So I know there are few real estate investors, realtors, and potential homebuyers/sellers on the board. This is long, but informative and I'm bored as hell stuck at home with school shut down.
I jumped on a call by Altos Research yesterday looking at early data on 2022 housing market and everything so far is pointing to another silly season this Spring. Dorn shared a chart the other day from these guys explaining we currently have the lowest listing inventory in history. They are extremely sharp and if your interested in forward looking data in real estate, look them up.
Here's a chart that projects the rest of the year.
View attachment 23588
So this year is the lowest inventory ever to start the year and next year is going to be even lower. To put real numbers to that, first week of January 2020, there were 775,000 homes listed, which was low historically. This year that number was 292,000 and could be as low as 220,000 next January. In the laws of supply and demand, demand doesn't even have to be moderate for this to cause price increases.
Another predictor of prices to come is the percentages of listings taking price increases and the percentage taking decreases. Increases are already starting to spike and decreases are declining, these indicators are tracking in line with 2021.
View attachment 23589
View attachment 23590
The most telling number to me is days on market of listings. Until listings start sitting around longer than normal, there is not going to be any significant price decreases. The lower the days on market, the more likely prices are to increase. Normal days on market in January is 100. We are currently at 56 this year which is even lower than last year this time. In fact, it's lower than a normal peak season. Until this metric gets back to normal, its a seller's market.
View attachment 23591
Now for the simplest tool from Altos. They have an indicator that they call the "Market Action" which is a measure of inventory turnover. Anything above 30 is considered a seller's market. Anything below is a buyer's market. Here is the current national reading.
View attachment 23592
Altos does allow you to break down the market action by individual markets. So I have lumped a few cities together to give some idea of how individual markets are fairing.
This is group of a few cities in MS.
View attachment 23593
Here are a few towns in the SE where I know a few readers may live or are at least nearby.
View attachment 23594
And here are a few in TX and the mountain west where we have a few posters (I think Fishwater is in a suburb of Denver, not sure which one... but look at that 17er's market booming... Rich guys get all the breaks.**)
View attachment 23595
The final thing I want to share with the call. There was a poll for the realtors on the call concerning affordability and 63% say their clients do not see affordability problems at this time. If rates get above 4% that number drops to 37%. So that says there is some interest rate sensitivity, but there is still some runway.
My personal guess is the spring in most markets is going to be wild again. It may start a little earlier and not get quite as crazy as last year. I would expect by this summer-fall higher interest rate moves will cool prices, but overall its going to be another solid year for home price appreciation. A lot of people like to compare this to 2007 and 2008. I am not so naive to think that housing can't crash, but we are nowhere near the inventory and debt imbalances that happened back then. In fact, it's exactly the opposite, personal debt obligations and inventory have never been lower.
View attachment 23596
We have completely under-built for more than a decade. The redline shows the normal number of SFH we should be building. Until we fill the gap created over the last decade, we will be under supplied.
View attachment 23597
If you want to look at "housing" crashes while they sting for sure (especially if you are in a market with lots of speculation), on the whole its not this death trap where everyone lost 50% of their home value. Not even close. Using median national home prices, if you were so unlucky as to buy your home in 2007, you lost a grand total of ..... 12% in your home value by 2009 when the market bottomed. You were back to even by 2012 and by 2017 you were up 33%. What would have really sucked is if you thought the market was a bubble in 2000-2001 and never purchased when you could have realized 40% 10 year gains even with the housing bubble factored in... Hint if we are in a bubble now, based on inventory and new starts we are much closer to 2000 than 2007.
View attachment 23598
My personal take on it is homes in most markets will never again be cheaper than they are today. This spring will probably be the last of silly season as any last minute shoppers take advantage of rates. But overall, we are in an inflationary period and it will last for a while, not at current rates, but higher than normal. Labor (especially manual skilled labor) is only going up. Materials all across the spectrum are seeing massive price increases and flattening would be the best we can hope for in the medium term. Boomers that may have headed off to assisted living or retirement homes are going to stay in their homes a whole lot longer after the pandemic and the newfound fear associated with being in a home getting stuck or sick. Most millennials are entering home buying age. Yes homes are expensive, but their incomes are growing quickly as are their savings, plus their boomer parents have plenty of equity and savings to chip in on down payments.
