Full Transcript
Happy Friday! Brian Manning here with the weekly update. Let’s get right to it. Let’s see. So, Monday this week, you had China’s equivalent of our US Federal Reserve cut their rates by ten basis points. They’re just seeing an overall concern and a softening of their economy there. There is a little bit of a surprise rate cut, but definitely being proactive and they’re trying to get ahead of the curve a little bit different than what we’re seeing here in the US. Also
Monday this week, we got some feedback from Cash Freight. This is a shipping index. This tracks goods that are being shipped around the US. So, like Amazon, for example, when you buy goods, they’re being shipped across the US. That shipping index was down. But what was interesting to see was that their shipping costs were down about 2% as well. So, potentially a little bit of a softening and inflation there, which of course, we’re all going to welcome.
Tuesday this week, we got a report from Redfin. So, Redfin says that of all the offers that are coming in on homes, 44% are still in bidding wars. And they’re saying that 44% of all homes across the US on average are seeing three to four offers. And you know, this is down from 70%. I think that’s about the high where we’re at with 70% were in a bidding war. That’s just not sustainable. That’s pure chaos. You can’t have a housing market where 70% of all homes are in a bidding war. Even still, seeing 44% across the country is a really high number. So, I won’t be surprised if we see some softening on that as well.
We also got CoreLogic rental index. This is for the month of July. And it showed that rents increased by 13.2%. So, this is new leases being signed for the month of July. Again… compelling fight for first time home buyers when you’re seeing rents go up 13.2% per year when you sign a new lease, could definitely make home ownership look very appealing for you.
Wednesday this week, we got retail sales. Retail sales were better than expected for the month of July. You know, interesting to see that even still in the face of inflation, consumers still opening up their pocket books and spending some money. So, stronger than expected report there. And then Thursday was really the reports of the week we were all waiting for. So… first, we got existing home sales. We’re going to look at a chart here in a minute and really dissect that existing home sales for the month of July were down 5.9%. You know, I look at this, I think, OK, well, this is really when buyers were most active in the months of May and June. June was the apex of interest rates. Interest rates were at their highest. So, I’m not surprised to see some calming in the markets here on the month of July. We’ve talked about this in the past. I mean, yes, we’re going to see some calming going forward. Everything has to calm down. It’s just not sustainable to have the volume and the bidding wars that we were before. 20% appreciation we’re experiencing on an annual basis before is not sustainable. Everything just really has to calm down, which we’re seeing happening right now, which I’m pretty much okay with because it just has to happen.
Also we got the Zillow index. Zillow index was down 0.1%. So, that was definitely a market headline. You know, first of all, 0.1% is a very minimal amount to see a decline there. Also what’s really important to know about the Zillow index is that it looks… very heavily at the median home price. So, I’m not a huge believer in the median home price because the median home price could be skewed. If you have more lower end home sales or more higher end home sales, that’s going to throw off the median home price. So, that’s one thing.
Also, their index looks at price reduction. So, if you have listings that were listed at a really high price and they weren’t selling and then you’re reducing your list price chasing the market and maybe you just listed your home unrealistically at a high price in the first place, that’s going to impact it and then they’re looking on time on market as well. So, I don’t put a lot of weight into the Zillow index, but it does come across a headline so I like to talk about it. What’s interesting to see though is that Zillow’s expectations for the market going forward over the next twelve months is home appreciation to be up 2.5%. I think that’s really important because if you watch the media right now, you know, it’s just doom and gloom that we’re in a housing crisis and we’re in a housing recession and you know, 2.5% appreciation is still appreciation, it’s not losing value in your home. We had to come down. You cannot sustain 20% appreciation on an annual basis. You know, it doesn’t mean that home values are going down, but 2.5% going forward just to hit a reset button here is definitely not a bad thing. I personally think going into the next year, you’re going to see mortgage rates come down, you’re going to see the Federal Reserve as they continue to hike rates. It is going to combat inflation, it is going to be impactful on inflation. I think as inflation gets under control moving the next year, you’re going to see mortgage rates come down. I won’t be surprised if you see a continual four in the beginning of that rate and I think it’s going to be impactful for us. So, I’m looking forward to what’s going to happen. I think we have, you know, good hope going into next year.
I do want to look at a couple of charts here with you as well and just some information on the housing reports. Bear with me for one second while I share my screen here. Okay, so the first thing I like to look at is just really breaking down the report for the existing home sales for July. So, existing home sales were down 5.9%, and on an annual basis is down 20%. So, yes, definitely a decline in existing home sales. I don’t put a lot of weight into the median home price here, even though it is higher.
First time home buyers made up 29% of all transactions. It’s down a little bit. I would love to see this number higher. You know, historically though, for quite a long time, we have been seeing first time home buyers, you know, anywhere from this 29% to 32% range of all transactions. So, we’re continuously kind of seeing that come up and down a little bit. So I’m not surprised there.
Cash buyers went down from 25% of all transactions to 24%, and investors made up 14% of all acquisitions instead of 16%. So, down a little bit there. What I really like to look at as well is the inventory. So… Inventory in the month of July across the country was up a little bit. It was up to 1.31 million units from 1.26. So, first of all, that’s a very minimal decline to see that. And I really think that we’re starting to see inventory crest for this year, which we’ll look at more here in a second. Also, just based on these numbers right here, they would say that we have a 3.3 month housing supply, while an average market, or excuse me, a balanced market is when you have six months of housing supply. So, 3.3 months is still considered good. But what doesn’t always jiving these numbers is that right now they always take into account active listings. I’m sorry, if we look at only active listings, of the 1.3 million homes that are listed for inventory, 43% of those homes are under contract right now. So 1.3 million, only 747,000 homes are still available. So the norm, when you look at activity in the marketplace and you look at how many available units there are, the norm is at 25% are under contract. So right now, we still have a really high number with 43% of homes being under contract, which really puts us at a two-month supply of inventory right now.
So still, a seller’s market for a home is priced correctly, and days on market right now on average is 14. So that’s still very much a record low. And you know, looking at inventory, we’ve looked at this in the past, you know, this shows a chart going back for the last ten years, and it shows you what inventory does every single year. And every single year, you know, we see this peak of inventory in the month of August, right, because people are listing their homes. Summer is just the prime time to sell your home. And every single year you look at this you see inventory go up, peak in the month of August, come down, up in August, come down, up in August, come down, every single year. It’s never been any different.
So if you look at our year right now, here we are, you know, we’re just a hair above inventory levels that we were last year, which last year was already considered extremely low inventory levels. And it looks like we’re starting to see a little bit of the crest here, which I’m not going to be surprised if we see our peak of inventory here and then we start to see inventory decline for the rest of the year.
So, you know, I personally very much think right now that we’re really more… I wouldn’t call it a housing recession. It’s just an activity recession, right? People are feeling beat up. They just got beat up over, you know, bidding worse than last year. They signed new leases, rates were higher. I just think that there’s less activity in the marketplace right now. And I think as we progress through this, and especially, moving into next year, you’ll start to see things get better and more activity because you’ll see mortgage rates come down. I’m available all weekend. If you have any questions, let me know. If you want to go through our strategic buyer consultation, give me a call. Call me on my cell phone, text me. I would love to help you any way I can. Happy Friday. Have a great day!
-Brian
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