Home sales

Sales of existing homes in the United States increase for second consecutive month

SitusAMC Director Tim Rood joins the Yahoo Finance Live panel to discuss the latest housing prospects amid COVID-19.

Video transcript

SEANA SMITH: Putting housing under control, home sales increase for the second consecutive month as demand exceeds a slight increase that we have seen in supply. But let’s see where it is right now with Tim Rood. He is the director of SitusAMC. And Tim, I guess, tells us where we’re at in this housing market because I think we’ve waited, what, 16, 17 months to see things slow down a bit. It looks like the supply is coming back, although it is a very slow rise. Are we seeing signs of a housing market slowdown?

TIM ROOD: Hey, Seana. In short, no. I mean, it’s … you’re really right. You hit straws when people are like, you know, there’s a downturn because you’ve gone from two and a half months of inventory to – wait – 2.6 months of inventory. I mean, we need six months of inventory just to be on a normal course.

So I mean, the real estate market, obviously, if you’re a seller, you know it’s hotter than a fat fire. It is pathetic if you are a tired, exhausted, devastated and quite downhearted buyer and now trying to find opportunities in the rental market which also leads to higher rents. So it’s a pretty awful situation if you’re trying to find shelter.

ADAM SHAPIRO: Tim, and I don’t want to put lipstick on a pig. It is always a pleasure to see you regarding this situation. I don’t want to call it a housing crisis, but here is what we are facing. Economists use this term as a negative feedback loop.


ADAM SHAPIRO: So right now the interest rates are low which has helped push the prices up. But eventually, interest rates will rise, making access to the housing market even less affordable for people. At this point, could we see a downward price correction?

TIM ROOD: I think you would see a price correction in all areas, not just in housing, but also in stocks, commodities, et cetera. So, I mean, right now you’re in this kind of liquidity black hole largely created by Fed policy and some, you know, very aggressive and heavy legislation in response to COVID. So you know, I don’t see anything that’s going to change, you know, some of the demographic tailwinds.

If you think – one of the main driving forces right now is that you’ve got, you know, millennials, we all know, coming of age. I just watched it this morning. You have 45 million millennials between the ages of 25 and 35 at the age of buying a home. And damn it, almost 50% of them still live at home with their mom. It is something that is going to be even more pent up demand that is going to come.

Interest rates are another thing. I mean, look, we’re living, you know, the – basically the great experiment of modern monetary theory, where – you know, as a source of capital the United States has enough confidence that we can keep printing. and pay for things without any real consequences. So as a result of that, there really is no way for the Fed to allow interest rates to rise. So it’s going to take a market correction, a market event – credit, stocks, otherwise – to really change this trajectory and raise rates.

And when rates go up, think of it that way. A 1% interest rate hike acts like a 10% tax. We just had appreciation rates of 18% year over year. Even if the rates went up 1%, that would slow things down. It will moderate, but it will not crash.

SEANA SMITH: Tim, most people still work from home, but there are some … I think all of us or many of us can say that we know someone who has returned to the office. Has it changed the dynamics of the housing market, just in terms of where people buy or what people are buying right now?

TIM ROOD: No, that’s a great question. I mean, so look, obviously COVID was a huge driver for home ownership. But also, it’s a huge driver for big houses. So what you noticed is … of course, now your home, even for a lot of people, is where you work. This is where you sleep. This is your gym. This is your child’s school room. It’s your entertainment, yada yada. The size of the houses is therefore increasing.

What you found was people were driving until they could afford it, right? Drive until you qualify. So they moved to the suburbs, a bigger space, a greener space, and so on. And now you have the anxiety that – well, despite the Delta variant – that, you know, companies are coming out with their work-from-home policies. And people get anxious saying, look, I’m probably going to have to go back to the office at least a few days a week. So I don’t know if I can drive all the way to Boise, Idaho, you know, and be away from the States or five hours from my job.

So I think you’re starting to see people getting closer to the suburbs and, you know, taking that into account. all of a sudden now you throw a pale water on it, and that anxiety drives the demand. Because, again, people don’t want to get dragged into the situation they were in, you know, in March 2020.

ADAM SHAPIRO: And so help us figure something out and forgive my myopic, you know, my self-centeredness on this one. But the pops and pops get heard as I’m talking to you, maybe they’re renovating an upstairs apartment. Every apartment in this building – there have been 12 in the past eight months – has been sold. And you see it across New York City. Apartments sell, sell, sell. The apartments are small. What is happening?

TIM ROOD: You know, I noticed that. It’s funny you talk about that, Adam. So I was reading about it this morning. If you see – co-ops and condos sell for around – I think that’s almost double the rate for single-family homes. It’s not just because of … you know, in terms of personal preference, right? It’s because the single family home market is so hot, the competition is so strong – you know, the average property usually only stays on the market for two weeks, and pretty much everything is sold within 30 days. I mean, it’s just a breakneck pace.

But you see condos and co-ops are overtaking them, one, because there is less demand for them. There is less competition. People are less worried about quarantining themselves and being in a tight space or in a dense urban or suburban area. So I think that contributes to it.

How durable it is, I don’t know. I think if the Delta variant becomes – you know, is treated with the vaccine or a third dose or something like that, that trend will continue. And there has been massive migration out of dense urban areas in general for over 10 years. So while you certainly see COVID exacerbating this, it’s a long-term trend.

SEANA SMITH: Tim Rood, always happy to chat with you, Director of SitusAMC. We will get back to you soon.

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