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Last week I highlighted the bullish signal that the price of newly listed homes after the first of the year were ticking up. This week I have another hint of good news. Rents.
In addition to the active housing market, Altos Research now tracks the active rental market. Our set of 750,000 – 1 million rental units a month is the largest set available anywhere. And it’s powerful.
US Rental Prices, weekly sample, single family homes and apartments for rent. Sample size is approximately 600,000 per week.
This chart illustrates rents across our Altos 20-City Composite and 10-City Composite as of January 27, 2012 so it’s a national view. This data is a blend of both single family homes and apartments on the market. The weekly upticks in rents is one of the signs we’re using to underpin our mildly bullish home price scenario for 2012. The argument goes like this:
- Rents are rising because mortgages are harder to get and because the conventional wisdom that “owning always wins” is diminishing. Percent of American households who own their homes has fallen to 65%. It’ll likely keep falling to closer to 60% over the next few years. This bodes well for rents.
- As rents rise, home prices fall, and mortgage money remains unnaturally cheap, we’ve reached the point where investors see growing returns on investment properties. There’s a well-funded investor pool who can take advantage. They’re buying.
- As rents rise, those non-investor home buyers see more opportunity buying vs. renting. As long as they can get a mortgage, there are relative opportunities.
So rising rents help provide a floor to home prices. Keep an eye on this space for more as Q1 2012 progress.
We track hundreds of local housing market stats here, but one of my favorite (because you can’t find it anywhere else, and because it’s so insightful) is the Median Price of Newly Listed Properties.
It turns out that if you watch the prices of the properties that enter the market each week, you can get a real sense for the quality of the demand in a local market.
Also notable is that the spring housing market starts the second week of January. Like clockwork.
Realtors, it turns out, in aggregate are quite sensitive to where homes should be priced. They tend to price homes very close to where they’ll sell. When they’re sensing healthy demand, they price more aggressively. When they sense weakness, they’ll price lower so the property will move. They’re pretty clever, those Realtors. Here’s what they’re telling us today:
Median price of new listings. Single Family Properties across 20 major US metro markets. Source: Altos Research
The data-point we’re looking at is at the far right side of the red line, that’s the weekly number, for January 13, 2012. Notice every 2nd week of January we get an uptick. This year is a nice strong move above the recent trendline (that’s the green). This move, while admittedly only one data point, is the very first signal of the new year.
It’s not aggressively bullish, mind you. But it implies US home price stability through the first quarter. And that’s encouraging.
Stay tuned.
Yes, home prices are down… Back in October…
…but getting less bad because inventory is down and still declining. The foreclosure pipeline is clogged in Florida, while New York and New Jersey still have their robo-signing hangovers:
Year-over-year Ask Prices & Active Market Inventory: Altos 20-City Composite, weekly averages
The constrained supply is also keeping days-on-market in check – sellers are still able to unload their for-sale properties in a tolerable period of time:
Days-on-Market: Altos 20 City Composite, 90-day rolling average
Still don’t inventory or days-on-market matter?
Take the extreme case – what if there were only 100 homes for sale in the entire country? Then prices would be higher regardless of how many houses are in foreclosure or how poorly consumer expectations remained.
If you want to know if new home starts are going higher, watch the active market listings.
Residential housing reported higher numbers for November today. What do homebuilders know about housing that surprised the stock market today?
Home prices are getting less bad:
Year-over-year Housing Market Ask Prices: Altos 20-City Composite
How? Inventory is down. While the foreclosures are clogged somewhere in the pipeline, there’s just not much available for Joe & Sally Homebuyer:
Year-over-year Inventory: Altos 20-City Composite
The homebuilders see what we see – when sellers get more confident on pricing, builders pick up their new home construction. (Data measures at a 77% correlation):
Monthly Single-Unit housing starts (July 2010 - Nov 2011): US Census, November 20, 2011
Looking at quarterly data since 2007, there’s more of the same. (Data measures at a 76% correlation):
Quarterly Single-Unit housing starts (2007-2011): US Census
Link for US Census/HUD press release.
