WHAT’S GOING ON: WITH HOME PRICES TODAY?

There are several narratives of why – lack of inventory, private equity buying all the houses, it’s too difficult to build with all the government red tape, a lot of folks are NOT selling their homes, and so forth...

Author

Lamina Toyeeb
June 29, 2024

WHAT’S GOING ON: WITH HOME PRICES TODAY?

Hello There 🙋‍♂️,

Welcome to this edition of "What’s Going On" 

Home-sale prices in the United States continue to soar, setting another new record of $387,600. This is 4% higher since May of last year. Average mortgage rates are still at an all-time high, with the average mortgage payment over $2,800. So yes, prices are high, its expensive to own and it’s a mess for those who are trying to afford their first home, or those that need to upgrade to a new home.

Home prices continue to surge even with housing expenses skyrocketing. Today, we are seeing about an 8% increase in new listings compared to last year, but that still isn’t enough to meet the short supply of homes, and again, driving prices up.

There are several narratives of why – lack of inventory, private equity buying all the houses, it’s too difficult to build with all the government red tape, a lot of folks are NOT selling their homes (holding on to their ultra-low mortgages that they got from a few years ago), and so forth.

Alexis ➤ Hey, Dean! How can we increase the supply of homes?

Dean ➤ First and foremost, we need to build more homes and apartments. Secondly, the government needs to make it easier to build more homes and apartments. There needs to be more incentives from the government or private sector for home and apartment builders.

WHAT IS REALLY GOING ON?? 🤔 

Let’s first look at private equity being the culprit. We have all heard a lot of complaints that the Blackrocks of the world, aka Private Equity, aka Institutional Real Estate Funds and the like, that are causing the problem, the reality is that there is no doubt, they are contributing to it, but are they the REAL culprit? Let’s see…

So, the data for how much these firms are buying up homes is not available, but what we have is from 2022. According to a study by Americans for Financial Reform (https://ourfinancialsecurity.org/) In June 2022, PE firms owned about 4% of apartments and 1.6% of rental homes nationwide. So it looks like not a big deal right? Not so fast. It's important to note that institutional investors, including private equity firms, have a significant presence in certain metropolitan areas.

For example, in cities like Charlotte, Tampa, and Atlanta, institutional investors owned a substantial portion of rental homes in 2020, with one-fifth of houses in some Atlanta neighborhoods owned by PE

firms. Additionally, in some markets like Memphis, Atlanta, and Lubbock and McAllen, Texas, investors purchased over 30% of single-family homes in the second quarter alone, of 2021.

So, this demonstrates that on a big picture view, it’s not a big deal, but in some specific markets, PE firms ARE the culprit, in that they are driving up demand and thus contributing to higher prices.

What about the supply problem?

In a nutshell, that’s a bigger problem than the high demand. Since 2008, housing supply has not kept up with the pace of demand. Why? Costs are so high, its not as profitable (or sometimes not even profitable) for housing developers to build more homes, it’s an economic issue most of the time. It takes too long with all the government (state, local etc.) regulations and anti-housing advocates significantly drive up the costs and cause delays. Inflation both in goods and labor drive up costs.

So, in general, less homes are built, all while the demand has not only remained the same but increased in over a decade. Look at it this way, we don’t build have enough places to live while we continually have more and more people needing a place to live. Our population is growing, has been growing and will continue to grow (maybe at a lower rate in the future, but still growing).

We need to figure out how to encourage more building of homes, condos, apartments and the like. It’s not something we can fix in a short period of time, but we ‘gotta start working towards that now, if not, it’s just going to keep getting worse.

NEED A MORTGAGE? WORK WITH ALEXIS  

Phone: +1-310-448-3009

NMLS: 2434190

WORK WITH OUR REALTOR: DANIEL LOWE


Born in Washington, D.C., to a Jamaican family, Daniel was raised in Los Angeles. Since launching his real estate career in 2011, Daniel has been consistently recognized as a top producer, and he has accumulated a vast network of industry professionals. He’s also shared his sharp expertise and industry insights as a contributor to the Los Angeles Business Journal.

When it comes to his clients, Daniel enjoys serving individuals from all walks of life, from young families and first-time buyers to athletes, physicians, and entertainers. He provides everyone with discreet, concierge-level service while keeping a steady finger on the pulse of the local housing market. Thanks to Daniel’s amiable nature, his track record of customer satisfaction includes turning clients into friends.

Phone: +1-310-420-6531

DRE: 01893579

AND THAT’S A WRAP

Thank you for joining us in this edition of "What’s Going On." Stay tuned for more insights into the latest trends and innovations shaping our world.

We hope you look forward to receiving our upcoming newsletters packed with exciting content. If you haven't already, be sure to subscribe to stay updated with all our future editions.

Until next time!
AlexisAndDean.

Tired of Unoriginal Investing News? Try The Daily Upside.

99% of news outlets serve algorithms, not readers, churning out uninspired content by "journalists" who barely understand the topics. In the financial and investing space, this is a complete waste of time.

But The Daily Upside is different. Created by Wall Street insiders and bankers, this fresh, insightful newsletter delivers valuable insights that go beyond the headlines.

And the best part? It’s completely free. Join 1M+ readers and subscribe today.

Reply

or to participate.