05/31/2024
🚨 Nerd alert haha 🤓
I just attended an ecnomic conference hosted by the National Association of Home Builders (NAHB) and wanted to share a few of the notes I took from their Chief Economist, Dr. Robert Dietz’s, presentation. 🏠🏘📊
The jobs market in the western mountain states have recovered the strongest since the Covid-19 pandemic, with Idaho leading the pack. Way to go, PNW!
Post-Covid population growth, largely from net immigration vs natural growth (births minus deaths), has kept housing demand high.
The personal savings rate has fallen from 7.4% in 2019 to 3.2% as of March 2024. Credit card debt is up 30% in the last 18 months, and at higher interest rates to boot.
Shelter costs continue to rise, currently at a 5.5% 12-month growth pace, greater than CPI (goods and services) at 3.4%.
The biggest problems home builders are facing are 1) the cost and availability of labor, 2) the price of building materials, and 3) the cost and availability of developed lots – which of these 3, is the one that is expected to continue to get worse throughout 2024.
The regulatory costs alone to build a new home account for 23.8% of the price, or $93,870, on average. This is the total effect of building codes, land use, environmental and other rules.
Analysts anticipate mortgage interest rates to ease up a bit in time, perhaps in the mid/upper 5% range on a Conventional 30-year fixed by the end of 2025, so maybe about a 1% to 1.5% drop from where they are at today. We shall see. 2023 forecasts for the 10-year treasury rate were all low-balled by 5 sources.
My takeaway is that we are still experiencing a significant housing shortage which isn’t going to change for the better anytime soon, combined with layers of regulation and lack of labor supply driving up the cost to build a new home, new and existing home prices, and rents as well. As Dr. Deitz said, “Shelter inflation is the last leg of the inflation fight in the United States.” We have to start by filling as many of the the 274,000 open construction jobs nationwide, building more houses, and make efforts to decrease regulation.
In my world as a mortgage lender I am seeing homebuyers with larger down payments, higher credit scores, and even multiple jobs/sources of income and/or co-borrowers buying the homes together. Many sellers are selling for less than their list price right now, and agreeing to concessions to pay for the buyer’s closing costs, and even permanent interest rate buydowns. It would be great to see mortgage interest rates improve as well, but we all know when that happens the affordability improves which increases demand which yields more offers on homes and sustains or even increases prices. My advice is to invest in real estate when you can, but conservative, relatively affordable real estate, which yes is still possible in this market! Seek opportunitities. Be creative. Think and plan for the future. Don’t bury yourself in consumer debt and be stupid with your spending so you can take advantage of opportunities when they arise!
Work with an experienced, educated, and honest mortgage and real estate professional on your side! I’m always here to help 🤓
