Real Estate

It's crazy that the demand for real estate is as strong as it is in the midst of war, market volatility, and inflation. We expected rates to increase over 2022 from 3.3% to 3.8%. That happened in January alone. Then, we got a hike of nearly the same size, to 4.4%. When Russia invaded Ukraine, real estate web traffic fell 3% - 5%. Any big headline-grabbing event, like an election, has that effect. But this has lasted longer. Recently, tours of listings were down 13%, though that's compared to freakish 2021 sales activity. Even still, we’re supply-constrained. Last quarter, 18.4% of homes sold to investors, a record; the 10-year average prior to the pandemic was 12.6%. Another record: 71% of homes in February sold in bidding wars. Pre-pandemic, when inventory was still low, the average was 55%. Year to date, the number of new listings is down, but only 6%. The average number of homes for sale is down much more: 24%. The amount of food being served is nearly the same, but it’s being eaten much faster. It’s not just that demand is stronger than before; tech made it faster. This tech includes Redfin’s app, the DoorDash equivalent for real estate. The time it takes us to notify a customer about a new listing, schedule a tour, then write an offer is measured in minutes. Even when the market cools down, it may not slow down: good homes will sell in a weekend. The rest will be discounted after two pundits gauge impact on commissions, which in 30 years fell from 6.1% to 4.9%. Brokers are a bit cheaper, but a lot faster: a lifestyle gig is now 24/7. Another misconception: Rising rates affect home-buyers more than owners, limiting demand not supply. But the monthly payment for a median-priced U.S. home with a 2.65% mortgage is $1,264. That home will rent for $1,900. Many would-be sellers would rather have ~$600 a month. That difference is why investors & individual homeowners would rather rent than sell. The Fed’s actions may have done the economy a solid in 2020 but clearly lacked any concern about the future or the byproducts of their policies, these actions will limit housing inventory for years to come. The bidding wars created by this inventory crunch have been the worst I've seen in my lifetime. #EndTheFed