Housing Market Crash Not Likely To Happen Soon, Say Experts

Gravity eventually brings everything back down to earth. But when it comes to the housing market, it’s not clear just when that might happen.

High home prices and mortgage rates north of 7% have kept many would-be buyers on the sidelines, hoping that an overheated market will lead to a housing crash that will make homes more affordable. But economists say that’s unlikely to happen.

Even if there is a crash, they say, it probably won’t be the type of severe downturn that followed the 2008 financial crisis, when prices fell 33% nationally, according to CoreLogic figures.

“Trying to wait for home prices to crash, that’s wishful thinking,” says Lawrence Yun, chief economist at the National Association of Realtors, or NAR. “That’s a long way out, or may not even happen at all.”

The median price of an existing home jumped 3.9% from August 2022 to August of this year, Yun’s group reported on Thursday. Prices rose year over year in all regions of the country.

A severe shortage of homes available for sale is keeping prices elevated. And Yun says if mortgage rates come down, even by just a little, more prospective homeowners could enter the market, which could drive up prices even more.

“With a [mortgage] rate decline, we will have more buyers for sure. Hopefully, we’ll have some pent-up sellers coming to the market,” Yun says. But “prices can certainly increase.”

Why the Housing Market Remains Strong

Intense competition for homes that are on the market, helped along by a resilient economy, may be the biggest reason there has not yet been a housing crash. As the jobs market remains strong, people have the resources to compete for a dwindling number of available homes despite higher mortgage rates and elevated home prices.

The supply of homes on the market hit a low point after the start of the Covid pandemic, when record-low mortgage rates and pandemic relief checks prompted a wave of home buying. Housing inventory fell to a low of just over 346,000 listed units in February 2022—down from the pre-pandemic November 2019 level of 1.14 million listings, according to St. Louis Federal Reserve data.

Since then, inventory has picked up somewhat.  There were 669,173 listings in August, but that’s a far cry from the millions of homes needed to meet demand, experts say.

“Since the Great Recession, the U.S. has not built enough housing to keep pace with demand created by job and population growth, leading to historically low vacancy rates and rapidly rising costs,” said Jenny Schuetz, a senior fellow at Brookings Metro, in testimony September 12 before a Senate Banking subcommittee.

“Researchers estimate that the U.S. needs roughly 3.8 million additional homes nationally to address this gap,” Schuetz told lawmakers.

When Will Home Prices Drop?

Inventory remains low, so home prices are continuing to move higher. The median sales price for existing homes rose to $407,100 in August, according to NAR data. It was just the fifth time in the survey’s decades-long history that the median price has exceeded $400,000.

Likewise, CoreLogic released a report September 12 showing that in July, home prices were up 0.4% from the previous month and 2.5% year-over-year. CoreLogic forecasts that home prices will have increased 3.5% for the 12 months ending in July 2024.

While few economists expect a housing crash in the near future, many do think the market will cool off because current mortgage rates are making buying a home even less affordable. Average rates for a 30-year fixed-rate mortgage have remained above 7% for the past five weeks, according to mortgage buyer Freddie Mac.

“High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages,” said Selma Hepp, CoreLogic’s chief economist, in a news release. “In other words, home prices are still growing but are in line with historic seasonal expectations.”

Will Mortgage Rates Continue to Rise?

The Federal Reserve’s Federal Open Market Committee has raised its federal funds rate 11 times since March 2022. Though Fed policymakers decided not to raise the rate in September, they have repeatedly indicated there might be one more rate hike this year in order to keep lowering inflation. The Fed doesn’t set mortgage rates, but its benchmark interest rate influences them.

High rates will continue to deter some home shoppers who want to avoid a costly mortgage. Meanwhile, decreased demand could give builders more time to build new homes and allow more sellers of existing homes to return to the market, some economists contend.

“With mortgage rates at a 22-year high, mortgage demand has fallen. The combination of higher rates and typical seasonal factors is allowing supply—the number of newly built homes—to catch up,” says Orphe Divounguy, senior economist at Zillow.

“A moderate uptick in inventory in the coming months should provide more options for prospective buyers,” Divounguy adds. “And absent another large economic shock, we should see a more balanced, healthier housing market as a result.”

 

Source: Housing Market Crash Not Likely To Happen Soon, Say Experts

https://www.creconsult.net/market-trends/housing-market-crash-not-likely-to-happen-soon-say-experts/

Just Sold 23-Unit Multifamily Property Morrison IL

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Morrison, IL, October 10, 2023 eXp Commercial (NASDAQ: EXPI), the fastest-growing national commercial real estate brokerage firm, announced today the sale of a 23-unit multifamily property located in Morrison, IL.

The property is located at 631 E Lincolnway Rd., Morrison, IL The property consists of 23 multifamily rental units comprised of ten studio apartment, eleven one-bedroom units and two two-bedroom units

The transaction was brokered, and both buyer and seller were represented by Randolph Taylor CCIM Senior Associate and Multifamily Investment Sales Broker with the eXp Commercial Chicago office.

