Housing prices continue their upward trajectory with Redfin reporting last week on four important trends worth highlighting:
- Housing prices are up 17% year-over-year
- There was a 7% drop in new listings
- Almost 3 in 5 homes were purchased within two weeks, an all-time high
- Half of the homes sold were for over asking price
Source: Redfin (March 2022)
Redfin Chief Economist Daryl Fairweather comments: “With so much uncertainty in the world and economy, it makes sense that homeowners are staying put…High prices and rising mortgage rates are a strong impediment even for homeowners who would ideally like to move to a better home. First-time homebuyers, on the other hand, are still seeking the security of homeownership despite the chaos of this market.”
Diana Olick of CNBC reports on pending home sales, which dropped 4.1% month-over-month between January and February as we enter the typically busy spring selling season. Sales were also down 5.4% compared with February 2021.
Prashant Gopal of Bloomberg reports on the rise in cash-out refinances, with investors pulling out cash from investment properties to buy more. “For U.S. landlords and second-home owners, these loans more than doubled in the fourth quarter from a year earlier to $8 billion, the highest level since 2006.”
Jacob Passy on Barron’s reports that one analyst in particular “is predicting a dramatic fall in the pace of home sales this year. In a research note, he [Ian Shepherdson, chief economist and founder of research consulting firm Pantheon Macroeconomics] projected that existing-home sales will drop roughly 25% from the annual pace of 6.02 million set in February to a rate of 4.5 million by the end of summer.”
Along a similar line, Lance Lambert of Fortune reports on a recent Mortgage Bankers Association (MBA) prediction that home prices growth will increase just 4.8% in 2022. This would mark a significant slow of the rapid growth seen over the past two years.
Remote work update
Megan Cerullo of CBS News reported last week on several polls relating to remote work, the first being that 82% of employees say that they enjoy working remotely. Further, a second poll found that almost 10% of job postings are for remote workers, triple the amount from pre-pandemic. This is further indication that remote work is likely here to stay.
According to Zillow research, “the number of vacation towns with a larger share of “favorites” per home listing than the typical U.S. listing has nearly tripled since the start of the pandemic” primarily as a result of work flexibility.
Similarly, Jeff Tucker of Zillow reports that “The pandemic-led shift to remote and hybrid work has put a premium on certain features that allow buyers to work from home…High-speed broadband access, when mentioned in a listing description, is associated with a 2.5% sale premium. A Zoom room or home office space can add 1.6% to a home’s sale price.”
Workers are now accustomed to the remote work life. June Sham of Biz Times reports that 55% of workers in a recent survey said that the ability to work from home is now more important to them than before the pandemic. This was even higher than those who cited higher pay as being more important (52%).
Remote work may not be as popular among younger generations. In reporting on an Apartment List survey, Aaron Leathley of The Record reports that 36% of Gen Z remote workers found it “extremely desirable,” whereas 62% of Baby Boomers, 54% of Gen Xers, and 51% of Millennials said continuing remote work would be “extremely desirable.”
#LocalNews: California, Texas
According to Hayley Smith and Sarah Parvini of the Los Angeles Times, there has been a significant population shift in California. In the first year of the pandemic, Los Angeles County lost 160,000 residents, more than any U.S. county. Similarly, the per capita loss in San Francisco was 6.7%, and 6.9% in New York. Between July 2020 and July 2021, California lost a total of 262,000 residents.
Source: Los Angeles Times (March 2022)
This is due in part to housing affordability. Christian Martinez also of the Los Angeles Times reports that “nearly 55% of Californians were concerned about not having enough money to pay their rents or mortgages.” Further, 26% are “very concerned” about having enough money to cover housing costs.
Pedro Nava, Cathay Schwamberger, and Dion Aroner of The Mercury News reported last week on the Little Hoover Commission which found the best way to improve affordability was to add more supply to the market.
Moving over to Texas, Redfin reported last week that nationally while asking rents were up 15% in February 2022, in Austin, they rose almost 40%. Portland, OR wasn’t far behind at 39%, and the Tri-State Area and Florida also saw rental jumps of 30% or higher.
Finally, Chandler France of the Texas Digital Reporter reports that “Between 2010 and 2020, there were 6.3 million new homeowners in the U.S. … [T]hree of the top five metropolitan areas for middle-income earners were in Texas.” These metros included Austin-Round Rock, Dallas-Fort Worth-Arlington, and Houston-The Woodlands-Sugar.