It's official! We've rebranded! This is such an exciting time in our company and we can't wait to see what's in store for us, and for you guys, joining along side us in this journey!
Today, I wanted to discuss this insane economy. Will it crash or boom? Let's dive in and find out...
Intro
The real estate market has been unusually strong this year, with robust housing demand in nearly every region of the country.
So far, the Covid-caused crisis has unfolded in the opposite direction of what is expected in a recession. The hyperactive buyers are bidding up home prices and causing homes to sell quickly in competitive housing market conditions. Currently, there is an extremely tight supply of homes on the market, the lowest on record since the turn of the century. Home price growth continues to surge in double-digits due to tight supply and lower interest rates or borrowing costs.
With the recovering economy, more buyers are entering the market. And since there remains a limited supply of housing inventory, home prices in a low mortgage rate environment may rise even more. The average prices of single-family houses with mortgages guaranteed by Fannie Mae and Freddie Mac advanced 1.4 percent from a month earlier in March 2021, the most since last October and following an upwardly revised 1.1 percent growth in February. Such home price gains are expected again until either supply ramps up or demand decreases.
The differences between today's frenetic housing market and last year's frozen market are quite significant. We are having a residential housing boom driven by the improving economy and millennials reaching their prime homebuying years. Low mortgage rates and an increase in working from home ignited by the pandemic have fueled a rapid increase in housing demand — especially in lower-density suburbs. More existing homes were sold in 2020 than in any year since 2006.
According to Realtor.com, the typical home asking price hit another new high in May 2021 by reaching $380,000, an increase of 15.2% compared to last year. While home prices never fell, they were flat this time last year. However, the pace of home price appreciation has slowed from last month by 2 percentage points. Relief is not yet on the horizon for homebuyers as inventory continues to shrink. The median home price is forecasted to reach more highs in the coming months before the cooling-off trends begin this fall.
More owners are putting homes up for sale this year as a result of which a record-high share of homes for sale is “new listings.” At the same time, these homes are selling fast with time on the market being 32 days shorter than at this time last year. This means while the influx of sellers will help relieve some of the competitive pressure buyers are facing they still need to make their offers strong enough to beat out a multiple-bid scenario.
Sales of existing homes dropped 2.7% in April from March to a seasonally adjusted annualized rate of 5.85 million units. Sales were 33.9% higher than April 2020 when the housing market had shut down at the start of the pandemic. In the previous month, the existing home sales had fallen 3.7% from the prior month to a seasonally-adjusted annual rate of 6.01 million.
Will This Housing Boom Last or Crash?
The housing industry and its economic factors depend on supply and demand. The existing home sales data shows the tightest housing market on record. The demand has not gotten significantly shorter since last May/June, and buyers and sellers are continuing to connect at a record pace. This trend shows that the housing market is as strong as it was during the housing bubble. It is nowhere too close to a level where you can imagine the balance of real estate market conditions. Speedy home sales continue in all regions of the country and the median sales price continues to have double-digit growth. Although millions were laid off or furloughed it didn’t prevent house hunters from buying homes across the nation. As a result, the housing market saw the highest pace of sales growth since the height of the unprecedented housing boom in 2005. That expansion was driven by negligent lending in the subprime mortgage market and the current housing boom is driven by the intense demand and record-low mortgage rates. Both of these factors were driven by the coronavirus pandemic. The housing market has seen record-breaking growth since last June after briefly put on hold during the outbreak of the pandemic this spring. As prices keep climbing month-over-month, it just shows the resilience of the US housing market in the face of an ongoing economic recession. Although sellers are listing more & more homes we need more new home supply to add to inventory and slow these sharp price increases. When Many market watchers are curious to know how long will this housing boom last or will the market eventually crash? Well, so far, the housing market continues to be sizzling hot resulting in higher home prices and quick-selling homes. The only factor of concern is the housing supply which continues to fall short of demand. Increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but the most recent housing market trends don't suggest that inventory is likely to improve soon. In May 2021, the unemployment rate declined by 0.3 percentage points to 5.8 percent, and the number of unemployed persons fell by 496,000 to 9.3 million. These measures are down considerably from their recent highs in April 2020 but remain well above their levels before the coronavirus pandemic. Reduced purchasing power (due to higher rates) may relieve some of the pressure on home prices as marginal buyers are forced out of the market as mortgage rates slowly climb to the 3.5 percent range by year's end, but competition will remain fierce among those who can still afford to buy. For the rest of the year, those wishing to refinance should be able to find reasonable deals, though at somewhat higher rates. Despite early warnings of an impending crash, the housing market has so far avoided the downturn that the coronavirus pandemic has wreaked on other sectors of the US economy. The median existing-home sales price in April was $341,600, a new record high that represents a 19.1% increase from a year before. That is both the highest median price on record and the largest annual increase on record. Every region of the housing market recorded price increases and it also marks 110 straight months of year-over-year gains. Properties stayed on the market for 17 days in April on average, and 88% of homes sold last month were on the market for less than a month. Single-family home sales dropped to a seasonally-adjusted annual rate of 5.13 million in April, down 3.2% from 5.30 million in March, and