Let’s talk real estate.
I am a magnet for the question of residential real estate. Getting around the RRE mess of about 2000, I get regular questions about real estate investing, price, cycle and quality. I don’t always know the answer, but I can usually find one
This current housing market is unusually confusing for a number of reasons, but let’s mention a few of them.
Start with a low supply of single-family homes. We discussed this in detail last summer. The tl: ড As the epidemic progresses, our demand for a decade has dwindled and there is a huge gap in the construction, the housing structure, to meet the huge demand.
Add to this the cost of mortgages was the cheapest in modern times.
Third, the epidemic has disrupted normal sales. Typically, this is what it looks like: First-time buyers buy a home from a growing family – one kid, on the other, needs more space. They take turns buying from the “Move Up” family, who buys a beautiful neighborhood, whose seller moves to a more luxurious home, who buys from a person who has moved to a waterfront / lakeside / mountain scene, who will soon buy a retiree. The total number of homeowners remains the same as purchases lead to sales.
This time it didn’t happen; People stuck in apartments or very small houses bought second (or third) houses without selling anything. It takes only a few quarters of this activity to suck up most of the supplies available.
In a very short period of time, these three factors – a decade of underbuilding, historically low rates, and disruption of the sales chain – have led to unusual conditions of high demand and low supply. Prices have risen as you can see in the chart above (via Yardeni research). Or, consider these annual benefits (via Charlie Bellelo):
The average price of a new home in the United States.
2021: 435k (+ 21% YoY)
2022: 570k (+ 31% YoY)
– Charlie Bilelo (CharlieBilelo) May 24, 2022
Where things are interesting is how homeowners and sellers respond to these situations There has been a bidding war for reasonably-priced homes, and in response, some sellers have put their homes up for sale at extremely high and low-selling prospects, at least compared to their immediate pre-comparable sales or for how long. They take relative sales relative to the average time in the market. My friend Jonathan Miller coined the term “Ambitious pricing”To describe this method of listing homes for sale.
Consider a favorite Zillow technique to see what it looks like. Draw a map of your favorite locale; You can do this by typing the name of a city in the search box or by using the Draw tool to enclose a given area. Now sort it by new list. Zillow does not allow you to reverse it, so instead you have to scroll down.
Despite being the hottest real estate market in recent memory, you can find homes that have sold for 500, 1000 or even 1500 days. And if you check the pricing history, you’ll see homes that have been listed by the same seller year after year and year after year.
Here are a few examples, but you can do the same thing with your own app or website.
The sale price contains market information; List Price is published on psychology.
Residential real estate in a volatile world (March 30, 2022)
How everyone miscalculated housing demand (July 29, 2021)
Mansions do not produce much alpha (December 2, 2016)