Video Transcript
Hey, we are here with Mike Simonson with
Altos Research, a part of HousingWire. Mike, how are you? Great, great to be here, Dan.
Thank you so much. Love to jump right in on real estate data. That is what your specialty is.
It’s what your background. First, as a first step, can you tell us
what are you seeing in in home sales right now as of today? today.
So we track at Altos, we track every home
for sale in the country every week so we can watch all the pricing and the supply
and demand and changes in those things. And what we’re doing is so right now
there’s 500 ,000 single family homes on the market around the U .S. It’s not a lot, but it is climbing each
week now.
It’s climbing. It’s climbing pretty quickly in the Gulf
States and in this, but the Northeast and the Western U .S. are still a little bit lower than they were a year ago, but
they’re all ticking up now for spring.
A little more selection happening. You deal in real -time data, which is why
this makes it interesting. Usually when we talk, we get data, we’re
getting it from two months ago, three months ago, you’re seeing this actually in
real time.
This is over the last week. So when you say inventory is up, we’re
here, it’s the second week of March, you’re saying inventory from March 1 to
today is higher? Is higher.
Yes, correct. It’s a it’s about half a percent a week. It’s ticking up a little bit each week as
mortgage rates are higher inventory builds.
And so that’s what we’re seeing this
spring. Is that weather related? It’s actually not weather related the
inventory building right now is really because mortgage rates have been up since
the beginning of the year and as Demand slows inventory grows.
So a little bit we’re seeing inventory
growing each week this this spring And it’s the spring so the late, you know
Sellers are starting to come on and we’re the March April May June are really the
peak of the of the home sales and buying season. So I’ve gone back, I’ve watched a lot of
your videos over on your YouTube channel, YouTube slash Altos Research. Great videos.
And one of the interesting things you’ve
said in the past was that COVID kind of threw the concept of a spring buying
season a little bit out of the window. Is there a return to that this year? Are we starting to see a return to normal
patterns?
Uh, there is some return to normal
patterns. So, um, the things that went out of whack
were when rates were really low and falling and people were buying everything
in sight, then inventory was, was falling because homes would get listed for sale
and snapped up. And, and, and so the available supply was
really low.
Uh, and, and now as rates have returned to
a more normal level, a little bit higher. Now we can see things in inventory
starting to build in March rather than falling through the year. So it is a little bit more normal.
There’s still fewer homes on the market
than say five or eight years ago, but it’s climbing, right? It’s starting to feel a little bit more
normal. Is there an interest rate at which you
start to see that the demand for homes drops?
As rates were climbing from 2021 and
through, people said 4%, all the housing’s gonna shut down at 5%, there’s not gonna
be anybody buying homes at 6%. Did you find that there was some interest
rates, some number, and rates had gotten above 7%, was there some number where you
found a tipping point? So the observation is that inside here is
that the change in rates matters more than the absolute levels.
So early in March, mortgage rates are 7
.2%. If you’re shopping at 7 .2 and suddenly
they’re at six and a half, that feels great. And so now you’re ready to take action.
If on the other hand, if they’re at six
and a half and suddenly they’re go to 7 .2, Now you you sometimes like oh i’m not
going to make that offer i’m going to wait and so it’s really the change in rates and
in the last two years we’ve had big changes in rates both uh from you know the
2 .8 to 7 or whatever in 22 and then in 23 they went from like six or in the fives to
eight and so there were there were big moves in those years and so it’s really
the change that matters and so you know If uh, if rates stay, let’s say they stay
in the upper sixes for the year, we will see gradually more sellers, more buyers,
more transactions that can happen because people understand what they can afford. They know what’s available. It doesn’t change on them.
So it’s really the change in rates that
matters more than the absolute level. There’s not like a magic number. What’s magic is please be stable for a
while.
all be selected as calculus. It’s the rate of change. I have to send a note to Mr.
Costango, who told me I would use this
stuff in my lifetime. Turns out he was right. So interesting on the change of rates.
So you’re talking when rates are dropping
quickly, that that may bring more people into the market more quickly. I think we saw that in November and
December as mortgage rates are really coming down from that peak. You guys track immediate sales, which is a
super cool stat.
That’s That’s homes that have gone the market and
sold within a day, within two days, a few days. What are you seeing happening now? Because if you’re a home buyer and you go
see a home listed and then it’s gone, right?
That’s not a great feeling. What are you guys seeing? yeah, and it was really the phenomenon.
The immediate sales was a phenomenon of
the pandemic, right? Rates were super low. We’re buying everything in sight.
There’s bidding wars. There’s multiple offers. There’s like, you know, the house is
listed and it’s sold and you’re like, wait, it just got listed.
