According to Merkley and Smith’s cite data from an Urban Institute report, there was not a single corporate entity that owned more than 1,000 single-family rental homes in 2011. Fast forward to 2022 and reports indicate that institutional investors owned a total of 574,000 single-family homes.
What does that mean for us?
When housing inventory levels are at all-time lows and institutional investors continue buying up single-family homes with a pace of owning nearly 30% of the market by 2030, it could mean that home prices will become nearly impossible for the average American to afford; no matter what the mortgage rates and terms would be.
Does the government have a legitimate solution?
Lawmakers have introduced a bill that would ban hedge funds from buying family homes and force them to sell all of the single-family homes in their portfolio. While this wouldn’t happen overnight, it seems to be a step in the right direction toward America’s affordable housing crisis and inventory levels. However, this bill gives hedge funds 10 years to sell only 10% of their portfolio.
The timing could prove to be great because if mortgage rates continue the downward trend, we will need the housing inventory to support the demand. Otherwise, low rates + low inventory could me another surge in home prices, thus defeating the point of rate drops in the first place.
“After hitting a 23-year high of 8% in October, mortgage rates have cooled down to the lowest levels since July. Some borrowers are even getting quoted in the 6% range.” -HousingWire
What’s in store for 2024?
Industry pros are anticipating continued rate decline. However, they are not confident that the Fed will actually cut the federal funds rate 4-6 times as the media has been portraying. Don’t expect home prices to fall. While rates might drop, if inventory levels don’t increase, home prices will likely hold steady, if not increase even more.
New construction is on the rise. Now that builders and suppliers have the ground beneath them again and are able to more accurately forecast timelines and cost, new home builds will likely continue. Be sure to connect your clients with a trusted lender who is well-versed in new construction financing.
As rates continue to drop, if existing home inventory isn’t available, clients may become more attracted to building and we will have another increase in new home builds like we did between summer of 2020 (rates dropped dramatically) and summer of 2022 (rates increased dramatically).
If you have any questions about the market, fast and reliable preapprovals, or construction financing options, give me a call at 573.239.9631 or contact me at TerryRoberts.com
Terry Roberts, USMC Veteran Sr. Mortgage Broker NMLS 397987 E Mortgage Capital, NMLS 1416824
Terry Roberts is a U.S. Marine Corps Veteran and specializes in residential mortgages, including new construction, conventional, FHA, and VA home loans. He has helped more than 10,000 clients start the home buying process across America.
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