Since many on this site may be buying or selling a home at any given time, own investment properties, or commercial real estate I'm posting this weekly update to stay current.
The data is well researched from multiple sources concerning the real estate & mortgage market.
Thus, it is fact based and only analyzing the data/trends without regard to government policy.
As I stated previously let's keep the thread informational for those that might be in the market and leave policy discussions in "The Corral".
Current Rates -
30 Year Conventional - High 6's
15 Year Conventional - High 5's
30 Year Jumbo - Mid 6's
30 Year FHA - Low 6's
30 Year VA - Low 6's
New Administration Takes Aim at Housing Affordability Issue -
This part of the thread is not political though it involves politics/the election - I'm not saying it is right or wrong. But changes are going to be made with any new administration and these changes can and will affect those on the board that are buying/selling/investing in real estate.
For that reason it would be remiss not to take note of them in this weekly post. In addition, "Housing Affordability" is a major issue that faces the county - that being said here is a preview of possible changes/new or different actions.
Three short days ago, Trump officially took office and signed a flurry of executive orders addressing many of the key policy issues that he ran his campaign on. While there wasn’t much “there-there” about housing, his administration did call for executive departments and agencies to deliver “emergency price relief” that would lower the cost of housing and expand the housing supply.
Most notably, the White House statement cited, “Many Americans are unable to purchase homes due to historically high prices, in part due to regulatory requirements that alone account for 25 percent of the cost of constructing a new home.”
Quick Edit - You heard that 25% cost first in the last edition of this post
Industry leaders are hopeful that his order will get people’s attention on the housing affordability issue. However, it is still unclear how the administration plans to achieve its stated goal.
While we wait for more clarity to come from the government, the National Association of Home Builders has laid out a “10-Point Housing Plan” which it believes could provide a clear framework addressing the issue.
Changes in Texas Realty Market -
It appears that in various Texas real estate markets the shift is moving towards a buyers market. With listing to sale times increasing, price reductions, and lower sales prices.
The housing market in Dallas has flipped.
Tech couple who sold and relocated to the exurbs couldn't find a place to buy in 2021 as they repeatedly got outbid.
Now, with WFH ending, they've found a home closer to downtown in Irving but can't sell their house in Celina.
From can't buy to can't sell.
Personal Opinion Here - I see the housing market just like the "Cash for Clunkers". All we did was rob years of future sales and compress them into an 18 month period, because everyone overreacted and thought they would work at home forever. People adjusted their lifestyles for a temporary interruption in the market. That coupled with ridiculously low and unsustainable rates has put us in our current position.
Now things are regressing to the mean both in lifestyle, work, and interest rates - we are starting to see it unwind in the form of falling real estate prices.
To add to the above we are starting to see a break in the "Lock-In Effect" - that is the phenomenon where people with rates in the 2's & 3's didn't want to sell their home because of the low rate. Things happen - divorce, job relocation, kids graduate, need to move for better schools etc. Time moves on...
Which one below do you think happens first?
Let's hope that real estate also returns to the saying that "Real Estate is Local" and we don't see home prices fall drastically nationwide. There is work to do.
Cap Rates Currently Less Attractive -
Investing is all about Risk Vs Reward. Traditionally investors like CAP Rates, a measure of their return, to be higher than what they can get in the interest rate markets. Why? Because when you own a piece of real estate, when it may be a good property and/or deal, it is an illiquid-asset - it takes time to sell and there is a higher cost to liquidate vs buying and selling a debt instrument.
Currently where bonds are priced, real estate investors can get close to the same return in the bond market as they can taking the risk to purchase an illiquid asset like real estate - and that affects the commercial real estate market and residential investment property market.
Rising costs aka insurance and lower rents are not helping with CAP Rates.
Short Term Rental or STRs Losing Their Luster -
Again Covid related during the last few years with travel restrictions lots of people turned to taking trips by car and doing an AirBNB aka a Short Term Rental/STR. Travel has returned, hotels are getting more competitive and serve a lot of travel needs. People I know that are doing well today in the STR market have unique or well-located properties with lots of amenities on site or close by. The days of getting high rental rates for the normal home even one in vacation areas seem to be fading.
The question now looms - can those owners make the payments on lower and/or fewer rents? How many of these homes will hit the market and at what price? Likely not the price people were paying during the Pandemic Boom of AirBNBs.
https://beatofhawaii.com/why-hawaii-vacation-rentals-plummeted-to-52/
Bonus -
For those of you wondering - that building we mentioned in a previous edition of this post finally sold.
And if you thought that was bad - here is one that sold for 3% of previous sale.
Final Thoughts -
My apologies for the "Late Edition" of this thread - busy week at work. Even though it's a little tardy I hope you found it informative. We should be back on our normal Thursday/Friday posting this coming week.
Would love to have comments or here your thoughts on the above topics!
One of my favorite times of year is upon us - Texas Longhorn Baseball Season! Can't wait to see what our new coach can do - exciting times on The Forty!
Always here to answer question ITT or send me a DM.
Also if there are any topics you would like addressed in an upcoming "Weekly Housing & Real Estate Market Thread" let me know.
May everyone have an Amazing & Prosperous 2025!
Hook 'Em!
MH
The data is well researched from multiple sources concerning the real estate & mortgage market.
Thus, it is fact based and only analyzing the data/trends without regard to government policy.
