Wednesday Market Update: July 20th 2022 with BRIAN MANNING

Happy Wednesday! I know I’m just throwing everybody for a loop right now because it’s not Friday, but… but Ashton, our marketing department, is going to be out this week, Thursday, Friday. She works really hard behind the scenes to get these videos out for us. I do want to thank her for all the hard work that she does and everything she puts into this.

But we got some good stuff going on this week, and I want to make sure we get it out today because there’s some good stuff to talk about here. So, let’s just jump right into what’s happening. So, Monday this week was a relatively quiet news day. We did get some more feedback from the Federal Reserve. Looks like they’re going to really focus on the 75 basis point rate hike coming up here, July 27. You know, maybe last week we thought it could be 100 basis points, something we possibly could be in favor of, but it looks like they’re going to keep it at 75. So, we’ll have to watch that as it proceeds forward.

That’s next week. We also got some builder feedback this week. So, Monday, we got builder sentiment. So, builder sentiment is a gauge on a scale of one to 100. Anything above 50 is considered expansion. This came back at 55. The thing is that it came back twelve points less than expected. Certainly seeing builders just a little bit concerned about what’s going on right now and a little bit of reduction in the sentiment there.

Tuesday, this week we got more builder info. This is for the month of June. We had single family starts that were down 8%. We had single family permits that were down 8% as well. So, not really great for GDP, not great for economic growth. But… when you have builder starts and builder permits down, it’s going to keep inventory tight. It’s going to help us out in the housing market here.

You know, certainly, builders looking at the market right now, interest rates, and, you know, without a doubt, their sentiment has been tampered. I know from me talking with buyers that are considering a new construction home right now or resale, some of them are nervous about new construction because if the home is not a ready for a year and they can’t lock in the rate, they’re just worried about what’s going to happen there.

Another interesting fact for builders is that there are authorized homes that are ready to get built, but not yet started, is down 16% year-over-year. So, you have these homes that are in the process of permits pulled, ready to go. But for whatever reason, supply chain issues or whatever it is, they haven’t actually been started yet. So, seeing a backlog of homes there as well.

Today, though, we get existing home sales. This is the primary reason why I wanted to get this out today. So, existing home sales, this measures closed transactions in the month of June. This makes up 90% of the housing market. This is probably people that were shopping for homes in the month of April and May. On a month-over-month basis, existing home sales were down 5.4%, on a year-over year-basis, down 14%. We’re going to look at some charts here in a minute to add some more color to this because it’s not as bad as it sounds. One interesting statistic was that first-time home buyers increased from 27% to 30%. So, if you are looking at renting right now and you’re looking at your cost of rent going up every single year, it’s certainly going to create a compelling fight to become a first-time home buyer. And it’s really great to see strength in the housing market based on first-time home buyers and stepping up from 27% to 30%. So that was really good to see.

As far as inventory is concerned, this is something that’s going to get talked about a lot in the media as well. Inventory is up 2.4% from last year and 10% from the prior month. We’re going to look a little bit closer at that because I’m not as worried about it as the media would say. Also, for months supply, we’re at three-month supply. So a balanced market is when you have six-month supply of homes available in the United States right now. We’re only at three. I think we’re at 2.7 previously, so not seeing a drastic change there. Days on market is still at a record low, that’s at 14. So, there’s still a lot of buyers out there that are looking at purchasing places.

And, you know, I just want to say this before we jump into the charts. I’m definitely not saying we’re not going to see a slowdown. I’m definitely not saying that the rise in interest rates has cool demand from buyers, without a doubt. But… 20% appreciation that we’re seeing in our markets before is not sustainable. So, I’m a fan of a little bit of the calming down right now because when you can calm down from 20%, even if you’re in single digit or high single digit appreciation, owning a home still creates an incredible amount of wealth. So, I just want to throw that out there.

Let’s take a look at some charts here to give you some more feedback of what’s going on in the marketplace. Bear with me for one second, please. Okay, so the first thing I want to look at here is just inventory. So, inventory was up on a month-over-month basis. This is the chart going back to the same time last year in 2021. You know, you look at the chart, it looks a little bit dramatic, but, you know, in the middle here, it was covid when we had record low inventory and everyone complained about how low the inventory was. Every buyer we talked to was complaining about, you know, a house is selling for 100, 200, $300,000 above list price because inventory is at record lows Here.

So, now we’re back to 1.26 million homes for sale in the United States. Still is at a lower amount compared to back in 2021. But what’s interesting is if we go back to 2013, every single year at this time of the year, you always see a bump of inventory. So, June, July, August., there’s always a bump of inventory. Summer is the prime selling month. If you’re going to buy a home and you have kids and you’re moving them and you want to get them into a certain school zone, you’re definitely buying over the summer. So, every single year, we always see this bump in inventory. We’re not even at the peak of where we were last year. And yeah, we’re probably going to see some more inventory in the marketplace for July and August. I’m not going to be surprised if we see higher numbers there until we come down again, like we do every single year. So, inventory is looking really good here.

What’s interesting, though, is if you look at existing inventory in the United States right now, it’s at 1.26 million homes for sale. But… 641000 of these homes are already under contract right now to be purchased. So, that means there’s only 619000 homes available for sale in the US right now. So, inventory is not as bad as the media makes it sound. If we look at active existing homes, right? So this strips out all the homes that were under contract. And we go back and we look at June of 2022.

Right now we’re at 619000 because 51% are under contract. We’re almost at where we were last year, which still, even last year was considered historic lows of inventory. So, you got to watch the media. Be careful for the negativity that you see in this, because every single year we always see a bump in inventory. And I’m not surprised that we’re seeing this right now. We’re going to see higher inventory continuing the month of July pushing into August. We’re all happy to see a little bit higher inventory right now. I’m around for the rest of this week if you have any questions. You want to go through our strategic buyer consultation, get pre-approved, give me a call. I will be around all weekend as well. Happy Wednesday. Hope you have a great day!