Odd Lots The Fed Hiked Rates Rapidly and Housing Is as Broken as Ever
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May 11, 2023 Ali Wolf, the Chief Economist at Zonda, dives into the perplexities of the housing market amidst significant rate hikes. Despite soaring mortgage rates, home prices remain stubbornly high. Wolf reveals why the housing sector has defied expectations and how homebuilders are adapting amidst a changing landscape. The discussion touches on shifting migration trends due to remote work, the persistent affordability crisis, and the intriguing dynamics between public and private builders. Plus, a lighthearted look at generational blame adds a fun twist!
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Rate Shock Ineffectiveness
- The 2022 rate shock barely slowed new home construction, and the market is rebounding.
- Homebuilder stocks are up, and housing starts are increasing again despite high rates.
Initial Rate Hike vs. Mid-2022 Freeze
- The initial rate hike to 6% didn't deter buyers due to fear of further increases and FOMO (fear of missing out).
- Demand froze mid-2022 as affordability concerns and recession fears took hold, forcing sellers, primarily homebuilders, to adjust.
Spec Home Strategy Shift
- Homebuilders, influenced by past experiences, initially avoided building spec homes.
- However, they shifted to building spec homes to control costs and construction timelines, which led to excess inventory when demand dropped.