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Where are the healthy real estate markets?

Where are the healthy real estate markets
by Brad Cartier, posted in Newsletter

According to Hannah Jones of, the median new home sale price hit $493,000 in October, a year-over-year jump of 15.3%. Further, new home sales rose 7.5% month over month in October. Despite a drop in buying activity due to rising rates, new home sales are made quickly due to low supply, with new homes spending only 1.6 months on market in October, a drop from 2.5 months last October.

New homes demand still strong - Realtor

Source: (November 2022)

Further, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 18, 2022, applications for mortgages increased. We reported last week on the significant drop in interest rates, which is likely fueling the increase in demand. MBA reports that loan volume increased 2.2% last week, and the refinance index increased 2% but is still down 86% year over year.

Joel Kan, MBA’s vice president and deputy chief economist, noted: 

“The 30-year fixed-rate mortgage fell for the second week in a row to 6.67 percent and is now down almost 50 basis points from the recent peak of 7.16 percent one month ago…The decrease in mortgage rates should improve the purchasing power of prospective homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year. As a result of the drop in mortgage rates, both purchase and refinance applications picked up slightly last week. However, refinance activity is still more than 80 percent below last year’s pace.”

Thomas Malone of CoreLogic explains that the U.S. housing market is not as vulnerable as others to price decreases. “[N]early all borrowers in the United States are locked into mortgages with rates at around 3% for the life of the mortgage. Overseas borrowers do not have the same luxury since banks hold the mortgages they sell, and thus directly bear the risk…Unsurprisingly, U.S. inventory remains very low, and the supply-demand balance becomes skewed. With such market conditions defining the U.S., the country may end up showing comparative resilience to price drops, and the housing market downturn should show itself more clearly in sales declines.”

Dana Anderson of Redfin talks about homebuyer demand, reporting that the Redfin Homebuyer Demand Index saw a jump of 1.6% month over month, despite being down 33% year over year. The demand decreases aren’t as sharp as earlier this year and could be leveling off.

Homebuyer demand increases slightly - Redfin

Source: Redfin (November 2022)


Yardi Matrix released its National Multifamily Report, which identifies the top local growth markets. Based on rent and employment growth, Yardi Matrix identified these markets as some of the most robust in the country. 

Top multifamily markets

Source: Yardi Matrix (November 2022)

Similarly, Aarthi Swaminathan of MarketWatch reports on Cadre data that, based on historical returns, 2-year growth, and liquidity potential, identifies the top 5 markets for multifamily investment.

  • Atlanta
  • Austin
  • Boston
  • Charlotte
  • Dallas

These markets were also chosen due to job and population growth, as well as rents, which are more affordable than purchasing a home. 

Some markets face a decrease in investor activity as a result of the current economic environment, according to According to its analysis, investor home purchases have fallen the sharpest in these specific markets.

Where investor purchases have slowed the most - Realtor

Source: (November 2022)

“[I]t’s harder to make the numbers work in today’s cost-squeezed market. For example, an investor buyer who was looking at borrowing $400,000 to buy a rental property last year with a 3.5% mortgage rate on a 30-year fixed-rate loan, would need to earn about $1,800 a month to cover the investment. If that same hypothetical investor is looking at borrowing $400,000 with today’s roughly 7% mortgage rate, it will take around $2,700 to cover the monthly payment. In many places, renters simply can’t afford that $900 rent hike, so the investment no longer makes sense.”

ATTOM Data Solutions released a report on local markets with the lowest loan amounts, which may indicate these markets will be more stable in any significant downturn or recession. Those metros with the lowest loan amounts include Peoria, IL ($132,000); Youngstown-Warren-Boardman, OH-PA ($140,000); Huntington-Ashland, WV-KY-OH ($140,404); Springfield, IL ($148,668); Davenport-Moline-Rock Island, IA-IL ($150,000); Erie, PA ($150,719); Toledo, OH ($151,652); Rockford, IL ($156,000); Utica-Rome, NY ($161,639); and St. Louis, MO-IL ($164,929).


Lily Katz of Redfin reports on rents, noting that even though rents rose 7.8% in October year over year, this is the slowest growth in 14 months. The largest rent drops were seen in Milwaukee, Minneapolis, and Baltimore. 

Redfin Deputy Chief Economist Taylor Marr is quoted as saying: “Demand for rentals is slowing because economic uncertainty is prompting many renters to stay put, and persistent inflation is shrinking renter budgets. That’s causing rent growth to cool…There are signs that inflation is starting to ease, but it will likely be a while before renters see meaningful relief given that rents are still up more than wages.”

Zumper released its National Rent Report last week, showing similar findings. Rent growth is decelerating rapidly, dropping below 9% year over year for both one- and two-bedroom units.

YoY rent growth decelerating

Source: Zumper (November 2022)

“Rent prices continue to decline gradually across much of the United States. Nationally, the median price for a one-bedroom is flat over last month; the two-bedroom median fell 0.4%. Nearly half the cities on Zumper’s list posted decreased or flat one-bedroom prices compared to last month; the two-bedroom median is down or flat in 60% of our top 100 cities.”

According to the Yardi Matrix report on multifamily noted above: “Meanwhile, only four metros saw negative growth in Renter-by-Necessity units. While it is difficult to draw hard conclusions from monthly numbers, it could be a sign that renters are becoming unable or unwilling to pay high rents.”

Indeed, Zillow released a report recently highlighting the ongoing affordability challenge for renters. Reportedly, at current average wages, it takes renters 62.6 hours of work to pay a typical U.S. rent. This is 6 more hours than before the pandemic, with rents growing 36.8% over the past 5 years, with wages only increasing 23% during the same period.

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