Are we going to run out of houses to sell? Are we going to have a foreclosure crisis? What about all of the looming evictions? V shape, K shape, policy, stimulus, unemployment, vaccines, why can’t my buyer find a house?
Between the emotional exhaustion and pandemic fatigue making sense of today’s real estate market is difficult at best. Add in some misleading headlines and it is no wonder why we have stressed out home buyers and sellers.
Let’s start with what we know.
National Real Estate:
“The shortage of homes for sale has been an ongoing issue for the last couple of years, but in December the combination of the holiday inventory slowdown and the pandemic buying trend caused it to dip to its lowest level in history. Looking forward, we could see new lows in the next couple of months as buyers remain relatively active, but a surge of new COVID cases may slow the number of sellers entering the market.”
– Danielle Hale Chief Economist for Realtor.com
Danielle Hale was right, as of last week, total single-family homes available in the US dropped down to 388,678. That means that only 0.05% of all single-family homes in the country are available. With NAR’s 1.4M members, there are 3.5 Realtors for every house for sale.
- Elliot Eisenberg shared, “While housing permits are running at 1.64 million/year, their best level since 9/06, the improvement is uneven. In the Northeast, permits are at 200,000/year and have been flat for decades. In the Midwest, permits are also at 200,000/year and have bounced between 200,000/year and 400,000/year since 1960. Out West, permits are 400,000/year, their midpoint since 1960. Only in the South, where permits are at 870,000/year, are they relatively high.”
- ATTOM Data Solutions recently released its 2020 Grocery Store Wars and found:
-The average home value near Trader Joe’s is $644,558
-The average home value near Whole Foods is $532,224
-The average home value near ALDI is $250,850
The AZ Market:
“This is what we call the homeowner prisoner’s dilemma. There’s nothing to buy because nobody is selling, but nobody is selling because there’s nothing to buy.” Mark Fleming
- Phoenix had the highest year over year rental increase in the country at 9.9% for November 2020. (Corelogic)
- As of last week, there are fewer than 5,000 active listings in Maricopa and Pinal Counties.
- There are roughly 5 buyers for every listing available in greater Phoenix.
12 of Amazon’s 20 facilities in AZ opened in 2020. The company employs 20,000 full and part time Arizonans. Three more facilities are planned to open in 2021. (AZ Big Media)
“Growth and expansion is based on demand. Amazon’s business continues to grow exponentially, and with it, Greater Phoenix is a beneficiary. Greater Phoenix is the perfect location for distribution because of our infrastructure, talent pool, low business costs and advantageous operating environment. Businesses in Greater Phoenix can serve more than 33 million consumers in a single days truck haul, our shipping costs to California are up to 75 percent cheaper than other Mountain West markets and we have the third largest labor pool in the western U.S.” Chris Camacho, president and CEO of GPEC
Commercial Real Estate:
- With 292,000 new units, 2020 nearly kept up with previous years’ new market-rate apartments nationwide. Phoenix was a top performer with 17,215 apartment starts in 2020. (AZ Big Media)
- JLL, one of the largest commercial real estate services companies, added a single-family investment advisory arm. Not only do they think that buying single-family properties to hold is a good investment, they created an entire branch to advise on it.
- Peter Linneman of Linneman & Associates said, “If you have a long hold horizon, I just think you’re in a golden age for multifamily. The spread is so outlandishly attractive. A lot of money’s going to be flowing to the sector that I just think we’re going to look back and say, ‘This is the third golden era of longer-term-hold multifamily.”
- 12,200 retail stores closed in 2020 which utilized about 159 million square feet or 1.4% of retail space. (Elliot Eisenberg)
Policy:
- One of the 17 executive orders signed by President Biden on Wednesday includes an extension of the eviction and foreclosure moratoriums through, at least, March 31, 2021.
- Part of the proposed $1.9 trillion stimulus plan, called the American Rescue Plan, will extend the eviction and foreclosure moratorium through September 30, 2021. It will also include another $30 billion for rental assistance.
- The National Multifamily Housing Council and National Apartment Association stated that while they support the rental assistance (for landlords) offered in the stimulus packages they fear it is not sufficient enough to address the outstanding debt. (Bisnow)
Lending:
In March, the Federal Reserve started purchasing bonds to stabilize interest rates. The Fed has committed to continuing the purchase rate as long as necessary, at an average of $120 billion a month, $80B in Treasuries and $40B in mortgage-backed securities. Fed holdings now exceed $7 trillion.
Interest rates run about 1.7% above the 10-year bond yields. Based on this, rates were not properly priced for the last 5 months of 2020. Logan Mohtashami, a senior economic analyst with HousingWire, expects the 10-year yield to reach around 1.33%-1.60% this year which would mean rates will likely rise to about 3.375%-3.625%.
Forbearance and Foreclosures:
- The total number of mortgages in an active forbearance plan decreased to 5.37% or 2.7 million loans.
- Due to the ongoing foreclosure moratoriums, the foreclosure levels are at historic lows.
- During normal economic times, nationwide we average about 69,000 foreclosures a month. (KCM)
Real Estate News:
- Now that Zillow is officially a brokerage (only representing its iBuyer acquisitions and sales), it has shifted to IDX feeds allowing for greater accuracy but also changes in how listings are shown. Buyer agents are now “personal guides” and the listing agent is noted separately.
- Zillow is no longer offering free rental listings. They now require contracts between Brokers, Realtors, and Zillow through its Feed Connection Program or for $9.99 weekly through Zillow Rental Manager. (Inman)
- Compass, one of the nation’s fastest-growing brokerages, filed paperwork with the SEC to go public via initial public offering (IPO) rather than merging with a special purpose acquisition company (SPAC) as many other real estate companies did in 2020.
Final Thoughts:
December’s 140,000 increase in unemployment claims, the first increase since April, was entirely lockdown based impacting leisure, hospitality, and private education the hardest. CA alone lost 600,000 jobs while other markets saw job growth. Real estate added 4,800 jobs in December and construction added 51,000 jobs. (US Department of Labor)
More workers in construction will lead to more building, which will lead to more inventory, which will lead to more purchases and a more stable housing market. And the best type of housing market is a stable one.
Elliott Pollack said, “Ignore the news about the poor economy over the next couple of quarters. It is unavoidable but also temporary. Focus on the period that will follow. Virtually all of the economic indicators will return or exceed February 2020 levels very quickly once vaccinations are available for enough Americans.”
That light at the end of the tunnel is getting a little brighter.