up 28.9% from one year ago. The median existing single-family home price was $347,400 in April, up 20.3% from April 2020. Manchester-Nashua, NH maintains its hold as the hottest housing market in the country with half of all homes in Manchester selling in under 10 days. Concord, NH holds the second-highest spot on the list. The main criteria for hotness are the market demand and the pace of the market as measured by the number of days a listing remains active on its portal. Other recent market trends show that more sellers than normal are planning to list their homes for sale in the next 12 months. With this trend, homebuyers will certainly have more options to choose from especially in this challenging housing market. The Federal Reserve is playing a key role to support the economy and housing market by keeping borrowing costs low for shorter-term loans. It has a huge impact on all kinds of interest rates, including mortgage rates, through its control of short-term interest rates. Fed is also helping to keep mortgage rates low by purchasing sizable amounts ($40 billion worth every month) of agency mortgage-backed securities (MBS). The Fed has also indicated it plans to keep rates low at least until 2022. 35% of respondents to “Fannie Mae’s May National Housing Survey” said it was a good time to buy a home, the lowest in the survey’s history and down from 47% in April. The percentage who said it is a bad time to buy increased from 48% to 56%. As a result, the net share of those who say it is a good time to buy decreased 20 percentage points month over month. Seller sentiment remained unchanged as 67% of respondents said they believed it was a good time to sell a home. The rate of price growth in double-digits and higher mortgage rates will further discourage some potential homebuyers from entering the market. Hopefully, buyers who are currently struggling to find a house would see an improvement in the number of listings available to them as more sellers list their houses for the spring buying season. Realtors & brokers believe that the vaccine roll-out is expected to ease seller apprehensions, which should improve the supply trends throughout the year.
However, the lack of adequate supply and rise in mortgage rates will likely continue to hold back potential home sales. That's one reason why Fannie Mae has decreased their housing sales forecast for 2021. But it doesn't mean that the housing market will crash. They just expect a slowdown in the monthly pace of both existing and new sales later in the year. However, on an annual basis, the total home sales in 2021 are still predicted to be 6.2 percent higher than last year. Even as mortgage rates drift upward, home purchase demand remains robust. Mortgage rates are expected to remain near borrower-friendly levels and will help maintain strong housing demand in 2021. Hence, the supply-demand dynamics will continue to push home prices up by 8 percent in 2021 – up from the previously predicted rate of 4.2 percent (FHFA Home Price Index). Another interesting thing is that this higher home price forecast more than diminishes the modestly higher interest rate forecast. Therefore, the mortgage originations are also expected to tick up by 14.5 percent year-over-year in 2021. Fannie Mae predicts overall single-family mortgage market originations in 2021 and 2022 to total $4.0 trillion and $3.0 trillion, up from $3.9 trillion and $2.9 trillion, respectively. However, according to another mortgage giant, Freddie Mac, the total originations will decline to $3.5 trillion in 2021 as higher mortgage rates have the potential to soften the robust demand the housing market has been experiencing. Freddie Mac predicts home prices will rise by 6.6 percent in 2021, slowing to 4.4 percent in 2022, while it expects home sales to reach 7.1 million in 2021, and then declining to 6.7 million homes in 2022. Even with rising mortgage rates and higher prices, the housing market should remain strong due to very tight inventories and increasing demand as more millennials are projected to buy houses this year. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country. This is encouraging news for the millions of millennials who are approaching peak homebuying age. The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country's housing demand, up 52% as compared with 2018's shortfall, according to a new analysis from mortgage-finance company Freddie Mac. In 2018, Freddie Mac had estimated that the housing market was 2.5 million units short of what it needed to meet long-term demand. The new estimate is as of the end of 2020 and it emphasizes the severity of the housing supply. While the current housing shortage is also due to the moratorium on foreclosures but it's mainly because of home builders not keeping up with long-term demand growth. Single-family housing starts rose last year to 991,000 units but builders would need to construct between 1.1 million and 1.2 million single-family homes a year to meet long-term demand. The last time single-family housing starts broke 1 million was in 2007.
Hence, there's no doubt that with the continued supply-demand imbalance, this upward pull on prices is expected to remain consistent in 2021 and beyond. The current pace of price appreciation can soften a bit only if either supply ramps up quickly or demand softens. Fortunately, there are reasons to believe a change in the trend’s intensity may be on the horizon as more inventory is expected to become available later this spring. In the last week itself, we could see the beginning of a usual seasonal trend of an uptick in new homes for sale on the market. The results of more listings in the summer buying season and higher mortgage rates are that both could slow down the pace of home price appreciation. If homes would sit on the market longer, markets will then accumulate more active listings. In the second half of this year, we will see higher mortgage rates and, as they continue ticking up, which may begin to create a ceiling on the median home price growth, as monthly payments on new mortgages become less and less affordable. Homebuilding will continue and new homes will pile up a bit which will slow down the rate of price appreciation. There are reasons to believe that the housing market will remain tight in 2021 because there are first-time buyers (Millennials) coming into the market. First-time buyers were responsible for 32% of sales in March, up from 31% in February. About 4.8 million millennials are turning 30 this year and will continue to do so for the next three years, a significant positive force for the economy and housing. The main challenge for markets is meeting this upsurge in demand with a declining supply.
