Housing Analysis

[The California Court Company]

household is getting smaller; % of wealthy people that own second and vacation homes are also higher

The data says there is no housing shortage.  This chart shows more housing units per person than at any time since the year 2000.  The number of units per person just surpassed the peak in 2008, but unfortunately we still have the largest number of housing units under construction in US history!!!  The US population, on the other hand, has flat-lined...

We had the lowest interest rates in 5,000 years which pulled demand forward like nothing ever before (not even the bogus mortgages of the mid-00's) and we will soon have a glut of inventory as "investors" unload their unprofitable properties.  AirBnB hosts are in a state of panic right now as summer bookings dry up!!! 

If you know anyone that owns real estate in Big Bear, Lake Arrowhead, Palm Springs, or Joshua Tree, tell them it's time to SELL SELL SELL!!!

[Liar Loan]

household is getting smaller; % of wealthy people that own second and vacation homes are also higher

The data says there is no housing shortage.  This chart shows more housing units per person than at any time since the year 2000.  The number of units per person just surpassed the peak in 2008, but unfortunately we still have the largest number of housing units under construction in US history!!!  The US population, on the other hand, has flat-lined...

We had the lowest interest rates in 5,000 years which pulled demand forward like nothing ever before (not even the bogus mortgages of the mid-00's) and we will soon have a glut of inventory as "investors" unload their unprofitable properties.  AirBnB hosts are in a state of panic right now as summer bookings dry up!!! 

If you know anyone that owns real estate in Big Bear, Lake Arrowhead, Palm Springs, or Joshua Tree, tell them it's time to SELL SELL SELL!!!

The demand for second homes skyrocketed during the pandemic as evidenced by the fact that second home markets rose more in value than non-second home markets.



The problem now is that demand has flattened out and probably started declining.  (They haven't released data for May, but in April second home demand was already almost down to pre-pandemic levels.)  As the economy worsens, second homes & vacation rentals will get hit the hardest because it's a luxury not a necessity like owner-occupied housing.  This is going to lead to a flood of supply in places like Idaho, Utah, Nevada, Arizona, and Florida, along with the aforementioned vacation rental markets in California.

[USCTrojanCPA]

Here's the thing, not all second homes are vacation home rentals.  I have a second home in Las Vegas and that's not rented out.  Sure there's going to be many that are vacation rentals but most are not is my guess.

[Liar Loan]

The cost of a mortgage payment is 60-80% higher than during the 2007 bubble peak.

[Liar Loan]

The "housing shortage" is a myth perpetuated by the National Association of Realtors.

The MYTH of the US Housing Shortage



What you really want to pay attention to are the Green Bars – they measure the ratio of Population Growth to New Housing Permitting in the US. The higher this figure is, the more pent up demand is being created for real estate. The lower the figure? The more supply is being delivered relative to people being gained.

An equilibrium Population / Permitting ratio is about 1.5, meaning 1.5 people added for every 1 permit (equilibrium is above 1 because not every new person needs their own home or apartment).

In the mid-2000s, right before the last housing crash, the Population / Permitting Ratio dipped below 1.5. This signaled that too many new homes and apartments were building built relative to how many people were being added to the US population. Sure enough, the Housing Market crashed shortly thereafter.

Lo and behold – since 2018 the US is back below that 1.5 marker. Especially so in 2019 and 2020, when Population / Permit Ratio measured 1.1 and 0.8, respectively. To repeat – that 0.8 figure in 2020, which means more units were permitted than population grew, is a first in US history.

https://reventureconsulting.com/the-myth-of-the-us-housing-shortage/

[Liar Loan]

The price-to-rent ratio has never been so high.  It was somewhat defensible when interest rates were at 5,000 year lows, but now, not so much.

[Liar Loan]

Ivy Zelman has a solid record of correct housing calls.

The housing market's next big crisis: too many homes

The US housing market went haywire over the past two years for a simple reason: There just weren't enough homes to meet overwhelming demand. But now one research firm is warning of a new threat looming on the horizon: too many houses.

At a time when most experts are honing in on supply tightness, CEO Ivy Zelman is concerned about longer-term trends that indicate housing demand is bound to weaken. Her firm's demographic analysis of the US reveals slowing household formation and population growth, as well as declining immigration levels. Sooner rather than later, Zelman says, we'll be left with more homes than people who want them.

That flies in the face of conventional wisdom today, particularly since the pandemic seems to have laid bare the need for more housing. But Zelman argues that the recent buying frenzy represents an anomaly spurred on by government stimulus payments, record-low mortgage rates, and heightened investor activity. As those factors fade and a record backlog of new housing construction comes onto the market over the next two years, demand might not be able to keep pace, according to Zelman.

