“Still very much tilted in sellers’ favor”
In last week’s TFTD we took a look at housing, where the latest CoreLogic Case Shiller Home Price report was making headlines with the largest gains in certain metrics in over 30 years. This data did, however, come with the caveat that it was from April and perhaps somewhat behind the times. Might there have been some base effects baked in that have since rolled off? This week, there was a slew of data showing that for both apartments and homes, the market remains remarkably strong.
In rental apartments, technology provider RealPage builds on the Apartment List data we highlighted last week and discusses the continued strength of apartment rents. Average monthly rents have hit all time highs after growing at the fastest year-on-year rate since early 2001. Rents have been pushed up in part thanks to occupancy, which is”now in line with the early 2000s all-time highs”. There are, as usual, some caveats: though rent growth is “widespread”, some major markets have asking rents that remain down on a year-on-year basis, such as a number big cities and those heavily reliant on the “languishing” oil patch.
Meanwhile, Redfin confirmed that the strong price increases exhibited in the Case-Shiller data have continued. Using data through the beginning of July, Redfin saw a 22% year-on-year increase in the smoothed median sale price of homes sold. And this was despite their data showing that “the number of homes newly listed for sale surpassed 2019 levels for the first time since the start of the year”. Though price growth was clearly still robust, there were a number of factors that lead Redfin to comment that the housing market was “feeling a few degrees cooler”. As Daryl Feirweather, Redfin’s Chief Economist wrote, “Buyers don’t have the same sense of urgency that they did at the beginning of the year” and are “waiting until more and better homes are listed”. As much as this shift may have resulted in some “cooling”, it and the price hesitancy that some of the survey data indicates appear to have yet to press very hard on the brakes. More than 50% of homes are being sold above list price and “homes continued to sell faster than ever, with the typical home lasting just 15 days on the market”. The two metrics do, however, appear to have “flatlined”.
P.S. While this slight “cooling”, or at least flatlining, might be welcome to the Fed, who is seeing increased “upside risks to the inflation outlook”, it might be too early to pop the champagne. June research from Fannie Mae not only dives into the relationship between housing and OER, but also warns that “increasing shelter inflation will last through at least 2022, meaning ‘transitory’ increases to the rate of overall inflation may be more prolonged than many are expecting”.
