Track your rental property performance for FREE

Learn More

Average equity loss of $8,300 in Q2 2023

Average equity loss of $8,300 in Q2 2023
by Brad Cartier, posted in Newsletter

According to a new Redfin survey, 1 in 5 millennials say they will never own a home. About half of millennials and Gen Zers who believe they will never own a home say it’s because of the high costs. Further, of the Gen Zers and millennials who plan on buying, 40% are working side hustles to afford the down payment. 

Jeff Tucker of Zillow reports on rising rents, noting that the average U.S. rent now sits at $2,052, a 3.3% year-over-year increase. This, however, is a continuation of the slow deceleration of rents seen over the past year. “August’s annual growth rate is now solidly below the annual pace observed just before the pandemic: year-over-year growth hovered between 4.0% and 4.2% in 2019.”

Housing prices continue rising higher due to low supply, according to Dana Anderson of Redfin. Mortgage purchase applications are at their lowest level in 30 years, as housing prices increased 4.5% month-over-month to an average of $378,725.

Housing prices still rising

Source: Redfin (September 2023) 

According to CoreLogic, homeowners have seen an equity decline in 2023. “U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity decline by a total of $287.6 billion since the second quarter of 2022, a loss of 1.7% year over year…In the second quarter of 2023, the average U.S. homeowner lost approximately $-8,300 in equity during the past year. New Jersey, New Hampshire, Connecticut and Rhode Island experienced the largest average equity gains, all at $20,000 or more.”

Markets with equity gains and losses

Source: CoreLogic (September 2023)

To offset rising housing costs, a new survey shows that more and more homeowners are considering short-term rentals. “Among the surveyed homeowners, 39% have or would consider renting out part of their primary home. The younger generations have the most experience and interest in this realm with 74% of Gen Z and 66% of Millennials having rented out part of their home before or considering it.” The main reason cited for this is the financial burden of owning a home.

Top markets for…

Christine Stricker of ATTOM Data Solutions released a list of the top metros for purchase mortgage originations. Despite an overall slowdown in the housing market, mortgages secured by residential property jumped to 1.56 million in Q2, down 38% percent annually but up 21% quarterly. This was the first quarterly increase in two years. The top markets for originations were as follows:

Metros with most mortgage originations

Source: ATTOM Data Solutions (September 2023)

Hannah Jones and Danielle Hale of report on the hottest metros in 2023 as gauged by listing views, median days on market, and median listing price. Based on this data, these were noted as the metros with the highest activity so far this year:

Top US markets

Source: (September 2023)

“Our list of top 10 zip codes shows the concentration of buyer demand in affordable Midwest markets and well-located Northeast markets that offer convenience and value. Homes in the hottest zip codes tend to be larger than the U.S. average. Despite their size advantage, a majority of the hottest zips see prices at or below the U.S. median. The Northeast markets on the list tended to be higher priced, but offered more space at a discount relative to the central areas of high-cost metros nearby.”

In another report, ATTOM Data Solutions released its top zombified ZIPS in the U.S., which show the number of pre-foreclosure properties abandoned by owners. Currently, 1.3 million (1,277,612) residential properties are pre-foreclosure and vacant, representing 1.3% of the housing stock, or one in 79 homes. The top markets for zombie homes include:

Foreclosure markets

Source: ATTOM Data Solutions (September 2023)

“[T]he number of zombie properties has grown quarterly in 19 states and annually in 28. The biggest increases from Q2 to Q3 2023 in states with at least 50 zombie properties, are in: Missouri (zombie properties up 51 percent, from 35 to 53), Maryland (up 22 percent, from 188 to 229), Oklahoma (up 15 percent, from 173 to 199), Connecticut (up 13 percent, from 77 to 87) and Pennsylvania (up 11 percent, from 401 to 446).”

Labor market

In welcome news for central banks and inflation watchers, the latest employment numbers point to a possible slowdown in the labor market. According to Fannie Mae, this will give the Federal Reserve more reason to put rate hikes on hold at their meeting next week. 187,000 jobs were added in August, and the prior two months were revised downward by a total of 110,000 jobs. Further, the unemployment rate increased to 3.8%, its highest level since February 2022.

Dan Burns of Reuters reports on the labor data, highlighting that although the jobs market softened last month, we have yet to see a marked increase in layoffs, which would be a stronger signal of an economic downturn. According to Burns: 

“While other data on the job market recently have shown signs it is softening from the extremely tight conditions that arose during the COVID-19 pandemic, Thursday’s data reinforces the view that it remains robust by historical standards. That may lead the Fed – which has jacked up interest rates aggressively over the last 18 months – to keep borrowing costs high for some time in order to bring inflation back to its 2% target.”

Bill Stone of Forbes notes that despite the rise in unemployment, it is considered healthy due to an increase in the labor force rather than an actual decline in employment. “This development will give rise to hopes that wage growth can moderate due to the added supply of labor rather than a reduction in demand for workers, which accompanies an economic slowdown.”

Finally, Megan Werner of JP Morgan comments on the jobs report, reporting that in the near term, the market is predicting (93%) the probability of the Fed keeping rates at their current levels during the September 20th meeting. 

Market predicts Fed pause

Source: CME Group (September 2023)

Find this content useful? Share it with your friends!