HOUSING MARKET: SALES UP, FEWER HOMES FOR SALE

Sales of existing U.S. homes rose 6.7 percent in January from December, the National Association of Realtors (NAR) reported, as buyers rushed to lock in low mortgage interest rates before the U.S. Federal Reserve boosts its key lending rate next month.
Homes are still selling within days of being listed, with more homes being bought outright for cash, the NAR said.
In January, 27 percent of existing-home sales were made with cash, compared to 19 percent in January 2021, the NAR noted.
The median price of existing homes sold in January was $350,300, 15.4 percent more than a year earlier, according to NAR figures.
Home prices are unlikely to retreat this year, analysts say.
Demand will continue to outstrip the limited number of homes entering the market: there were 860,000 homes for sale in the U.S. at the end of January, 2.3 percent fewer than in December and 16.5 percent less than a year before.
That translates to a 1.6-month inventory, the smallest since 1999 when the NAR began to track the figure.
In the four weeks ending 13 February, the number of active listings was 447,000, 27 percent smaller than during the same period a year earlier, online brokerage Redfin said.
“It will take years to build our way out of the supply-and-demand imbalance that should keep home prices rising strongly this year despite higher [interest] rates,” Robert Frick, an economist at the Navy Federal Credit Union, told The Wall Street Journal.
New-home starts in January slipped 4.1 percent below December’s number.
The average interest rate on a 30-year mortgage rose to 3.92 percent, with eight-tenths of a point, as of 17 February, its highest since May 2019, according to the Federal Home Loan Mortgage Corporation.
The rate was 3.69 a week earlier and 2.81 a year ago.
The average rate for a 15-year fixed-rate loan moved up to 3.15 percent from 2.93 the week before.
Higher interest rates are not deterring qualified buyers, in part because rents are rising so quickly. The average residential rent across 50 major U.S. cities leaped 14 percent last year, according to government data reported by CBS News.
The tight market continues to lock out first-time, modest- and middle-income buyers, and those without abundant cash for a sizable down payment.
First-time buyers took just 27 percent of homes sold in January, compared to 33 percent a year previous.
TREND FORECAST: We maintain our long-standing forecast that the higher the U.S. Federal Reserve raises interest the sharper the decline in home sales. And, that when rates hit and go beyond 1.5 percent, housing sales will contract sharply.
While real estate values will fall, minus a wild card event, we do not anticipate a residential real estate collapse.
However, on the commercial real estate front, with a sizable percentage of people disgusted with wasting much of their life commuting and demanding to work-at-home full or part time, this will put increasing downward pressure on the commercial real estate sector, particularly in the office occupancy sectors.
TRENDPOST: The new normal of remote work has given many employees the option of moving farther from a central office, freeing many to buy homes with more space in cheaper locales.
That trend has created entirely new enclaves of demand-driven pricey real estate, a trend we have highlighted in the article “Million-Dollar Homes Now the Norm in Hundreds of Cities” in this issue.
TRENDPOST: A key underlying factor driving housing costs higher and higher is the pervasive entry of private equity firms into the U.S. housing market.
We have documented the trend extensively: as home prices rose, private equity firms began snapping them up, often snatching a house from a family that already had made an offer.
The firms then rent the houses back to the failed buyers at premium rental rates.
This tactic has reconfigured the housing market for years, and perhaps generations, to come.
Renters are paying top rates because the U.S. is in the midst of a long-term housing shortage. Materials, labor, and especially land to build new houses are in acute short supply.
TREND FORECAST: Demand for rental homes will keep prices high, making it harder and harder for renters to save enough cash to make a down payment on a home for which the price is now at record levels.
This is likely to create at least one generation of renters instead of homeowners, depriving these households of the main way in which Americans build and store wealth: by creating equity through home ownership.
To trace the development of this trend and explore its meaning, see our past coverage:

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