Housing inventory is no longer the driver for home prices.
Inputs that matter: Buying a home has become significantly more expensive than just a few years ago.
- According to Zillow, the average US home is hovering around $350,000.
- That is up 3.6% from last year.
- Realtor.com reports that the housing inventory is up from last year by 11%.
The opportunity: As a seller's market, buyers will be responsible for more of the costs associated with the sale.
- The $418 million settlement with the National Association of Realtors (NAR) is expected to lower overall agent commissions.
- Yahoo! Finance explains that "buyers could be responsible for their agent compensation."
- For example, the standard commission on a $300,000 home is $18,000. A buyer is expected to pay half of that ($9,000) out of pocket at closing.
Zoom in: PEW Trust confirms that investment companies buy up a quarter of the single-family home market.
- Investors are not concerned with a single property like a typical home buyer. Instead, they are looking at the performance expectations of a block.
- This means that such investors can pay more for some properties.
- CNBC expects Institutional investors to control 40% of US single-family rental homes by 2030.
Between the lines: Hedge fund analyst Hudson Cashdan explains, "The influx of this institutional capital is one element driving the surge in single-family housing prices and rents across the US today, and despite negative media scrutiny, rising rents are attracting even more investors."
- Unlike Apartments, a block of single-family homes has no common areas to maintain.
- Single-family homes can be sold individually to restructure capital, whereas an apartment building is a single asset.
- Weather and natural disaster risk is spread across cities and states with single-family homes.
Follow the money: Mortgage rates are still elevated, with the average annual income needed to qualify above $100,000.
- The average mortgage payment is over $2000 per month.
- A standard 20% down payment for the average home is $70,000.
- All of this is driving a growing rental market.
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Read More
- https://www.zillow.com/home-values/102001/united-states/
- https://calculatedrisk.substack.com/p/part-1-current-state-of-the-housing-332
- https://finance.yahoo.com/news/realtor-lawsuit-settlement-unburdens-home-sellers-from-heavy-commissions-what-now-for-buyers-090010199.html
- https://todayshomeowner.com/blog/guides/are-big-companies-buying-up-single-family-homes
- https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html
- https://www.toptal.com/finance/real-estate/wall-street-buying-single-family-homes
- https://www.mortgagenewsdaily.com/markets/mortgage-rates-03192024