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US Home Purchases Fall Through At Record Rate On Cost Burden
Hopelessly-stretched would-be US homeowners caught a small break over the last week, as financing costs for nondescript wooden boxes in the suburbs slipped alongside Treasury yields.
The average 30-year conforming fixed was 7.02%, down a whole 7bps from the prior week's level, which counted as the highest since May.
It was the first decline since early December, and only the fourth weekly decline since the Fed first cut rates four months ago.
Obviously, the reprieve's mostly meaningless. If
I may have mentioned this here in the comments some time ago, but strangely, the YouTube algo started feeding me Florida real estate videos from local agents saying things like buyers leave auctions early, the rise in HOA and hurricane insurance spikes have people trying to sell, and distressed selling (above and beyond the divorce and estate volumes) is attracting financial buyers. Sellers are cutting their asking prices 30% on condos, etc. Thus “more inventory” may not be finding buyers and sitting on the market longer. I don’t even follow real estate on YT. Could all be guff.
What this and many analysts ignore is the elephant in the room. Wall Street investors. I have read they own 25 year supply of the market, that is if they sold and no one else did, it was take 25 years for them to unload their properties. In some markets such as Florida and Texas they are starting to sell, markets there are in the tank deeper than some other places.
These wall street investors enjoy the same tax breaks as small investors who own less than 10 houses which considering their costs means the investors owning 10 houses are at a significant disadvantage. The individual homebuyer is simply outbid. The wall street investors can afford to pay more if financing costs are low.
However today what is more likely driving markets is Cap rates less than 5%, mortgage money 7%, rising insurance rates and falling rental rates. Net result (aghast does not describe it) the wall street investors are losing money. As rates continue higher for longer and insurance is re-priced we will see more wall street sales. We have not yet seen package deals of 100 houses with terms, but who knows that could be coming soon to a town near you.
We need real tax reform for housing to ‘fix’ the housing market for the long term. This hot and cold folowing investment cycles will not work for our long term prosperity. We cannot prosper as a nation of serfs trying to stay afloat in a boom and bust economy.