We’re back and eager to resume our collection and analysis of actionable data about housing construction, finance, sales, and leasing and the general economic data that impacts the housing industry.
If the holidays erased your memory of housing in 2022, our archive of weekly reports is a great resource and now full-text searchable.
Home Sales, Starts, and Financing
- Frequent readers of our weekly reports are aware that housing market data is available from many sources. While diversity and multiplicity of sources can add to reliability, those factors also can create confusion and uncertainty. Data on single-family housing inventory is an example, as reported by Calculated Risk. We write more on this subject in a separate post on rent inflation forecasting.
- After reviewing data from the National Association of Realtors, Realtor.com, and Altos Research, CR’s Bill McBride concludes that the NAR inventory data include enough pending sales to obscure accurate measurement of periodic changes in inventory.
- McBride concludes that Realtor.com and Altos better manage the impact of pending sales and are a more accurate source of data for evaluating inventory changes year-over-year.
- The analysis is important in the current market because NAR reports a much lower year-over-year inventory increase than does Realtor.com.
- McBride did not comment on Redfin data released early in the week, which showed a 32% decline year-over-year in pending sales.
- The average price of those pending sales is up just 0.5% from a year earlier, bringing the pace of price growth closer to historical norms than at any time in 2021 or 2022.
- That average price is 10% lower than June 2022.
- In many of the major housing markets across the U.S., the price of pending sales was lower year-over-year.
- New listings dropped over 22% from December 2021, setting a record low.
- Months of supply nearly doubled from the prior year to 3.4 months, but still remains below a level considered “balanced” by many industry observers.
- Median days-on-market rose to 42 from 30 over the past year.
- Similar variations occur in residential rent data from different sources. See below and farther below for more.
- Wee little bits of interesting data in a review of 2022 by EPB Research. Highlights:
- Existing home sales are 85% of the for-sale housing market.
- Existing home sales at the end of 2022 were down 45% from the pace at the end of 2020.
- The inventory of existing homes (but see above) stands at 3.3 months.
- The inventory of new homes is vastly greater at 8.6 months and probably does not take into account the 20% cancellation rate.
- Pending home sales are measured by many firms, and their numbers differ in magnitude but not in direction. Sales are down year-over-year and continuing to decline.
- Redfin, the real estate brokerage, reports that pending sales are down to a volume last seen seven years ago and down 23% from December 2021.
- Divergence is the word and fact of the week. The St. Louis Fed produced a telling summary of U.S. Census Bureau data on housing under construction.
- From April 2021 through the following 12 months, single-family and multi-family builders rode alongside each other, keeping nearly identical numbers of units under construction.
- The falling out occurred in May 2022 when multi-family builders boldly went where single-family builders would not go. Drastically higher mortgage interest rates slowed single-family construction, but multi-family builders continued starting new projects.
- By November 2022, multi-family builders had 20% more units under construction than their single-family counterparts.
- Master-planned communities in 2022 were emblematic of the broader residential sales market, according to John Burns Real Estate Consulting.
- Sales were down 11% and 16% from 2021 and 2020, respectively.
- The developers of these communities cited supply chain, lot supply, and interest rates as headwinds.
- Twelve of the top 25 communities are in Florida. Six are in Texas. Three are in Nevada.
- Realtor.com measured the change from December 2021 to 2022 in price per square foot of listed homes. The bottom line? Price per square foot rose the most in historically less desirable migration destinations (e.g., Omaha (NE) at $181 and Jackson (MS) at $144) and dropped the most at the other end of the spectrum (e.g., Boise (ID) at $263 and Denver (CO) at $280).
Construction Costs and Supply Chain
- Residential construction spending in November, according to the National Association of Home Builders, illustrated the single-family versus multi-family dichotomy that emerged in 2022 in the rising mortgage interest rate environment.
- Spending on single-family construction dropped a substantial 2.9% in November 2022 while spending on multi-family rose 2.4% in November. These numbers track closely the inventory disparity between the two residential product segments.
- Year-over-year, single-family construction spending is down 10.2% and multi-family spending is up 10.7%.
- Much of the dichotomy likely is explained by the much longer life-cycle of a multi-family project, measured in years, versus months for a single-family home. Look for multi-family spending to slow and reverse course in 2023 as projects under construction complete and investors postpone new starts in the face of rising vacancy rates and much higher financing costs.
