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After four months of decreasing home sales, there’s a 1.4% blip upwards

(REAL ESTATE) With massive annual gains and slight monthly gains, existing home sales rise 1.4% in June, but the market remains plagued by tight inventory levels.

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Between May and June, existing home sales (contracts signed) rose 1.4%, after fourth consecutive months of declines and a 22.9% increase from June 2020, per the National Association of Realtors (NAR). The average days on market nationally was only 17 days.

After months (years) of restricted inventory levels, and an entire sector holding their breath for any relief, inventory levels rose 3.3% in June. The market remains blue in the face while holding said breath, but even this slight improvement is a sign of hope.

Meanwhile, the median home price hit $363,300, rising 23.4% over the year, the second highest increase on record since January 1999. All-cash transactions are increasingly common as folks increase their wealth by cashing out of the stock market and/or their housing equity, continuing to nudge out many first-time buyers who rely on traditional mortgage options (despite interest rates remaining historically low).

NAR’s Chief Economist, Dr. Lawrence Yun said, “Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales. Home sales continue to run at a pace above the rate seen before the pandemic.”

Dr. Yun noted that home prices won’t decline with still-tight inventory conditions, but expects price appreciation to slow by year’s end. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”

Existing home sales in the Northeast rose 2.8% in June, 3.1% in the Midwest, 1.7% in the West, and remain unchanged in the South.

So what’s next for the housing sector with rising prices and restrictive inventory levels?

“NAR continues our conversations with policymakers and leaders from across the industry in an effort to boost housing inventory and increase access to safe, affordable housing for all Americans,” said NAR President Charlie Oppler. “As the nation’s economy continues to recover from COVID-19, securing policies that are in the best interest of U.S. consumers and homeowners remains NAR’s priority.”

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Real Estate Big Data

Housing starts stagnate, market conditions are rapidly shifting

Housing starts for April stagnated, marking the second consecutive months of declines, and more renters being left out of this shifting market.

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Housing starts stagnated in April, down 0.2% from the prior month, according to the U.S. Commerce Department.

The sentiment appears to be that although this marks the second straight month of dips, most are seeing today’s news as a positive, especially as construction of new homes was expected to fall 2.4% in April.

Further, housing starts are up 14.6% from April of last year, driven primarily by multifamily construction.

But it’s worth not getting overly excited, given that permits dipped 3.2% in April which is a forward-looking indicator, so expect starts to continue cooling in a time where we quite need the inventory.

Demand for housing inventory remains high, but the National Association of Home Builders reports today that confidence in the single-family housing market fell dramatically in May, marking the lowest level in two years.

Dr. Lawrence Yun, Chief Economist at the National Association of Realtors said in a statement, “The worst of the housing shortage is ending, but market equilibrium between supply and demand is still some ways off.”

He notes that as mortgage rates increase, builders “are chasing rising rents, with fewer homebuyers and more renters being forced to renew their leases,” noting that even prior to the interest rate increases, rents were rapidly rising and vacancy rates rapidly declining.

Pointing to another market shift, Dr. Yun notes that “Some degree of a return to the office is also fueling back-to-city living where high rises are concentrated.”

That’s a problem.

“Even as home sales look to trend back to pre-pandemic levels after the big surge of the past two years,” concludes Dr. Yun, “inventory will not return to pre-pandemic conditions. That means home prices will get pushed even higher in the upcoming months, albeit modestly, given the supply-demand imbalance.”

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Real Estate Big Data

Home prices jump double digits in majority of American metros [report]

(REAL ESTATE) Housing affordability was already a widespread challenge before current economic pressures were applied, but now home prices are skyrocketing.

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As home sales slide and mortgage rates rise, home prices in 70% of 185 measured metros saw a double digit annual increase in Q1, according to the newest data from the National Association of Realtors (NAR), up from 66% in the previous quarter.

The Southern region accounted for 45% of home sales in Q1, and experienced a 20.1% increase in annual home prices (compared to 14.3% just the quarter prior). Home prices in the Midwest jumped 8.5% annually in Q1, while The Northeast rose 6.7%, and the West increased 5.9%.

The median sales price of a single family existing home has now hit an astonishing $368,200.

“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022,” said NAR Chief Economist, Dr. Lawrence Yun. “Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”

Yun expects supply levels to improve, and for “more pullback in housing demand as mortgage rates take a heavier toll on affordability,” given that “there are no indications that rates will ease anytime soon.”

At first blush, price appreciation sounds lovely to anyone that owns a home, given that it is the largest investment most Americans will ever make.

But regarding today’s report, several homeowners told us that they now feel trapped, and that if they sold their current home, even if they purchased a new house at that same price, they would likely have to downgrade.

Affordability is an ongoing problem weighing down the housing sector. NAR reports that the monthly mortgage payment on a typical existing single-family home with a 20% down payment rose to $1,383 (up $319, or 30%, from one year ago). Families now typically spend 18.7% of their income on mortgage payments (but only spent 14.2% one year ago).

“Declining affordability is always the most problematic to first-time buyers, who have no home to leverage, and it remains challenging for moderate-income potential buyers, as well,” Dr. Yun observed.

Map of how home prices are behaving nationally

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Real Estate Big Data

Office occupancy is on the rise, but its knocking down morale

(BIG DATA) Despite work from home policies still in place and the flexibility some employers are offering, office occupancy is increasing steadily.

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Empty startup office with open floor plan, abandoned while working from home.

As coronavirus numbers dwindle and some officials begin calling for a fourth COVID-19 shot, more and more people previously working at home after being kicked out of shuttered office buildings are returning to the bullpen.

The National Association of Realtors reports that more than 80% of metro areas in the United States have seen an increase in in-person working.

Boston saw the largest office occupancy growth over the past year. Chicago, New York and Washington, D.C. have the most open space.

NAR researcher Scholastica Cororaton says office occupancy is also increasing in areas with a big tech presence. San Jose, San Diego, San Francisco and Seattle lead those areas.

“The rising occupancy in these tech metro areas indicates that tech companies are contributing to the demand for office space,” Cororaton wrote. “Even as nationally, 45% of mathematical and computer workers work from home for at least some part of the time.”

The way companies are returning to work vary and are sparking anger. For instance, Google employees must now be in the office three days a week. On the other hand, Apple begins its return to office plan next week. It starts with employees coming back one day a week which will eventually grow to two days and then three days a week. Apple employees have revolted against the idea and are have threatened to quit.

Many in leadership are pleased with the return to the office to boost productivity and collaboration. However, employees are finding they’re showing up in person to just log in to Zoom again, which has stirred up even more frustration.

On top of the redundancy of work that could be done at home, a study shows only 3% of white-collar employees want to work in the office all week. 86% want to stay home for at least a few days.

Plus, the return to the office drives up costs, with gas prices seeing soaring and inflation at a 40-year-high.

Since the second half of 2021, 30 million square feet of office space has been taken up, however, about 100 million square feet remain.

NAR reports filling that space up again could take through the end of 2024.

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