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Welcome to the Homefinity weekly market insights post.
This week sees a further decline in home sales, “Mr. Wonderful” has some sunny news about commercial real estate (or not), and Newsweek highlights which cities in America our Mother Earth hates the most.
Latest average U.S. Mortgage Rates 2023-09-21
- 30-year fixed: 7.19% (previous week: 7.18%)
- 15-year fixed: 6.54% (previous week: 6.51%)
- 30-year FHA index: 7.099% (previous week: 7.042%)
- 30-year fixed rate Jumbo index: 7.631% (previous week: 7.674%)
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NAR: Existing-home sales dip slightly in August
According to the market watchers at National Association of REALTORS® (NAR), existing home sales experienced a modest decline in August.
While sales improved in the Midwest and remained unchanged in the Northeast, the South and West saw a slight drop. The upshot: Year-over-year, all four regions recorded sales declines.
NAR Chief Economist Lawrence Yun noted that mortgage rate changes can impact the market in the short run, while job gains have a positive influence in the long term. The South’s lighter decline in sales, he said, was attributed to robust regional job growth since the pandemic’s peak.
Current housing inventory remains low, with a 3.3-month supply at the current sales pace. Home prices continued to rise despite lower sales, emphasizing the need for increased supply to moderate price gains.
First-time buyers scored 29% of the sales in August, and all-cash sales slightly increased to 27%. Distressed sales remained stable at 1%.
Kevin O’Leary: Commercial real estate “doom loop” continues
“Shark Tank” star and O’Leary Ventures CEO Kevin O’Leary laid out his concerns about the commercial real estate industry on FoxBusiness, bluntly stating that it is on the verge of collapse.
Many office spaces, even in major cities like Boston, are facing high vacancy rates due to the shift towards remote and hybrid work models.
McKinsey conducted a study in July analyzing real estate in nine “superstar” cities: San Francisco, New York, Houston, London, Paris, Munich, Tokyo, Beijing, and Shanghai.
The study found that office attendance is currently approximately 30% lower than the typical pre-pandemic level observed in 2019.
Small and regional banks hold about 80% of the commercial real estate market’s debt, making them vulnerable to the impending challenges.
O’Leary suggested the situation may lead to stricter lending standards, higher interest rates, and limited access to loans, affecting businesses and households.
Newsweek: Overvalued housing markets and climate risk
Finally, who doesn’t love another story about how the planet is doomed?
Newsweek dumped some of this eco-love on their readers, suggesting that some of the most overvalued housing markets in the United States are also at the highest risk of climate-related damage.
Extreme weather events, they say, such as hurricanes, floods, and wildfires, are expected to increase in frequency and severity due to climate change.
DeltaTerra Capital experts noted that about 19% of single-family homes with high exposure to flooding or wildfires are overvalued by 18 to 30%. This overvaluation could lead to losses ranging from $1.3 trillion to $2.2 trillion in the market.
The most overvalued markets, they say, are in Cape Coral/Fort Myers, Florida, and Riverside/San Bernardino, California.
Insurance companies are already adjusting their rates due to increased climate risk, and mandatory purchase requirements for flood insurance may further impact these markets. This localized issue could reportedly create additional supply pressures in safer areas.
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Photo by Ketut Subiyanto