The RE Reality Zone is a weekly 3-minute read that cuts through real estate noise and gives you the data that matters to make money - no hype, just the critical information to make good real estate investment decisions.

30-Second Summary

2024 ended up with a 4% increase in home prices nationally. With an expectation to return to the booming economy levels of 2016-2020, optimism is higher, but affordability is a major problem until wages catch up. We need private-sector full-time job growth.

Mortgage Interest rates rose to a low of 7%, the highest since July. This affects buyers, they can’t get into a loan unless they buy less house than they need, or wages increase. We’re getting farther and farther from the super-low interest rates, so the “recency bias” is wearing off. That will increase buying activity as wages rise. Home sales are down this week from same period last year, but mortgage applications are up 33% from last week. Lets see if that translates into a surge of home sales.

Seasonally, the national supply of single-family houses (inventory) will decline for a couple more weeks (total inventory is still 23% below the pre-pandemic level in 30 states).

The new listing volume is a tad higher, but sellers' motivation to sell continues to be very low. This lack of sellers has been coined “the Great Stay.”  

Interestingly, the US has a different real estate market in part of the country. Some southern states have a higher inventory and are softer than the other half. The Reality Zone shows those locations.

Mortgage delinquency rates are 3.48%, less than the 4.5% normal pre-pandemic level.
Foreclosure starts are 5.4% lower than pre-pandemic levels.  Foreclosures are 34% less than pre-pandemic levels. This is because people don’t want to lose their loan payments. Renting somewhere would be hundreds of dollars more per month.

However, there have been six consecutive months of increasing serious delinquency for 90+ days. It's pressure but not a crisis. Prepayment activity was also up 40%, down barely this last period. That's amazingly good. There is no foreclosure crisis.

Nothing shows an imminent price crash unless the greater economy tanks. The real problem is that people with median incomes can't afford a median-priced house. That is a significant problem.

We need more houses. If the illegal immigration situation changes, that may affect housing. No one knows by how much.

Make your purchase and sale decisions based on the fact that the sales pace increases later in January.

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We’re also trying out the Real Estate Reality Zone as a video - click below to check it out and leave us a note in the comments to let us know what you think!

Key Stats

(from our friends at Altos, Housingwire, Jason Hartman, Joe Manausa, and others)

Last week’s SFH Inventory on Market: 624,000 (altos)
This week’s SFH Inventory on Market: 632,000 (24.8% higher than same week last year)

Listing volume – 46,000 new listings (__% higher than same week last year)

Sales volume – 45,000 new contracts (10% lower than same week last year)

This week’s TOTAL SFH in Contract status: 257,000 (2% lower than same week last year)

This week’s price reductions are Lower at 33.50% = High (normal is 30-35%).
(A leading indicator of buyer demand strength, and home price direction)

Last week’s on-market SFH Median Home Price: $395,000
This Week’s on-market SFH Median Home Price: $394,000 (3.6% higher than same week last year)

Last week’s Median Price of Homes in Contracts: $375,000
This Week’s Median Price of Homes in Contracts: $375,000 (0.5% higher than same week last year)

Last week’s Median Price of New Listings: no weekly data
This Week’s Median Price of New Listings: $409,000 (2.5% higher than same week last year)

Housing Vacancy Rate: 6.9% – very low (quarterly)

National vacancy rates in the third quarter of 2024 were 6.9 percent for rental housing and 1 percent for homeowner housing. The rental vacancy rate was slightly higher than the rate in the second quarter of 2024 (6.6 percent) and than the rate in the third quarter of 2024 (6.6 percent).

Policy Watch

Big picture items that may affect Real Estate:

• Look for economic changes to increase national revenue, like energy sales. Hard to say what the effects will be on mortgage interest rates.
  

• The US owes 36 Trillion dollars in national debt, please hold our leaders accountable to reduce that number and be fiscally responsible. Yes, it means tough discussions on what should be cut. This high debt means interest rates have to be high to sell the treasuries to other countries. Speaking of debt, the treasury bonds that came due in 2024 were not pushed out years like they should have been - instead they were pushed out short term to the first quarter of 2025 to be dealt with this qtr, or pushed out again.

• Are the BRICS nations going to get off the Dollar and go to gold or a digital currency? It seems like those countries would not be able to organize themselves enough to do it, but they are trying hard to unseat the dollar. Firm but fair financial system management is critical.

• *** The jobs report is important. Please know when the gov puts out a report like "jobs", there is a revision done a month or so later, sometimes later, when they crunch the actual numbers. The press rarely reports the revisions, but that is the most accurate. I advise you to ignore the initial reports and ONLY look at the later revised reports for a more accurate view. They indicate part-time, full-time, or foreign-born jobs, those are categories that matter. Dec jobs increase was fantastic, but let’s hold applause until we see what the revision later is.

• In my view, everything is about to get better with a reduction in Federal involvement in everything, delineated to the states, and a reduction in Federal spending.

• Please say NO to Central Bank Digital Currency (CBDC) in any form (i.e., Fedcoin).

• Passive income from RE is a shield for most of this, whereas "flipping" and wholesaling can stop at any time. We love “co-living” for amazing cashflow. Ask us about how we can help you retire with just 5 single family houses.

Mortgage Applications & Rates

Why it matters: The current market relies HEAVILY on the CHANGE in mortgage rates.

The average rate on a 30-year fixed mortgage backed by Freddie Mac rose to 7.04% as of January 16th, marking the fifth consecutive week of increases and reaching the highest level since early May 2024.…. source: Trading Economics

Mortgage applications in the US surged by 33.3% from the previous week in the period ending January 10th, erasing the decline in application volumes from four prior weeks, to record the sharpest increase in weekly applications since 2020, according to data compiled by the Mortgage Bankers Association.....…. source: Trading Economics

Delinquency & Foreclosures

(Monthly as of November 2024)

Why it matters: Delinquency is the leading indicator of borrower stress. (It will lag behind a few weeks before the data is reported)

ICE First Look at Mortgage Performance: Delinquencies Hit Highest Level in Nearly Three Years; Prepayments Drop on Higher Rates

• The national delinquency rate jumped 29 basis points (bps) in November to 3.74%, its highest level in almost three years, marking six consecutive months of year over year increases

• While much of November’s spike was driven by seasonality, post-hurricane distress, and a late-in-the-month Thanksgiving, delinquencies more broadly continue to rise from recent year lows

• Early-, mid- and late-stage defaults all rose in November, with seriously delinquent loans – 90 or more days past due but not in active foreclosure – now at the highest level since February 2023

• Both foreclosure starts and completions dropped in November and remain well below pre-pandemic levels, leaving 31K fewer loans in active foreclosure than at the same time last year

• Prepayment activity fell -25.0% month over month on October’s higher interest rates, and remains nearly 30% off last year’s levels

https://mortgagetech.ice.com/resources/data-reports/first-look-at-november-2024-mortgage-data

Find additional supporting data on our website

We appreciate you and will succeed together!

Corey & Team
Fidelis Wealth Builders

Our obsession is Faithfully Serving You with actionable information and training to help you achieve your hopes and dreams quickly with as much risk mitigation as possible. Tap here to find out more about our real estate investing mentorship program.