The Person of the Week spotlight is shining on Kelly Mangold, principal at RCLCO Real Estate Consulting in Bethesda, Maryland, and the subject is today’s housing scene.
The first question is a broad question: What is the state of the U.S. housing market today?
What’s happening now in the for-sale market is an interesting story. There’s a lot of demand in from people at stages of their lives that would normally be looking to buy. But we know that high interest rates have caused a pretty big challenge in terms of affordability. The new homes that are being built tend to be higher priced, so there’s a lot of households that are having challenges purchasing those homes.
On the flip side of things is the resale market. That’s another big area in which people could potentially buy a lot of homes, but the inventory of existing homes is down because a lot of people that live in those homes are locked into their current lower interest rate, so they don’t want to move. So, we’re seeing a scarcity on the existing home side.
Plus, pricing overall is unaffordable with the mortgage rates. I’d say that the market as a whole has slowed down somewhat. We have seen in the recent months that new home sales have ticked up a little bit, just because they are in some places where there not a lot of resale homes on the market.
And how are things on the rental side of the housing market?
The rental market has been quite strong as a result of supply constraints in the for-sale market. About a year or two ago, we saw double-digit rent growth in many places, but that has stabilized this year.
There’s a lot of people that are renting right now that in other times might’ve looked to buy, so the demand has increased. And we’re seeing relatively strong conditions in the rental market, both in multifamily rentals as well as the build for rent single-family homes.
Who are the renters? Are they mostly Gen Zers new to the housing market? Or are they across all demographics?
Gen. Z is starting to age and are in the years when renting is quite popular. But millennials are still renting it at relatively high rates compared to past generations. We see Gen X and boomers starting to look at the rental market as an option if they are downsizing – it’s lower maintenance and helps them if they’re living part of the year in one place and part of the year somewhere else, so it’s a really good solution where stuff is taken care of for them.
With the homeowners that don’t want to move out because of interest rates being so high, are they tapping into their home equity to do more repairs to their property?
That’s what a lot of people are doing, and not just repairs but renovations and even additions. That has become a lot more popular recently – people have decided they want to have more space or upgrade their home, and in the past they might have just moved. A lot of people are now looking to with contractors or other people to make upgrades to their homes and may be financing in a variety of ways.
During the pandemic there was a large migration of people leaving California and some of the Northeastern states for the Southeast and for Texas. Are we still seeing that?
We’re seeing it. It was actually happening before the pandemic and accelerated during the pandemic, partially because of remote work. We are seeing more return to work and hybrid work happening. so I’d say it’s slowing down somewhat.
I think people are continuously looking to move to areas that has more attractive cost of living. Of course, we know that in many of those markets that seemed relatively affordable have become quite unaffordable – take Austin, Texas, as an example.
Is there new construction for both single family-homes and multifamily housing?
We’re seeing new construction of both, pretty much across the nation. I would say that multifamily was doing a bit stronger recently, just because there was some hesitation during the pandemic. And with the mortgage rates, I think some builders some slowed down their production somewhat.
But what we’re also seeing is the single family for-rent has become more and more popular. And we’ve seen cases where developers have taken a whole neighborhood that they planned to sell and are building a whole neighborhood of single family-homes that are intended to be for rent. We’ve seen that become quite popular.
If we were to pick up this conversation a year from now, where would you see housing?
I’d like to see what happens to mortgage rates between now and then. If mortgage rates go down, I think there we’re going to see a boom in the for-sale market because we’ve had so much pent-up demand and we haven’t been building houses anywhere near the rate of household formation.
If interest rates remain where they are, or possibly go up, you know, I think we’ll probably see markets that kind of the same as they are now. I don’t see us going into a big downturn like 2009 in the housing market.