"You start to think about the pipeline over the next few years — you have all this supply coming, and it's not there yet," Zelman told me. "Will we be able to fill up all of these homes?"

https://www.businessinsider.com/next-housing-market-price-crash-too-many-homes-real-estate-2022-6

[zovall]

Ivy Zelman has a solid record of correct housing calls.

The housing market's next big crisis: too many homes

When this takes place, do you think certain areas will be hit harder than other areas? What areas/properties do you think will weather the downturn better?

[Liar Loan]

Ivy Zelman has a solid record of correct housing calls.

The housing market's next big crisis: too many homes

When this takes place, do you think certain areas will be hit harder than other areas? What areas/properties do you think will weather the downturn better?

I think the demographic headwinds will affect the entire nation to some extent, but the less desirable secondary markets will probably take the brunt of the damage because that's also where the most homes are being built.  SF, LA/OC, and SD will always be top tier markets that thrive no matter the demographic headwinds, because there are many priced-out people that would move here given the chance, and relatively few new homes being built.

[Liar Loan]

In January, there were 28% fewer listings than the prior year.  Today, there are 19% more listings than the prior year.  Expect that trend to continue.

Home Listings Jump in Turnabout for Supply-Starved US Market

The housing slowdown is helping to solve the US real estate market’s most intractable problem: tight inventory.

With fewer buyers competing, the number of active US listings jumped 18.7% in June from a year earlier, the largest annual increase in data going back to 2017, Realtor.com said in a report Thursday. And new sellers entered the market at an even faster rate than before the pandemic housing rally began.


Metro areas with biggest annual jumps in active listings

Austin-Round Rock, Texas   144.5%
Phoenix-Mesa-Scottsdale, Ariz.   113.2%
Raleigh, N.C.   111.7%
Nashville-Davidson--Murfreesboro--Franklin, Tenn.   85.6%
Riverside-San Bernardino-Ontario, Calif.   71.7%
Seattle-Tacoma-Bellevue, Wash.   65.6%
Sacramento--Roseville--Arden-Arcade, Calif.   65.0%
Dallas-Fort Worth-Arlington, Texas   61.6%
Denver-Aurora-Lakewood, Colo.   58.3%
Tampa-St. Petersburg-Clearwater, Fla.   55.9%

https://www.bloomberg.com/news/articles/2022-06-30/home-listings-surge-in-turnabout-for-supply-starved-us-market

[irvinehomeowner]

Ivy Zelman has a solid record of correct housing calls.

The housing market's next big crisis: too many homes

When this takes place, do you think certain areas will be hit harder than other areas? What areas/properties do you think will weather the downturn better?

I think the demographic headwinds will affect the entire nation to some extent, but the less desirable secondary markets will probably take the brunt of the damage because that's also where the most homes are being built.  SF, LA/OC, and SD will always be top tier markets that thrive no matter the demographic headwinds, because there are many priced-out people that would move here given the chance, and relatively few homes being built.

So you're saying Irvine will do better than others.

[Liar Loan]

Ivy Zelman has a solid record of correct housing calls.

The housing market's next big crisis: too many homes

When this takes place, do you think certain areas will be hit harder than other areas? What areas/properties do you think will weather the downturn better?

I think the demographic headwinds will affect the entire nation to some extent, but the less desirable secondary markets will probably take the brunt of the damage because that's also where the most homes are being built.  SF, LA/OC, and SD will always be top tier markets that thrive no matter the demographic headwinds, because there are many priced-out people that would move here given the chance, and relatively few homes being built.

So you're saying Irvine will do better than others.

Yes, this time.

[irvinehomeowner]

Ivy Zelman has a solid record of correct housing calls.

The housing market's next big crisis: too many homes

When this takes place, do you think certain areas will be hit harder than other areas? What areas/properties do you think will weather the downturn better?

I think the demographic headwinds will affect the entire nation to some extent, but the less desirable secondary markets will probably take the brunt of the damage because that's also where the most homes are being built.  SF, LA/OC, and SD will always be top tier markets that thrive no matter the demographic headwinds, because there are many priced-out people that would move here given the chance, and relatively few homes being built.

So you're saying Irvine will do better than others.

Yes, this time.

Success!

[USCTrojanCPA]

Looks like bond rates are rolling over as the market is pricing in a higher % chance of inflation and 10-year bond rate is below 2.90%, which I believe we'll get by the end of the this year/early next year.  If that happens, bond rates will roll over and mortgage rates will follow. 

[talkirvine]

Looks like bond rates are rolling over as the market is pricing in a higher % chance of inflation and 10-year bond rate is below 2.90%, which I believe we'll get by the end of the this year/early next year.  If that happens, bond rates will roll over and mortgage rates will follow.

Yes, 10-year treasury yield has been coming down from the high. Fixed mortgage rate will follow.