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

Mortgage Interest rates dropped a little more, remaining under 7%.

But there are few buyers, buyers 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” will hopefully wear off. The hope is that buying activity will increase as wages rise, and/or optimism of wages increasing.

Home sales are down 5% this week from the same period last year. More people are also having to go rent, which takes buyers out of the marketplace.

The big stat for you is that house payments are 115% higher than 2020. 

Seasonally, the national supply of single-family houses (inventory) will increase as we enter the Spring. Sellers' motivation to sell continues to be very low because they have lower mortgage payments than they will get if they sell and move.

This lack of sellers has been coined “the Great Stay.”  

However, the number of owners with a mortgage over 6% has increased to 17%, the highest since 2016. The national inventory remains 25% below 2020 levels. Some parts of the country are back to “normal,” and others are not.

Mortgage delinquency rates are 3.72%, less than the 4.5% 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.

Nothing shows an imminent price crash unless the greater economy tanks. That is unlikely. The real problem is that people with median incomes can't afford a median-priced house. That is a significant problem that can only be fixed with wages catching up to cost.

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 starting in late January.

Key Stats

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

Last week’s SFH Inventory on Market: 638,000 (altos)
This week’s SFH Inventory on Market: $640,000 (28.7% higher than same week last year)

Listing volume – 54,000 new listings (4.8% higher than same week last year)

Sales volume – 60,000 new contracts (5% lower than same week last year)

This week’s TOTAL SFH in Contract status: 315,000 (_% lower than same week last year)

This week’s price reductions are Higher at 33.2% = 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: no weekly data
This Week’s on-market SFH Median Home Price: no weekly data

Last week’s Median Price of Homes in Contracts: $386,000
This Week’s Median Price of Homes in Contracts: $385,000 (2.6% 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: no weekly data

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.

• The BRICS nations are going to have a hard time coming off the Dollar as the U.S. actions being taken to curb spending kick in to increase stability.

• *** 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 cash flow. 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 eased to 6.85% as of February 20th, marking its fifth consecutive weekly decline from an eight-month high of 7.04%. This decrease mirrored the drop in long-dated Treasury yields, driven by markets' reaction to the Federal Reserve's minutes, which suggested a potential pause in asset sales and an end to quantitative tightening, along with reduced supply of longer-term securities. “Mortgage rates decreased slightly this week.....…. source: Trading Economics

Mortgage applications in the US fell by 6.6% from the previous week in the period ending February 14th, erasing the rise from the two prior weeks to mark the sharpest decline so far this year, according to data from the Mortgage Bankers Association. The decline took place despite another week of softening in benchmark interest rates, indicating that high prices for housing continued to sideline potential home buyers....... source: Trading Economics

Delinquency & Foreclosures

(Monthly as of January 2025)

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: Foreclosure Starts Jump as VA Moratorium Ends; Wildfire Delinquencies Emerge

• Delinquencies fell 24 basis points (bps) to 3.47% in January; that’s 10 bps higher than last year but 33 bps below pre-pandemic levels

• Foreclosure starts jumped by 30% and sales rose by 25% in January – driven by an expiration in the VA foreclosure moratorium – with active inventory rising by 7% in the month

• While the number of borrowers past due as a result of last year’s hurricanes has fallen from 58K to 41K in recent months, the financial impact from the recent Los Angeles wildfires is emerging

• An estimated 680 homeowners in the path of the Los Angeles wildfires missed their January mortgage payment, and ICE daily mortgage performance data through Feb. 17 suggests as many as 3,300 borrowers may be at risk of missing their February payment

• Prepayment activity (SMM) fell to 0.48% in January, its lowest level in nearly a year, driven by the combination of modestly higher rates and the typical seasonal slowdown in home sale activity

https://mortgagetech.ice.com/resources/data-reports/first-look-at-january-2025-mortgage-data

Find additional supporting data on our website

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Corey & Team
Fidelis Wealth Builders

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