Welcome, prop.text readers!

In issue 32, we dispel the notion of a national “housing market,” the looming huge transfer of wealth and look at investor home buying.

publicly.traded → Market heat index, housing is local
industry.chatter → Boomers passing along RE
beyond.the.curve → Listings, delistings and time on market

All Housing, Like Politics, Is Local

The phrase “the housing market” permeates the real estate industry’s discourse. The “housing market” is some 4 (or 5 or 7) million homes short of demand; the “housing market” is frozen because of high mortgage interest rates (not really, but that’s a story for another day) and elevated sale prices; first-time buyers in the “housing market” are losing out to institutional buyers and investors who can pay cash (another myth we’ll dispel on another day).

Blah, blah blah-blah, blah.

The reality is there are tens of thousands of “housing markets” across the US in the 19,429 incorporated cities, towns, and villages with municipal governments across the country. (The United States Geological Survey lists some 35,000, including unincorporated places.) And there are deals to be had in almost all of those markets, if you are willing to look and know what you are looking for. Because “the housing market,” despite the Zillows, Compasses, Realtor.coms, etc., is still an inefficient market.

Lance Lambert, the co-founder and editor of Resiclub, does a really nice job of analyzing data and producing maps and charts that help tell the story of “the housing market.” The one below he came out with at the end of June caught our eye.

The Northeast is running hot, as is the upper Midwest, and California is holding its own. But markets that were on most writers’ hot lists a few years back (including this one) have turned cold. Markets in the so-called smile belt across the Southeast, stretching from Florida to Texas and out to Arizona, are all feeling the chill. Some of this is just the effect of gravity, as prices needed to moderate after a crazy runup in many places during the pandemic.

Austin, Texas, is a poster child for this. Prices rose some 60% between 2020 and 2022, and the median sale price peaked in May 2022 at $659,500, according to Redfin. By 2023, the party was over, and it’s been a pretty steady downward slide since. These days the median sale price is around $450,000, and inventory is up and homes are lingering — median number of days on the market in June was 66 days, according to Movoto, up from 59 days last year.

Meanwhile, South Florida is getting hammered, especially Cape Coral, which the Wall Street Journal called “the worst housing market in America.” (Paywalled, and we read it so you don’t have to.)

From 2020-2022, median home price rose nearly 75% to $419,000, as many were lured to this boating community on Florida’s west coast with 400 miles of canals, more than any city in the world. Today, “For Sale” signs line the streets of Cape Coral and open houses are deserted. Foreclosures are up and builders are trying to unload half-built shells at discountss.

“Cape Coral is the worst housing market in America right now,” José Echevarria, a Realtor, told the Journal. “I don’t think we’re at the bottom yet.”

But the story in the Northeast is much rosier, according to a report from Realtor.com. Three markets in New England on the site’s hotlist experienced growth in June: Manchester-Nashua, Worcester, and Providence-Warwick saw prices climb from 3.4% to 6.2%, with median list prices near $600,000 — more than $100,000 above the national median.

But other cities may not be too far behind Cape Coral, at least according to Mark Zandi, the chief economist at Moody’s Analytics. He has a pretty pessimistic outlook of “the housing market” and the broader economy, according to a LinkedIn post on July 14.

“Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon. That, however, seems unlikely,” he wrote. Housing will present a “full-blown headwind to broader economic growth, adding to the growing list of reasons to be worried about the economy’s prospects later this year and early next.”

There were plenty of dissenters to Zandi’s post and one from Edward Golding, executive director & senior lecturer at MIT Sloan School of Management, was near and dear to our heart: “Housing markets are notoriously hard to predict (animal spirits) and very local.”

Proptext smells opportunity on the horizon, so keep your powder dry and keep hunting for deals.

With the oldest boomers turning 80 next year, the US is on the verge of a huge transfer of wealth as millennials stand to inherit an enormous amount of property. (Boomers own some $19.7 trillion in real estate.) The problem, according to Business Insider, is that many are not ready to take on the responsibility. Family drama, tax considerations, homes that need extensive renovations, and the resistance to being a landlord are among the complications. Weaker housing markets, years of retirement spending and eldercare can sap estates and, for some millennials, what looked like a windfall can turn into a burden. 

Real estate investors bought almost 27% of all homes sold in the first quarter this year, or  265,000 homes, according to real estate data firm BatchData. Between 2020 and 2023, investors bought 18.5% of homes on the market. Of the investor-owned homes, which account for about one-fifth of the 86 million single-family homes, some 85% of those are owned by those with 1 to 5 properties, or so-called mom-and-pop investors. Those with between 6 and 10 properties account for another 5%. Institutional investors with 1,000 or more homes account for only about 2.2% of all investor-owned homes. The increase in investor purchases reflects the affordability issues traditional buyers are facing, according to BatchData.

The housing market is sluggish in many places, and a report from Realtor.com offers more evidence: some sellers are pulling the plug and taking their homes off the market. In May, there were elevated shares of delisted homes in metro areas including Miami–Fort Lauderdale–West Palm Beach in Florida, Phoenix-Mesa-Chandler in Arizona, and Houston–Pasadena–The Woodlands in Texas. The increase in delistings is “an early signal that sellers may be losing patience in a market that’s taking longer to deliver desired offers,” the report said.

Though the sale of western lands we mentioned in the last issue of proptext did not make it into the final bill that President Trump signed into law on July 4th, we’d be remiss if we did not mention Brian Potter’s 2,600-word deep dive on the subject on his Substack. He has lots of maps, and identifies multiple cities, including Boise, Idaho, where federal lands do offer opportunities to build housing.

Just Because

We write a lot about affordability, because well, we think people deserve a decent place to live that allows them to pay for life’s other necessities. But if you make $200,000, you should be able to buy a house, right? Not if you live in Nantucket. Jody Kasper, the police chief, earns over $200,000 a year and lives in a rental with her wife, who works for the public school system. For Ms. Kasper, 50, it’s the third rental home in less than two years because she was only able to find short-term rentals. “The newest 20 police officers, myself included, don’t own a home here on the island, and the probability of them ever acquiring a home is almost zero,” Ms. Kasper told The New York Times. The median home price on the island is around $2.5 million, according to the local housing agency.

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