While the construction activity in the single-family housing market is improving, it's the opposite for multi-family housing. If mortgage rates have peaked & liquidity improves, what happens next?
Hi Amrita- great article. Before you publish part 3 and your conclusions for the housing market, you might want to check out M3_Melody Substack (@m3melody) as she covers the residential real estate market “on the ground” beyond just published data and has warned about a lot of shadow inventory that is not in the data. Another great resource for housing is Reventure Consulting on YouTube (@ReventureConsulting) who is very data driven, but takes and combines data from a lot of different sources. Thanks for your recent notes for new Substackers :)
Sorry, just seeing your comment now. Thanks for your insight and questions, which I will get back to shortly in my latest post. Thank you for both the resources that you have pointed out. I am aware of Melody's work, she is terrific. Will be integrating more of her work and of others in future posts.
Housing will not falter. Not just yet. New Home Sales has been so resilient is because Homebuilders are offering deals home buyers cant refuse. There is so much construction around my neighborhood. Check this ad by DR Horton:-
They're teasing with 5.99% and only 3.5% downpayment which is affordable in such an inflationary climate. It doesnt matter if delinquencies will rise later. What matters is its affordable now.
You are spot on. No wonder the homebuilder stocks have been on a tear. And even if we see some form a slowdown next year, I don't necessarily anticipate a sizable housing decline. There is so much pent up demand, in fact given all the new construction, it may actually provide a better supply-demand dynamic.
Construction of new homes is happening like crazy where I life. But there is a government mandate to build more following every census herein California. In the meantime, empty older homes were gobbled up by the banks a few years ago. Most sit empty. 😒
You mentioned in the note that some of these houses that are sitting empty have been rented out at crazy prices. So, despite these places being rented out and no tenants moving in, they are not dropping the rent prices?
The rental situation in Canada, specifically Vancouver has blown up. I think, relatively speaking, the rental situation is starting to look better, prices coming down?
Well since the construction activity is improving, it points to new inventory coming into the market soon as the housing projects are finished. If more supply hits the market, that will inherently bring down prices. The degree of the decline is a little unknown. If overall employment remains strong and credit conditions are fine, home prices may not drop as significantly as it would if we have terrible unemployment and debt defaults in the coming years.
Thanks Dino. My guess is that home prices will stay more or less put, may go down a bit further as well, given the current level of demand in the market and the state of the housing affordability. But, if more homes are to come to the market (as the residential construction activity points to), there actually may be some downward pressure.
Out of curiosity, are you still based out of SF?
Meanwhile, enjoy your coffee or pumpkin spice latte.
That is some insane price for a condo back in 2004 in DC.
One of the things though that I notice in the SF market is prices have come down since the pandemic, so today it is actually cheaper than NYC, possibly DC? SF is obviously fighting its own demons, but if it succeeds to bring back life, I am sure prices will start creeping back up again.
2 welcome pebbles resisting a torrent. Looking forward to the 3rd pebble.
👍🏼
Hi Amrita- great article. Before you publish part 3 and your conclusions for the housing market, you might want to check out M3_Melody Substack (@m3melody) as she covers the residential real estate market “on the ground” beyond just published data and has warned about a lot of shadow inventory that is not in the data. Another great resource for housing is Reventure Consulting on YouTube (@ReventureConsulting) who is very data driven, but takes and combines data from a lot of different sources. Thanks for your recent notes for new Substackers :)
Sorry, just seeing your comment now. Thanks for your insight and questions, which I will get back to shortly in my latest post. Thank you for both the resources that you have pointed out. I am aware of Melody's work, she is terrific. Will be integrating more of her work and of others in future posts.
Housing will not falter. Not just yet. New Home Sales has been so resilient is because Homebuilders are offering deals home buyers cant refuse. There is so much construction around my neighborhood. Check this ad by DR Horton:-
https://www.drhorton.com/All-Promotions/210-special-interest-rates
They're teasing with 5.99% and only 3.5% downpayment which is affordable in such an inflationary climate. It doesnt matter if delinquencies will rise later. What matters is its affordable now.
You are spot on. No wonder the homebuilder stocks have been on a tear. And even if we see some form a slowdown next year, I don't necessarily anticipate a sizable housing decline. There is so much pent up demand, in fact given all the new construction, it may actually provide a better supply-demand dynamic.
Construction of new homes is happening like crazy where I life. But there is a government mandate to build more following every census herein California. In the meantime, empty older homes were gobbled up by the banks a few years ago. Most sit empty. 😒
You mentioned in the note that some of these houses that are sitting empty have been rented out at crazy prices. So, despite these places being rented out and no tenants moving in, they are not dropping the rent prices?
The rental situation in Canada, specifically Vancouver has blown up. I think, relatively speaking, the rental situation is starting to look better, prices coming down?
A complex and yet interesting topic.
Looking forward to Part 3 :-)
Stay tuned!!! Also, thanks for the restack.
You are welcome J.R. You too.
Thanks for your input. The long term picture is not clear by any means, lots of conflicting forces at play here.
Well since the construction activity is improving, it points to new inventory coming into the market soon as the housing projects are finished. If more supply hits the market, that will inherently bring down prices. The degree of the decline is a little unknown. If overall employment remains strong and credit conditions are fine, home prices may not drop as significantly as it would if we have terrible unemployment and debt defaults in the coming years.
Thanks Dino. My guess is that home prices will stay more or less put, may go down a bit further as well, given the current level of demand in the market and the state of the housing affordability. But, if more homes are to come to the market (as the residential construction activity points to), there actually may be some downward pressure.
Out of curiosity, are you still based out of SF?
Meanwhile, enjoy your coffee or pumpkin spice latte.
That is some insane price for a condo back in 2004 in DC.
One of the things though that I notice in the SF market is prices have come down since the pandemic, so today it is actually cheaper than NYC, possibly DC? SF is obviously fighting its own demons, but if it succeeds to bring back life, I am sure prices will start creeping back up again.