💼 Fall Housing Market

briefcase | invest smarter | Issue #145

A big shout out to the Real Estate Espresso podcast, who recently interviewed briefcase co-founder Brad Cartier, talking about multifamily and the power of missing middle. Check it out…

🍂 Fall of a Seller's Market

Much like the leaves changing colors, the housing market is slowly changing from a savage seller’s market to one with muted buyer demand.

This brings some equilibrium back to the market, but not necessarily in the healthy way we’d like. We need more supply and better affordable options, but instead, we have the opposite.

This leaves a record number of buyers on the sidelines, leading to an unhealthy imbalance in our housing market.

So how did we get here? It’s interesting…

📈 Interesting Rates 

7.31%: That is the current average 30-year mortgage rate, according to Freddie Mac.

This is the highest seen in well over 20 years. Back then, Titanic was the top-grossing film, and frosted tips were a questionable fashion statement.

Symbolic? Perhaps. Higher interest rates are putting a damper on the housing market. People are now thinking twice about getting a loan or mortgage when they'll end up paying a hefty interest rate.

In fact, 16% of all sales contracts were canceled in August alone, according to reports. Even so, prices are still rising. NAR reports that housing prices still rose 3.9% year-over-year in August.

And sellers? They might have to play the waiting game a bit longer. But, with housing prices sticky on the high side, many are still looking to clock in gains. After all, we have record equity in our homes these days…

That’s a $30T iceberg of total homeowner equity, about $200,000 per mortgaged property. As a recession looms, some may look to use their homes as ATMs, much like we saw in the lead-up to the 2007-2008 financial crisis.

😓 (Not So) Home Sweet Loan 

According to the Mortgage Bankers Association (MBA), average mortgage payments hit $2,170 monthly in August.

This is an astounding 18% increase from just one year ago. Affordability is a key component of the current market headwinds, with ATTOM Data Solutions finding recently that:

Redfin reports similar data, finding that the median monthly mortgage payment hit an all-time high in September of $2,605.

So, who can blame buyers for sitting on the sidelines? Redfin highlights the current market conditions leading to a drop in buyer demand:

🍂 Crisp Air, Cooler Markets: Autumn Advantage

Zillow released its quarterly market update highlighting some of these cooling headwinds on the housing market. They conclude that the fall slowdown is faster than typically seen, with competition among buyers declining, an increase in new listings, and more price cuts.

In fact, almost 10% of all listings had a price cut this year. And, some markets had over half of the total listings see a price cut.

So What? The fall season presents a golden opportunity for financially flexible home buyers who can navigate the challenges of elevated mortgage rates. The truth is that the housing market is cooling faster than overboard passengers on the Titanic.

…Maybe in the springtime.