re: Will The Bank Fiasco Affect Mortgage Rates?

quote:

---

The argument from the real estate industry is there must be an undersupply of homes but this argument amounts to "wishcasting" IMO because of what the FRED data on rate of home ownership (homes lived in by the person owning the mortgage or property outright) show.

---

There is.

The FRED data shows homeowner vacancy rate at an all time low of .8% for Q4 2022. LINK

Rental vacancy rate is at the lowest levels since pre-1985. LINK

This chart shows homeownership, homeowner vacancy and rental vacancy all on one graph. LINK

Starts are down, but vacancy rates are the lowest they've been in ~40 years. There is an undersupply. Of course housing is regional so it will look different depending on population migration.

The vacancy rates are one of multiple relevant metrics. Others ro consider are the larger numbers of homes under construction (hitting the market over the next 12 odd months) and the number of extra homes people have bought as investment properties or vacation homes. That number is around 20 million. Both vacation homes and investment properties should be thought about as having different characteristics than the primary housing people live in where they work and their kids go to school.

quote:

---

Just started 2 new houses. Sales are up here in middle TN over the last 3 months. I’m expecting big drop in mortgage rates EOY and want to have both these houses ready. That said, even at current levels I anticipate selling both properties quickly.

There is no inventory here.

---

Very nice. Smart.

quote:

---

housing starts peaked in April 2022 and have sharply declined since then. Those spring starts should already be on the market by now, using the average of 6 months to complete a spec home.

---

The 1.67 million under construction as of January make me think a significant amount more supply is coming from just the new construction segment.

LINK

quote:

---

If someone bought a vacation home, that doesn't help with the undersupply problem

---

The concern is it adds to potential supply. People who don't live in a house they own will be more likely to sell if they are investors not making money (or enough money) or are less able to afford multiple homes than they were in an expanding economy with low interest rates, taxes, insurance etc.

A vacation home is a luxury you eliminate before more important expenses. An investment property (long term rental, Air B&B, whatever) is either profitable and worthwhile or unprofitable and therefore disposable. Both categories of home ownership are easier to forsee being sold because they not essential for shelter by the owner.

The very wealthy who own extra homes aren't selling IMO but the people living above their means are the ones who may choose or be forced into selling.

Like the old Buffet quote says we won't know who was swimming naked until the tide goes out. From this 2022 article among others we know the FRED data about vacant homes (for sale) are not representative of the overall rates of property vacancies.

quote:

---

States with the highest vacancy rates

No. 1: Vermont
Total housing units: 341,405
Vacant housing units: 78,052

Vacancy rate: 22.86%
Median home value: $235,000
No. 2: Maine
Total housing units: 755,380
Vacant housing units: 171,323
Vacancy rate: 22.68%
Median home value: $211,000

No. 3: Alaska
Total housing units: 321,385
Vacant housing units: 65,929
Vacancy rate: 20.51%
Median home value: $288,100

---

quote:

---

States with the lowest vacancy rates

No. 1: Oregon
Total housing units: 1,830,846

Vacant housing units: 141,983
Vacancy rate: 7.76%
Median home value: $373,500

No. 2: Washington
Total housing units: 3,242,721
Vacant housing units: 255,063
Vacancy rate: 7.87%
Median home value: $419,500

No. 3: Connecticut
Total housing units: 1,530,056
Vacant housing units: 123,819
Vacancy rate: 8.09%
Median home value: $287,500

---

LINK

Definitely starting to see rates drop a little. Not sure how low they’ll go or how long it’ll last but in the short term at least it seems rates are being affected.