- Construction labor may have gotten the message that the hey day of the pandemic housing boom is over.
- Lumber prices continued choppy but consistently downward momentum in the first week of the New Year. In the trading days after Christmas and into 2023, Lumber dropped 10% to end the week around $354 per 1,000 board feet. In early March 2022, the price peaked at $1,464.
- History is a warehouse of lessons, some learned and others still to be discovered. Earlier this week, researchers at the Massachusetts Institute of Technology and Harvard, unearthed a hardened secret of Roman construction.
- Collaborating with colleagues in Europe, the team of scientists and engineers used new techniques to reveal the role of lime in Roman concrete.
- The team concludes in a paper recently published that the lime gave the ancient concrete a “self-healing” capability, which could explain its durability.
Residential Leasing
- Former Fannie Mae economist Tom Lawler diligently tracks residential rent data from multiple sources. The sources agree that rent growth is dropping and likely will become year-over-year declines in some markets, at least. The magnitude of the change in rent trajectory varies significantly among the sources.
- Consistent and strong monthly rent increases through September 2022 have turned abruptly and significantly.
- Month-to-month increases over 1% from May to July evaporated.
- November rents dropped 0.73% from October.
- Multi-family construction continues to trend upward as single-family construction declines.
- Vacancy rates are rising.
- A correction sentiment is in the air.
Other News and Data
- Real estate sages quip that real estate investing should be driven by location, location, and location, but other factors obviously are influential. Two of those factors are overall employment rate and average or median income.
- Through 2021 (the most recent year for which data is available), the markets leading in those two factors can be separated by population.
- Large metropolitan areas not surprisingly have a higher percentage of the best paying jobs. San Jose / San Francisco, Washington (DC), Boston, Denver, and Atlanta are examples. With the exception of Atlanta, these markets also have historically the highest housing costs.
- A second tier of metros smaller in overall population have historically had strong employment and more recently have experienced an increase in the proportion of higher-paying jobs. Austin is the leading example over the past decade but also has seen an astronomical rise in housing costs. A few other markets are following in the footsteps of Austin, such as Tampa, Charlotte, Raleigh, Orlando, and Salt Lake City.
- The U.S. Labor Department reported on growth in jobs and hourly earnings in December 2022. Both were strong, but less strong than earlier in 2022.
- The U.S. economy added 223,000 jobs in December, while wages rose 4.6%. In times gone by, those numbers would have been received with celebrations of a strong labor market. In December 2022, those numbers are signs of a cooling labor market that many hope will cajole the Federal Reserve to slow the pace of interest rate hikes.
- The downside in a demonstration of economic irony is that unemployment dropped to 3.5%, a 53-year low, which may not bring joy to members of the Federal Open Market Committee.’
- Many more details from the Wall Street Journal.
- The Labor Department also reported on job openings in November. At 10.46 million, the number of available jobs remains high, and likely higher than the Federal Reserve prefers in the contest it is waging against inflation.
- The companion number to watch is wage growth, which has slowed, but still remains higher than compatible with the Fed’s 2% target inflation rate.
- And, on the subject of wage growth, take note of another example of how data purportedly measuring the same economic metric — wages — yield noticeably different nominal values but consistent trends.
- An analysis of customer data by United Van Lines segmented states by inbound and outbound relocation volume.
- Vermont led the list of states most popular to new residents followed by Rhode Island, South Carolina, North Carolina, Washington (DC), South Dakota, New Mexico, and Alabama.
- New Jersey led among states experiencing a net loss of residents followed by Wyoming and Pennsylvania.
- The Federal Trade Commission proposed a new rule that would ban non-compete agreements between employers and workers and void all existing non-compete agreements.
- And, to close the week in data, let’s be mindful of our Federal Reserve economic caretakers.
- In barely intelligible but clearly gruff words, the Fed warned investors that optimism is unwelcome.
- If investors refuse to heed the Fed’s desire for a cooler economy, interest rates will continue to rise and certainly will not decline in 2023.
A Word on Cybersecurity
If you use a password manager to create and recall your passwords to applications and websites, you should be aware of a major data breach at LastPass.
If you don’t use a password manager, then you’re likely using passwords that are too simple and using the same password for multiple logins. Both create security risks.