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 bit to get under 7% again. 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” 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 were huge and held up. Let’s see if that translates into a surge of home purchases/sales this Spring to offset the inventory.

Seasonally, the national supply of single-family houses (inventory) will increase as we enter the Spring (total inventory is still 20% 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 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.”  

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 that can only get fixed with wages catching up.

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.

Key Stats

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

Last week’s SFH Inventory on Market: 637,000 (altos)
This week’s SFH Inventory on Market: 635,000 (27.7% higher than same week last year)

Listing volume – 49,000 new listings (10% higher than same week last year)

Sales volume – 56,000 new contracts (4.7% lower than same week last year)

This week’s TOTAL SFH in Contract status: 282,000 (3.5% lower than same week last year)

This week’s price reductions are Lower at 33.6% = 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: $421,000
This Week’s on-market SFH Median Home Price: no weekly data

Last week’s Median Price of Homes in Contracts: $384,700
This Week’s Median Price of Homes in Contracts: $389,700 (2.5% 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: 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 complaining about tariffs is unwarranted. Look how quickly Canada and Mexico put troops on the border to stop the fentanyl. Also using tariffs to balance trade deficits is not going to “harm our allies” it’s called fair trade. It may have a temp effect on price, but the long-term gains are obviously far better for Americans.

• *** 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 6.95% as of January 30th, declining for the second consecutive week from the highest level since early May 2024 of 7.04%. The decrease aligned with declining long-dated Treasury yields and the Federal Reserve's indication that there is no rush to extend its cutting cycle after holding borrowing costs unchanged..…. source: Trading Economics

Mortgage applications in the US fell by 2% from the previous week in the period ending January 24th, trimming the 33.4% surge from two weeks earlier, which was the sharpest increase in weekly application volumes since 2020, according to data compiled by the Mortgage Bankers Association.......…. source: Trading Economics

Delinquency & Foreclosures

(Monthly as of December 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 Ended 2024 on a Strong Note Despite Remaining Near a Three-Year High

• The national delinquency rate eased 2 basis points (bps) to 3.72% in December, but rose 4.0% year over year – the seventh consecutive annual increase – ending 2024 near a three-year high

• Early-stage delinquencies fell 41K (-3.6%) in the month, while serious delinquencies (loans 90+ days past due but not in active foreclosure) continued their slow climb – up 29K (+5.7%) in the month and a fifth consecutive rise year over year

• Foreclosure sales declined by 5K (-5.6%) in December, hitting their lowest level in nearly two years, while foreclosure inventory climbed 7K (+3.8%), but was down -10.7% year-over-year

• Despite rising in December on volatility around the holidays, foreclosure starts averaged 26,800 per month in 2024, down from 28,500 in 2023 and lower than any year outside the pandemic moratoria

• Prepayment activity (measured by single-month mortality or SMM) fell to 0.57% on rising interest rates, down -9.8% in the month but up 47.2% from the same time last year

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

Find additional supporting data on our website

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Corey & Team
Fidelis Wealth Builders

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