Dissecting the Shifts in the US Real Estate Market with Mike Simonsen
Sep 7, 2023
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Mike Simonsen, Founder of Altos Research, discusses the shifts in the US real estate market. Topics include fluctuating mortgage rates, the comparison between homeownership and investment properties, rising mortgage rates impacting market pace, the role of home builders, and the interplay of inventory and mortgage rates in housing demand and affordability.
Higher mortgage rates reduce affordability and slow down purchase demand across all price points, but demand for affordable homes remains strong.
Interest rates affect inventory levels, with higher rates leading to more supply and lower rates leading to less inventory.
Airbnb and investment properties have a limited impact on the housing market, as most investment properties are owned by individuals and not large corporations.
Deep dives
The Impact of Mortgage Rates on Housing Demand
The podcast discusses the ways in which mortgage rates impact the demand for housing. It highlights that higher mortgage rates reduce affordability and slow down purchase demand across all price points. However, it challenges the assumption that cash buyers only purchase expensive homes, stating that the demand for affordable homes remains strong. The data shows that mortgage rates and inventory levels influence housing market dynamics, with higher rates leading to more supply and lower rates leading to less inventory.
The Relationship Between Inventory and Interest Rates
The podcast explores the inverse relationship between inventory levels and interest rates. It explains that when interest rates are higher, it becomes more expensive to hold onto real estate, leading to an increase in inventory as sellers aim to sell and finance their next property. Conversely, when interest rates are lower, holding costs decrease, resulting in less inventory as sellers retain their properties. The podcast emphasizes that falling rates spur demand but not necessarily supply, while rising rates lead to more inventory.
The Impact of Airbnb and Investment Properties
The podcast challenges the notion that the prevalence of Airbnb and investment properties significantly impacts the housing market. It argues that investment properties, including those used for Airbnb, represent a small fraction of the overall market. The main focus is on the fact that most investment properties are owned by individuals, not large corporations. The podcast suggests that factors like historically low interest rates and the financial benefits of owning real estate have contributed to the decrease in available inventory for homebuyers.
The Role of Migration Patterns in Housing Market Dynamics
The podcast discusses how migration patterns impact the housing market. It highlights how destination markets experienced a boom during the pandemic due to inbound migration, while origin markets saw a slowdown. This divergence in market dynamics resulted in varying levels of inventory across different geographies. The podcast also emphasizes that factors like job loss, recessions, and property tax policies can influence inventory levels over time.
Affordability, Homebuilders, and Future Outlook
The podcast addresses the topic of affordability in the housing market and the role of homebuilders. It explains that affordability challenges persist due to policies that incentivize homeownership and protect existing homeowners. Additionally, the podcast mentions that homebuilders had a successful year, benefiting from tight inventory and better control over interest rates for buyers. Looking ahead, the podcast predicts that future inventory levels and price dynamics will be influenced by interest rate changes, affordability, and market conditions.
On today's episode, we've invited Mike Simonsen, the brainchild behind Altos Research, to dissect the intricate trends of the US real estate market. Mike's company is the industry's pulse monitor, scrutinizing every home for sale in the United States every single week. Fascinated by how the dynamics of the housing market can shift like sand through your fingers? Mike and our team dig into the factors influencing these changes, such as fluctuations in mortgage rates and inventory levels. We've got your curiosity piqued, haven't we?
Our discourse takes a riveting turn as we tackle the intriguing comparison between homeownership and investment properties. How do laws, policies, and even platforms like Airbnb feed into this dialogue? Mike possesses a goldmine of insights, delving into how rising mortgage rates may put a damper on the market's pace and making sense of the year-over-year comparisons for home prices. We have a feeling you're not going to want to miss out on this enlightening exchange.
But wait, there's more! We've got you covered on the role of home builders in the housing market, investigating their post-pandemic performance and their cunning strategies to edge out resale homes. Ever wondered how the interplay of inventory and mortgage rates shapes housing demand and affordability? We've got the answers. With a plethora of data-driven observations and forward-thinking projections, this episode promises to be a rollercoaster ride through the dynamic world of real estate. Tune in for an episode chock-full of wisdom nuggets that you won't find anywhere else.
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Nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities.
The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
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