Randolph can be contacted at rtaylor@creconsult.net or (630) 474-6441

[/col] [/row] https://www.creconsult.net/company-news/just-sold-23-unit-multifamily-property-morrison-il/

1120 E Ogden Ave

New Listing | Retail-Office For Sale Naperville IL
eXp Commercial is pleased to present to market 1120 E Ogden Avenue, a highly visible 10,860 square foot retail-office property on 1.26 acres in desirable affluent Naperville, Illinois, along the I-88 E-W corridor approximately 28 miles west of Chicago. The property is currently owner-occupied and will be fully vacated shortly after closing, with the seller seeking approximately 60 days of post-closing possession. Flexible B3 zoning allows for a number of retail and office uses, ideal for an investor, owner-user, or redevelopment of the property.
Listing Broker: Randolph Taylor | rtaylor@creconsult.net

https://www.creconsult.net/retail-office-for-sale-1120-e-ogden-ave-naperville-il-60563/

Fannie Mae Launches New Workforce Housing Program

Fannie Mae has launched a new financing program to support the creation and preservation of workforce housing for middle-income renters.

The agency created the new Sponsor-Dedicated Workforce product in an effort to build and preserve workforce housing by incentivizing borrowers to place rent restrictions on properties for the life of the loan, according to a press release.

The program will be offered to borrowers who agree to make at least 20% of units at a multifamily property affordable to households earning between 80% and 120% of the area median income. Compliance will be confirmed annually by Delegated Underwriting and Servicing lenders.

Workforce housing continues to be one of the least-built affordable housing options. A report published in October 2022 by Fannie Mae says the New York and Los Angeles metro areas have a combined shortage of 1.25 million workforce units, while they lack 911,000 units of affordable and low-income housing.

Fannie Mae has secured five SDW loans in the past two months, CoStar reported. The loans total $80.1M and are backed by 867 units in the Dallas, Chicago and Washington, D.C., areas. The largest loan was a $31.8M refinancing of the 384-unit Green Oaks Apartments in the Chicago suburb of Palos Hills, Illinois.

"Affordability continues to be a significant challenge for multifamily renters as rent increases have outpaced income growth," Michele Evans, head of multifamily at Fannie Mae, said in the release. "Fannie Mae is addressing the need for workforce housing by providing innovative, attractive programs that create and preserve affordable multifamily units while enabling socially responsible investment opportunities for investors."

 

Source: Fannie Mae Launches New Workforce Housing Program

https://www.creconsult.net/market-trends/fannie-mae-launches-new-workforce-housing-program/

Just Sold 12-Unit Multifamily Property Aurora IL

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eXp Commercial, the fastest-growing national commercial real estate brokerage firm, announced the sale of a 12-unit multifamily property located at 557-559 Ashland Ave. in Aurora, IL, for $1,395,000.

The property was exclusively listed and sold by Randolph Taylor CCIM Senior Associate and Commercial Real Estate Broker with the eXp Commercial Chicago office.

Randolph can be contacted at rtaylor@creconsult.net | (630) 474-6441

[/col] [/row] https://www.creconsult.net/company-news/just-sold-12-unit-multifamily-property-aurora-il/

Who’s Lending in Multifamily

Government-sponsored enterprises are still the big lenders in the field.

In the five-year span from 2015 through 2019, the big lenders for multifamily were government-sponsored enterprises. In the first half of 2023, the same dynamic is again present, according to a report from MSCI.

In that five-year period, the average contribution of the GSEs was 54%, with national banks providing 10% and regional and local banks accounting for 13%. There was also significant lending by insurance companies, commercial mortgage-backed securities, as well as investor-driven lending such as debt funds, though all under 10% each.

In 2022, when heavy market activity was followed by increasing interest rates to battle inflation, only 38% of the lending was from GSEs, with regional and local banks making up 19%, investor-driven rising to 13% and national banks at 12%.

“As other lender groups retreat in the face of banking sector turmoil, these lenders have captured a plurality of the market share for new loans in H1 2023,” MSCI noted. “For most other lender groups, it was not just the share of originations that fell in the first half of 2023, but the dollar volume as well. Total lending to apartments fell 53% from a year earlier in the first six months of 2023. That comparison is a bit off base, however, given the excess liquidity in the market seen in the first half of 2022.”

During the first half of 2023, GSEs came back strongly at 58%, although the deal flow from January through August was down 67%, compared to 2022 and off significantly from the pre-pandemic period, so this was hardly a normal cycle. Regional and local banks provided 16% of financing in the first half, but no other source hit even 10%.

GSE involvement was strongest in garden multifamily, at 68%, with regional and local banks at 15% and nothing else coming close.

Mid- and high-rise was more eventually distributed: 41% from GSEs, 17% local and regional banks, 15% insurance companies and 13% investor-driven.

Student housing had the smallest percentage of GSE funding at 26%, with 13% insurance, 17% national banks, and 29% local and regional banks. Senior housing had a similarly low percentage of GSE participation at 28%, 15% investor-driven, but 41% local and regional bank financing.

But the participation of local and regional banks is likely shifting.

“The shocks to the regional/local banks can be seen in the quarterly trend of originations,” MSCI wrote. “These smaller banks had captured 22% of the market in Q1 2023 and were the second largest source of debt financing for the apartment market behind the GSEs. Never before has the share of originations by regional/local banks fallen so sharply since we started tracking these figures in 2011.”

Source: Who’s Lending in Multifamily

https://www.creconsult.net/market-trends/whos-lending-in-multifamily/

RE Journals Gurnee

eXp Commercial, the fastest-growing national commercial real estate brokerage firm, announced the sale of an 18,504-square-foot net-leased industrial property located at 940 Lakeside Drive in Gurnee, Illinois, for $1,275,000.

The property, a single-tenant net-leased industrial property occupied by Akhan Semiconductor, was exclusively listed and sold by Randolph Taylor CCIM, senior associate and commercial real estate broker with the eXp Commercial Chicago office.
https://rejournals.com/exp-commercial-sells-net-leased-industrial-property-in-gurnee/