3,286 in Q2 to 3,905 in Q3, marking an almost 19% increase quarter-over-quarter.

  • This surge in supply is not entirely positive. A considerable portion of these properties has been on the market for over a year, indicating potential challenges in the STNL market.

  • The report by investment brokerage firm B+E highlights the dynamic nature of the STNL market. It suggests that while there is growth in terms of supply, the market faces complexities, such as prolonged listing durations for properties.

Something I found Interesting

Millennials are more real estate obsessed than their parents link

  • Millennials, despite facing a tougher path to homeownership, value it more than their parents' generation. The Bank of America Homebuyer Insights Report reveals that millennials equate owning a house with "making it," even more so than the previous generation.

  • High mortgage rates and a limited housing supply are significant challenges for millennials, especially those aged 35 to 45, who also bear a large portion of student loans. As of October this year, the average 30-year fixed mortgage rate reached 8%, making homeownership even more difficult for younger people.

  • The importance of homeownership has grown over generations, with 58% of millennials and 60% of Gen Z believing it's more important now than for their parents. In contrast, only 26% of boomers felt homeownership was more important for them compared to their parents, highlighting a shift in attitudes towards real estate.

One Cool Chart

Pro Member Only Content

99% of Americans will be financially worse-off than they were pre-pandemic by mid-2024, JPMorgan says 

(This content is restricted to Pro Members only. Upgrade)

  • JPMorgan reports that most Americans have used up their excess savings from the pandemic. By mid-2024, it's expected that all but the top 1% of consumers will be in a worse financial position than before COVID-19.

  • The bank highlights increasing credit card and auto loan delinquencies and Chapter 11 filings. By June 2024, every income group except the top 1% is projected to have lower inflation-adjusted liquid assets than in March 2020.

  • Elder millennials face unique financial challenges, having endured both the 2008 financial crisis and the pandemic. High childcare costs, persistent inflation, and housing market issues make it difficult for this group to own homes, save for retirement, and spend within their means.

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Cheers,

Vidit

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