ADR BLOG

Housing Stock Plummets to 60 year low growth rates

March 10th, 2023 10:12 AM by Andrew Walter May CEO

It's incredible to think that people actually believe we'll see housing prices get trashed. The only people that say that are people that rent, people that teach and people that make money by selling research.

All data sources I've checked show housing supply levels at the lowest in 60 years (growth rates).

Who, what, why, how and when? To start: WHO?

Charlotte and Raleigh are ranked 19th and 20th for shortest days on market (Avg 1 month supply).

Virginia Beach is ranked 8th (.8 months supply).

Tampa is ranked 13th (.9 months supply).

Arlington Tx and Ft. Worth Tx have less than 1 month supply and are ranked 14th and 17th respectively.

I don't see much difference between 1/2 month supply (two of the three lowest supply levels are in CO) and the markets we operate in above (NC, VA, TX and FL). I'm coining a new housing market phrase:

If you ain't buying, you're dying (financially that is).

What?

Demand is being shifted into the future. A huge demand is sitting on the sidelines as investors continue to scoop up 1 in 20 homes. Since home prices continue to go up in these top markets and we have less than 2 months supply of housing nationwide - what's a renter to do? Pay more and get less. Ten years ago the supply of housing was balancing at 7 months and our country was emerging from a political and financial disaster. To get back to that balance will take many years.

Why?

It's obvious. We closed a ton of clients at rates as low as 2.25% in 2021. They are not moving. They may like to rent to you - since rents are sky-rocketing. 2/3s of home owners are below 3% or own their home out-right. What will it take for them to move? A renter willing to pay a ton.

How?

With the Pandemic housing starts cratered. Remember if you were considered ESSENTIAL? Well building a house wasn't considered essential. Builders couldn't build. Supply cratered. And the incentive to build now? With interest rates rising to 10%? Or Beyond? ZERO. Most builders are keeping their powder dry and sitting on the sidelines. Lumber represents the largest cost of most homes (30%+). (2022 - 92% of new built homes were wood framed). Here's what lumber prices did over the last several decades (per thousand board feet):

1970s and 1980s - $100-250

1990s and 2000s - $200-$425

2010s and 2020s - $180-$1600

The good news is that lumber prices are back under $400 in March and I expect that to fall back down under $300 per thousand board feet in the next year of two. Why? Because the cost of financing has gone up 300% in the last year (based on Coupons) and that's way more important than the cost to build. Based on the 10 year Treasury rates are up 500%+ over the last year. (Remember, invest in laddered CDs).

When?

So with so much great data, when should I buy? Well taking the geo-political issues out (which are tough to predict - such as war) my belief is now is the perfect time to buy. Yes, someday rates will come down. But my number one strategy when it comes to interest rates is this:

A BALL IN MOTION STAYS IN MOTION.

Take a look at interest rates over any time you want. They don't go up - then down - then up - then down over a month or a year. They are in cycles. On 4/1/2020 the 10 year treasury (which mortgages are based) was .64%. Today? It's at 3.74%. It will go a lot higher. These are still low rates compared to historical patterns. In fact, Fed Chairman Powell recently stated they have to go a lot higher! There it is. They are going up up up. And the cost to purchase a home will only continue to rise. Until it turns, and we aren't anywhere near a turning point.

While the housing market is super strong the weak spots are in the mortgage and real estate sales associate area. In 1908 there were 1608 Real Estate Sales people. Today? Well in 2022 it peaked at 1.581 million. How about mortgage loan officers? 340,000 in 2022. Of which 37,000 are located in California. So how many mortgage loan officers were there in 1908? Zero. Insurance companies started the mortgage industry in the 1930s, with the help of the Federal Government. The numbers combine to about 1.9 million people. By 2025 I think that number will be around 1.5M or less.

If you are looking for a buydown option, ADRMortgage.com has rates that will impress you. We have the largest investor in the country providing a unique rate matrix for buydown 30 year fixed rates.

Call us to find out more. 919-771-3379. www.adrmortgage.com for disclosures. Lastly, we do mortgages in Texas and Florida (the top two fastest growing markets). As well as North Carolina and Virginia.

ADR offers substantial savings to all Purchase and Refinance Clients. Call Andy May for a rate quote and see how much you will save with our special finance rates. It only takes 5 minutes to fill out a loan application at www.adrmortgage.com.

919 771 3379

This is not an offer. Relevant disclosures and licensing found at:

www.adrmortgage.com

Posted by Andrew Walter May CEO on March 10th, 2023 10:12 AM

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