As I stated previously let's keep the thread informational for those that might be in the market and leave policy discussions in "The Corral".
Current Rates -
30 Year Conventional - High 6's
15 Year Conventional - High 5's
30 Year Jumbo - Mid 6's
30 Year FHA - Low 6's
30 Year VA - Low 6's
New Administration Takes Aim at Housing Affordability Issue -
This part of the thread is not political though it involves politics/the election - I'm not saying it is right or wrong. But changes are going to be made with any new administration and these changes can and will affect those on the board that are buying/selling/investing in real estate.
For that reason it would be remiss not to take note of them in this weekly post. In addition, "Housing Affordability" is a major issue that faces the county - that being said here is a preview of possible changes/new or different actions.
Three short days ago, Trump officially took office and signed a flurry of executive orders addressing many of the key policy issues that he ran his campaign on. While there wasn’t much “there-there” about housing, his administration did call for executive departments and agencies to deliver “emergency price relief” that would lower the cost of housing and expand the housing supply.
Most notably, the White House statement cited, “Many Americans are unable to purchase homes due to historically high prices, in part due to regulatory requirements that alone account for 25 percent of the cost of constructing a new home.”
Quick Edit - You heard that 25% cost first in the last edition of this post
Industry leaders are hopeful that his order will get people’s attention on the housing affordability issue. However, it is still unclear how the administration plans to achieve its stated goal.
While we wait for more clarity to come from the government, the National Association of Home Builders has laid out a “10-Point Housing Plan” which it believes could provide a clear framework addressing the issue.
- Eliminate excessive regulations
- Promote careers in the skilled trades
- Fix building material supply chains and ease costs
- Pass federal tax legislation to expand the production of affordable and attainable housing
- Overturn inefficient local zoning rules
- Alleviate permitting roadblocks
- Adopt reasonable and cost-effective building codes
- Reduce local impact fees and other upfront taxes associated with housing construction
- Make it easier for developers to finance new housing
- Update employment policies to promote flexibility and opportunity
Changes in Texas Realty Market -
It appears that in various Texas real estate markets the shift is moving towards a buyers market. With listing to sale times increasing, price reductions, and lower sales prices.
The housing market in Dallas has flipped.
Tech couple who sold and relocated to the exurbs couldn't find a place to buy in 2021 as they repeatedly got outbid.
Now, with WFH ending, they've found a home closer to downtown in Irving but can't sell their house in Celina.
From can't buy to can't sell.
Personal Opinion Here - I see the housing market just like the "Cash for Clunkers". All we did was rob years of future sales and compress them into an 18 month period, because everyone overreacted and thought they would work at home forever. People adjusted their lifestyles for a temporary interruption in the market. That coupled with ridiculously low and unsustainable rates has put us in our current position.
Now things are regressing to the mean both in lifestyle, work, and interest rates - we are starting to see it unwind in the form of falling real estate prices.
To add to the above we are starting to see a break in the "Lock-In Effect" - that is the phenomenon where people with rates in the 2's & 3's didn't want to sell their home because of the low rate. Things happen - divorce, job relocation, kids graduate, need to move for better schools etc. Time moves on...
Which one below do you think happens first?
Let's hope that real estate also returns to the saying that "Real Estate is Local" and we don't see home prices fall drastically nationwide. There is work to do.
Cap Rates Currently Less Attractive -
Investing is all about Risk Vs Reward. Traditionally investors like CAP Rates, a measure of their return, to be higher than what they can get in the interest rate markets. Why? Because when you own a piece of real estate, when it may be a good property and/or deal, it is an illiquid-asset - it takes time to sell and there is a higher cost to liquidate vs buying and selling a debt instrument.
Currently where bonds are priced, real estate investors can get close to the same return in the bond market as they can taking the risk to purchase an illiquid asset like real estate - and that affects the commercial real estate market and residential investment property market.
Rising costs aka insurance and lower rents are not helping with CAP Rates.
Short Term Rental or STRs Losing Their Luster -
Again Covid related during the last few years with travel restrictions lots of people turned to taking trips by car and doing an AirBNB aka a Short Term Rental/STR. Travel has returned, hotels are getting more competitive and serve a lot of travel needs. People I know that are doing well today in the STR market have unique or well-located properties with lots of amenities on site or close by. The days of getting high rental rates for the normal home even one in vacation areas seem to be fading.
The question now looms - can those owners make the payments on lower and/or fewer rents? How many of these homes will hit the market and at what price? Likely not the price people were paying during the Pandemic Boom of AirBNBs.
https://beatofhawaii.com/why-hawaii-vacation-rentals-plummeted-to-52/
Bonus -
For those of you wondering - that building we mentioned in a previous edition of this post finally sold.
And if you thought that was bad - here is one that sold for 3% of previous sale.
Final Thoughts -
My apologies for the "Late Edition" of this thread - busy week at work. Even though it's a little tardy I hope you found it informative. We should be back on our normal Thursday/Friday posting this coming week.
Would love to have comments or here your thoughts on the above topics!
One of my favorite times of year is upon us - Texas Longhorn Baseball Season! Can't wait to see what our new coach can do - exciting times on The Forty!
Always here to answer question ITT or send me a DM.
Also if there are any topics you would like addressed in an upcoming "Weekly Housing & Real Estate Market Thread" let me know.
May everyone have an Amazing & Prosperous 2025!
Hook 'Em!
MH
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