A recent Zillow survey shows that millions will enter the housing market in 2021 to purchase their dream house. In their survey, more than 1 in 10 Americans (10%) said they moved in the past 12 months, either by choice or circumstance. And now, with the COVID-19 vaccine circulating and the economy slowly picking up steam, Zillow researchers say millions of more households could be potential homebuyers in 2021.
In fact, we have seen a huge influx of movers wanting to take advantage of larger houses and larger plots for a fraction of the price they would pay in the metro area.
Summary
There really isn't a concrete answer as to what is going to happen. All we can do is look at all of the data and make the best calculated decision for ourselves and our goals. My partners and I, however, are buying up everything that pencils out to be a good deal. We have bought almost 300 units already this year with no plan to stop anytime soon. This time kind of reminds me of 2010. Everyone looks back now and thinks "Man, I should've bought everything I could get my hands on in 2010 because I'd be rich!" Maybe now is the time to be buying everything you can get your hands on...
Mobile, AL Market Data
Business: 1. A three-year, $129 million project brings a boost to the Mobile economy and could result in future U.S. Navy projects. Last week, APTIM Federal Services LLC delivered a Surface Ship Support Barge (SSSB) to the Port of Mobile for a dismantlement and disposal project, set to take place at Alabama Shipyard, a 425-acre facility on Pinto Island. “The SSSB brings with it an exciting opportunity for the city of Mobile’s economy by paving the way for tremendous job growth now and through future work in the dismantlement of Navy ships with highly-skilled personnel,” Mayor Sandy Stimpson said.
Prior to its arrival, the barge resided in the Navy’s possession at the Newport News Shipyard in Virginia. APTIM took possession in the James River, where the barge was transferred for dry docking and preparations for the dry tow. From there, the SSSB began her 13-day journey from Virginia to Mobile.
The SSSB is a “radiologically controlled” dockside refueling facility built from a converted Navy tanker. The project means local hiring and training; use of local materials, supplies, trucks and hotels; maximization of the shipyard, port and rail services; and recycling of non-impacted steel.
The project represents a major step forward in NAVSEA’s campaign to reduce — in the most cost-efficient and safest way — inactive nuclear reactors in both vessels and shore facilities, said Alan Weakley, president of APTIM’s business unit overseeing the disposal.
“APTIM is proud of our contribution to safely and efficiently dispose of this once strategic asset. We are also proud of our partnership with Alabama Shipyard and their impressive safety record,” Weakley said. “APTIM has been a part of the fabric of Mobile for many years with our Port Modernization team headquartered in Mobile, and our support of the U.S. Army Corps of Engineers, Mobile District. We are excited to strengthen our ties to Mobile and safely dispose of the SSSB.” 2. Austal USA held a christening on Saturday for the future USS Canberra Independence-variant littoral combat ship. Canberra is the 15th LCS designed and constructed by Austal USA and the second U.S. Navy ship to be named after the Australian capital. Canberra is the 15th of 19 small surface combatants Austal USA is building for the U.S. Navy. Five are under various stages of construction and a sixth is waiting to start construction. Austal USA is also constructing two Expeditionary Fast Transport ships for the U.S. Navy with one more on contract awaiting start of construction. The company recently broke ground on its new steel manufacturing line to expand its shipbuilding capability to service the rising demand for steel ships in the U.S. Navy and U.S. Coast Guard. 3. Imperial Dade, a distributor of food-service packaging and janitorial supplies, is constructing a 220,000-square-foot logistics hub off Interstate 10 in Loxley. The expansion is expected to create 55 new jobs. The facility is phase one of a Class-A industrial park known as the I-10 Gulf Coast Logistics Center. “Baldwin County continues to see high demand for new industrial and warehousing space,” Lee Lawson, president and CEO of the Baldwin County Economic Development Alliance, said. The new logistics center provides existing space and new options for those looking to invest in the Gulf Coast region, he said. Developed and owned by I-10/Gulf Coast Logistics Center LLC, the hub’s location provides easy access to the entire Gulf Coast market, including the Port of Mobile. Officials are currently marketing phase two of the development, with a total of 250,000 square feet in two additional buildings capable of accommodating tenants as small as 20,000 square feet. The center is located just south of the $100 million, 564,000-square-foot ALDI regional headquarters and distribution center. 4. The Infirmary Health Diagnostic and Medical Clinic starts seeing patients June 15 at the new, $26 million Medical Office Building on U.S. Highway 90 in Malbis. Infirmary Health held a ribbon-cutting Tuesday at the location near the intersection of U.S. 90 and County Road 181. The 79,000-square-foot, state-of-the-art building features a neoclassical Greek architectural style in honor of the Greek heritage of the Malbis community. “We are excited to continue growing along with Baldwin County,” Infirmary Health President and CEO Mark Nix said. “This new facility will offer residents of Daphne, Spanish Fort, Malbis and neighboring communities convenient access to a variety of physician practices and specialized medical clinics.” Later this year, Infirmary Therapy Services, Oncology Infusion and Infirmary Surgical Specialists will open in the new space.