Finally all of this is with the caveat that nothing matters more than location. If you are in a market that is shrinking or stale in population and no new jobs/money are coming in, none of this applies to you. With all those other markets showing a seller's market, check out Noxapater, its a buyer's market:
View attachment 23599
I jumped on a call by Altos Research yesterday looking at early data on 2022 housing market and everything so far is pointing to another silly season this Spring. Dorn shared a chart the other day from these guys explaining we currently have the lowest listing inventory in history. They are extremely sharp and if your interested in forward looking data in real estate, look them up.
Here's a chart that projects the rest of the year.
View attachment 23588
So this year is the lowest inventory ever to start the year and next year is going to be even lower. To put real numbers to that, first week of January 2020, there were 775,000 homes listed, which was low historically. This year that number was 292,000 and could be as low as 220,000 next January. In the laws of supply and demand, demand doesn't even have to be moderate for this to cause price increases.
Another predictor of prices to come is the percentages of listings taking price increases and the percentage taking decreases. Increases are already starting to spike and decreases are declining, these indicators are tracking in line with 2021.
View attachment 23589
View attachment 23590
The most telling number to me is days on market of listings. Until listings start sitting around longer than normal, there is not going to be any significant price decreases. The lower the days on market, the more likely prices are to increase. Normal days on market in January is 100. We are currently at 56 this year which is even lower than last year this time. In fact, it's lower than a normal peak season. Until this metric gets back to normal, its a seller's market.
View attachment 23591
Now for the simplest tool from Altos. They have an indicator that they call the "Market Action" which is a measure of inventory turnover. Anything above 30 is considered a seller's market. Anything below is a buyer's market. Here is the current national reading.
View attachment 23592
Altos does allow you to break down the market action by individual markets. So I have lumped a few cities together to give some idea of how individual markets are fairing.
This is group of a few cities in MS.
View attachment 23593
Here are a few towns in the SE where I know a few readers may live or are at least nearby.
View attachment 23594
And here are a few in TX and the mountain west where we have a few posters (I think Fishwater is in a suburb of Denver, not sure which one... but look at that 17er's market booming... Rich guys get all the breaks.**)
View attachment 23595
The final thing I want to share with the call. There was a poll for the realtors on the call concerning affordability and 63% say their clients do not see affordability problems at this time. If rates get above 4% that number drops to 37%. So that says there is some interest rate sensitivity, but there is still some runway.
My personal guess is the spring in most markets is going to be wild again. It may start a little earlier and not get quite as crazy as last year. I would expect by this summer-fall higher interest rate moves will cool prices, but overall its going to be another solid year for home price appreciation. A lot of people like to compare this to 2007 and 2008. I am not so naive to think that housing can't crash, but we are nowhere near the inventory and debt imbalances that happened back then. In fact, it's exactly the opposite, personal debt obligations and inventory have never been lower.
View attachment 23596
We have completely under-built for more than a decade. The redline shows the normal number of SFH we should be building. Until we fill the gap created over the last decade, we will be under supplied.
View attachment 23597
If you want to look at "housing" crashes while they sting for sure (especially if you are in a market with lots of speculation), on the whole its not this death trap where everyone lost 50% of their home value. Not even close. Using median national home prices, if you were so unlucky as to buy your home in 2007, you lost a grand total of ..... 12% in your home value by 2009 when the market bottomed. You were back to even by 2012 and by 2017 you were up 33%. What would have really sucked is if you thought the market was a bubble in 2000-2001 and never purchased when you could have realized 40% 10 year gains even with the housing bubble factored in... Hint if we are in a bubble now, based on inventory and new starts we are much closer to 2000 than 2007.
View attachment 23598
My personal take on it is homes in most markets will never again be cheaper than they are today. This spring will probably be the last of silly season as any last minute shoppers take advantage of rates. But overall, we are in an inflationary period and it will last for a while, not at current rates, but higher than normal. Labor (especially manual skilled labor) is only going up. Materials all across the spectrum are seeing massive price increases and flattening would be the best we can hope for in the medium term. Boomers that may have headed off to assisted living or retirement homes are going to stay in their homes a whole lot longer after the pandemic and the newfound fear associated with being in a home getting stuck or sick. Most millennials are entering home buying age. Yes homes are expensive, but their incomes are growing quickly as are their savings, plus their boomer parents have plenty of equity and savings to chip in on down payments.
Finally all of this is with the caveat that nothing matters more than location. If you are in a market that is shrinking or stale in population and no new jobs/money are coming in, none of this applies to you. With all those other markets showing a seller's market, check out Noxapater, its a buyer's market:
View attachment 23599
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