How did they already know? And all of those things. So the immediate sales was really a
phenomenon that was of those ultra low rates during the pandemic.
So right now, because through the
beginning of March, mortgage rates climbed since January 1. And so we could watch those immediate
sales ticking down. Fewer immediate sales, yeah, because
people are like, well, I’m just going to wait.
And so it’s OK if I wait to. It’s not that great a deal. My payments will be higher right now.
So there are fewer immediate sales. And so what’s interesting is if rates. start ticking down from here finally, then
one of the things we will see is more immediate sales.
We’ll see more buyer competition. There’s a lot of folks who are waiting for
a better deal. I’m happy to wait for rates to be cheaper,
like my payments to be cheaper, but there’s a lot of other people who are
waiting right alongside.
So suddenly we would see more immediate
sales, you see more bidding wars, you see all of those factors that happen. when rates decline. Are you seeing this in all price points?
Our customers tend to be in the $100 ,000,
$250 ,000 price range. What I’ve seen in stats is that it’s
actually more difficult in this market because it’s more accessible to more
people. Are you seeing that nationally or locally?
You started by giving us regional data. What’s something our audience can take
from that? Yeah.
So, you know, the, um, we can look and see
that as mortgages have gotten more expensive, the parts, the price points
across the country that are, that are slower are generally higher prices. So, you know, above seven 50, a million
dollar homes, like those kind of homes are significantly slower. Now it matters locally because, um, you
know, in some markets, seven 50, Is like I live in San Francisco and 750 is
the low end of the market, right?
So like that matters. It matters where you are. But in general, you can see that where
there’s more affordability.
There’s you know, there’s the in a lot of
places there is very little evidence of slowdown. Like there’s still immediate sales. They’re like, wow, there’s a house at 200
grand that like that’s the house I’ve been looking for.
There’s a lot of people looking for that. So you can you can. see things like immediate sales happen in
those price ranges as well.
There was a stat, National Association
Realtors, every month they do their existing home sales and they break down by
price point on median days on market. And you consistently see that $100 to $250
,000 price range. Those homes are selling 25 to 30%.
The median days on market is 25 to 30 %
faster. You’ve got to be that much more on it. You could be that much more prepared.
And so just to kind of move into the last
point. So the State of the Union address was this
week. And the president comes out and says he
wants to do these things for first time home buyers and to help by giving mortgage
relief credits, wants to help sellers who are owner occupied sellers who are selling
to other owner occupied buyers, which was a super interesting, you know, the way to
categorize that.
Right. So all of these, you know, all these
potential steps or whatever programs, proposals for the housing market. Do you have any gut reactions to what was
said or what may happen or what may help home buyers the most?
Just curious if you had any hot takes on
that. know, there are four buyers right now. Payments are a problem, especially
compared to a couple of years ago.
Home prices have not come down because
inventory has been restricted enough that there’s enough people buying the homes
that are available. And so we have an affordability challenge. And so one way to help that is to give
incentives, give credits or breaks or mortgage credits, any of those things for
payments.
That is a, that is one way to help that. The challenge of those is that that helps
more people buy homes. It creates more buyer competition, which
does things like, you know, brings inventory down and brings a price floor
in.
So it’s, um, you know, the, the grand
scheme of, of, you know, how do we really help people long -term is, is on the
supply side. Do we build more homes? How do we, I think, you know, the, the,
the.
selling an owner occupied home to an owner
to an owner occupied is probably a little help. You know, but mostly it’s there’s a
there’s a lot of fear about big Wall Street investors owning too much homes and
they don’t own very much but it’s a really handy headline. You know, the Wall Street landlord is like
the the most ready made villain that there could be.
So, so it’s very easy to say, you know, we
want to We want to support everybody else, but not
the Wall Street landlords. And so that could help a little bit, you
know, and helps, or at least helps affordability for those people to buy and
sell. Maybe it loosens up a little bit more
inventory.
But I think what we’re going to see is as
mortgage rates are higher, higher mortgage rates leads to more inventory. As demand slows, inventory grows. And so having more inventory over time, is a factor to keeping a lid on price
appreciation so that it’s not growing wildly.
It is a factor for first time buyers who
have suddenly have more selection than they’ve had in years. And so those like it feels rough. It is rough to have a higher mortgage
rates, but it’s the path to a more healthy housing market over time.
This has been awesome. YouTube .com slash Altos research to check
out your weekly videos. I want to do this again.
And in the next time that we talk, I want
to bring up the Fannie Mae study that showed that boomers are more ready to age
in place than before and hold that home supply to themselves. I want to come back. I want to talk about that later.
So we will get a chance to do this again. Thanks, Mike. I’ll talk to you soon.
See it. What do I do now? Does it stop on its own?
So we almost did five minutes.
