“Housing boom is over as new home sales fall to pandemic low”
Misleading headlines like this was one of the main motivators for me wanting to start this weekly email newsletter.
The majority of people (your clients if you are a real estate professional) will just read that headline and move on thinking they know what’s happening in real estate (in other words – they’ll think it’s a bad time to buy).
The few that actually click the link to read it will be hit with a bunch of out-of-context data comparisons that don’t tell the real story. For example…
“Sales of new single family homes fell to an annualized rate of 676,000, 6.6% below May’s rate of 724,000 and 19.4% below the June 2020 level of 839,000.”
Let’s set aside for a second the fact that all real estate decisions should be filtered through a local lens, not using only national data.
Sure…the data may be accurate, but they are missing all the context behind it. Check out this graph showing New Home Sales (national) charted out over time.
May and June of 2020 showed an incredible acceleration of sales following 2.5 months of sales bottoming out. The market was playing catch-up and builders had a plethora of new homes ready and available for sale.
Fast-forward to June 2021 and the supply has significantly dwindled in comparison, yet sales are still in line with pre-pandemic norms.
Pre-pandemic norms weren’t too shabby when it comes to real estate values…
Feb and March of 2020 saw an average year of year appreciation of 7.4%. That ain’t bad.
Sure, the market is slowing down…but to say the boom is over is just misleading clickbait.
That’s why I’m still putting so much into this newsletter every week…to cut through that nonsense. I hope you’re enjoying it. And if you are, I hope you’re sharing it too. ?
Thanks for helping us help more people win with real estate.
Ok, I’m stepping off my soapbox now.
Weekly Snapshot
This week: The weekly run down plus a quick commentary on rental rates in San Diego. So let’s get to it…
Mortgage rates are back to early February levels.
| June 16-22 | Prev 4 Week Avg. | % Change | July 9-15 | |
|---|---|---|---|---|
| New Listings | 890 | 806 | 10.42% | 804 |
| New Pending Sales | 913 | 833 | 9.67% | 870 |
| New Sales | 745 | 673 | 10.66% | 648 |
| Active Inventory | 3,316 | 3,379 | -1.85% | 3,535 |
| 30 Year Fixed Mortgage | 2.78% | 2.95% | -5.6% | 2.88% |
Prospective homebuyers that missed out on the mad rush of 2021 might have to pay a little higher price for the home of their dreams now but at least they are snagging a lower interest rate than their counterparts who purchased in the 2nd quarter.
Check out that nosedive in July.
Why? There are a lot of variables at play but the resurgence of COVID is definitely the chief among them. Deja vu. ?
The other variable worth noting is the removal of the adverse market fee that Fannie and Freddie added last summer that arbitrarily increased the average rate.
The rest of the data shows that buyers are still out in full force, but sellers are still edging out a little more inventory than buyers can snag up.
If history repeats itself (2019 and 2020) that trend will reverse come Q4 (when most sellers normally hit the brakes) and active inventory will start to fall again. That said, history might not be a good predictor of future results after nearly unprecedented 30% year-over-year price increases…we shall see.
In The News
- San Diego prepares to offer Sports Arena sites to affordable housing builders.
- Mortgage update: Rate locks up driven by purchasing and cash-out refinances.
- San Diego’s unemployment rate actually increased to 7% in June.
The Week Ahead
- The Fed is meeting again on Wednesday. Last time they moved up their projected timeline to start hiking up rates. Will we get some information on its bond-buying program this time around?That program is the most influential factor in keeping mortgage rates as low as they are, so we’re watching it closely.
San Diego rental rates are up 8% year over year.
Something we don’t talk about often here is rental rates, but we should. Check out this update from Rent Cafe that shows rental rates in San Diego are up 8% year over year. That’s a pretty significant jump for rents.
And look at all the other San Diego County cities showing strong rent growth in the chart below:
Rent increases won’t be transitory, so this could be the chink in the armor of the Fed’s argument about inflation being a temporary problem. Housing is a huge chunk (32.9%) of the bucket of goods the Fed tracks for inflation.
If you ask me, this is just the beginning. Real estate values have shot up like crazy (30% crazy). That will naturally and continually bleed into rental rates. It won’t happen as fast, but it will come.
Ok, that is all…until next week!
