Hope everyone had a great holiday. This is the last edition for 2022. Have an amazing New Year!

Size of Home vs Number of People Living There

Interesting article and chart that Jassen Bowman sent over. Our houses have fewer people living in them and their much bigger. Not sure this is the cause of our housing challenges, but it certainly is not helping.

And a related article and chart from the NY Times.

New Construction

The latest new home construction numbers from Bill McBride (sales are up for November) including (still) one of my favorite charts showing how prices of new construction has changed over time.

Mortgage Rates

Some perspective on mortgage rates.

Rent Trends

Overall demand for rentals dropping a bit and rents softening. See update from Tom Lawler.

Miscellaneous Charts

Some charts with a little bit of my commentary thrown in (the text in the images is NOT me). Special thanks to Lon Welsh for sharing these.

This is change from last year. Last year wasn’t a normal year, so I tend to highly discount the importance that we’re way off from last year (for now).
My comments look like the above with the orange band to the left.

This is a good chart showing that the number of sales is low in context of the last 7 years (all pretty hot real estate market years so keep that in mind).

I have nothing to say on this one.

Number of pending sales are down compared to 2020 and 2021 but those weren’t normal years so not really a fair comparison IMO.

Inventory is still really low… despite the last 7 years or so being relatively strong real estate markets (seller’s markets for sure) with low mortgage rates. This makes now an unusual time… low inventory with high rates. I’d expect inventory to rise, but it is not… yet.

How many active listing… except we’re comparing to the 2020 and 2021… not nice guys, not nice at all… those are unfair comparisons since 2020 and 2021 were exceptional.

Months of Supply takes into account supply (inventory) and demand (sales) in one cute little package. Most economists consider 4-6 months to be a balanced buyer/seller market with just the right amount of inventory and just the right amount of sales.

We’re still below that because for the last seven years (2015-2022) we’ve been in a seller’s market (below that 4-6 months of supply that is considered balanced).

Good to see it rising.

Also, see 2020 and 2021… that’s why comparing this year to those 2 years is not a good or fair comparisons… they were exceptional in an already exceptionally strong seller’s market.

I do like this chart.

It shows that median sales prices are still higher than they were last year at this time.

But, more importantly (at least to someone who owns some real estate) it shows how abnormal the appreciation was for the second half of 2020 and all of 2021 (the space between the previous year’s line).

The larger the space the more appreciation we saw over last year.

We’re WAY WAY WAY ahead of what we should have been with reasonable appreciation (good for those of us that own real estate and kind of a bummer for those that don’t).

Is it possible we could “give back” some of the extra appreciation we saw and still be WAY ahead of where we “should have been” if we were on a more reasonable, steady appreciation path… yuppers.

You think the market is soft and you can low-ball sellers? Not so fast there sparky… almost 25% of offers that were accepted by seller’s were above the last listing price.

It is possible that SOME of these… maybe even a good percentage of them were concessions of some sort… but still.

Cash is even “more king” than usual. But, there’s still more than 2/3 of the market getting financing.

So, if you’re getting financing you’re not soooooo disadvantaged that you’re never going to get an offer accepted.

Since 2004 (the start of this chart) it seems like lot of people with really good credit have been buying properties and fewer people with lower credit scores.

This is good for the stability of the real estate market (less likely to have foreclosures and short sales) but honestly it probably telegraphs some of the challenges for people with less than perfect credit have had getting a house… which I believe is super important.

So apartment rents are softening (chart and link earlier in this email), but we have a record high number of apartments under construction.

<sarcasm>Well, that certainly won’t be an issue… at all.</sarcasm>

In all seriousness, we’re in a weird, unusual market… maybe it will be fine. But typically if you see apartment rents softening, you don’t want to build A LOT more of them which could cause more supply and less demand and drop rents (and therefore prices because prices are often tied to rents in multi-family) even more.

You know… supply and demand yo.

But heck, if the numbers still make sense to buy… they still make sense. So, we shall see.

See my comments above… as vacancies increase… maybe having a bunch of new construction apartments coming on is not going to be the best news for those apartments that are serving a specific niche well.

Love,

James Orr
The Real Estate Financial Planner™

P.S. If you liked me adding my commentary, please tap the heart icon… or better yet, reply to this email and let me know.