Competition For Realtors Is As Fierce As It's Ever Been, But You Already Knew That. | (2.27.23)
"Success isn't owned. It's leased, and rent is due every day." - J.J. Watt
What You Need To Know Today:
• This morning the National Association of Realtors (NAR) published updated pending home sales figures for the month of January 2023. For the second consecutive month, pending home sales increased with last month’s reading coming in up 8.1% from December 2022.1 This reading was significantly higher than the pre-release market expectation of 0.9%, however, on a year-over-year basis pending transactions are down 24.1%. Remember, a year ago this week interest rates were approximately ~4.0%. As always, pending home sales figures provide a decent look into the future as the homes under contract will not close their transactions for approximately 30 days after the accepted offer date.
TL;DR — Pending home sales came in much hotter than expected.2
• As reported by Bill McBride, for the first time on record in the United States there are more “build-for-rent” units that started construction over a quarter than “build-for-sale” units.3 This is outlined in the below graph which shows quarterly build starts split by category including single-family homes (for sale), owner built, starts built for rent, and multi-family properties (built for sale). The red line, marking single-family starts (for sale), illustrates the 34% decline in Q4 2022 compared to the same quarter in 2021. Meanwhile, the blue line (units built for rent) was up by 15% in Q4 2022 compared to Q4 2021.
TL;DR — For the first time in nearly 50 years, there were more units built-for-rent started in Q4 2022 than single-family units (built-for-sale) started.
• According to Redfin, investors purchased approximately half as many homes in Q4 2022 as they did in Q4 2021.4 This was likely driven by the significantly increased cost of capital as well as growing fears over a potential home value correction. Specific markets that exploded with popularity during the COVID-19 Pandemic such as Las Vegas and Phoenix have been impacted the most with investor purchases falling by more than 60% year-over-year.
TL;DR — Investors have hit the brakes on residential real estate purchases.
Chart Of The Day:
Here’s the data to support what you already know to be true. The number of licensed realtors has skyrocketed (driven by the incredibly hot market between 2022 - early 2022), but transaction volumes are continuing their descent.5 Competition is and will continue to be fierce in this market segment. Top performers will thrive, and underperformers will be pushed out of the market completely. Ultimately, clients will benefit the most as true competition makes everybody better at their job.
TL;DR — Competition is as tough as it’s ever been for realtors.
Source: National Association of Realtors (NAR) — Pending Home Sales.
Source: Advisor Perspectives.
Source: Redfin — Investors Are Buying Roughly Half As Many Homes As They Were A Year Ago.
Source: Chartr — One Year On.