Odeta Kushi
@odetakushi
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Deputy Chief Economist @firstam | Real Estate & Housing Finance | Data + Econ + Housing | Co-host of REconomy Podcast | Albanian-American | Views are my own
Washington, DC
Joined July 2009
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U.S. households own $41 trillion in owner-occupied real estate, just over $12 trillion in debt, and the remaining ~$29 trillion in equity. The national "LTV" in Q2 2022 was 29.5%, the lowest since 1983.
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Apartment rents are already declining in many cities, and those with more construction underway that lack the demand to absorb new deliveries will see rents fall further in 2024. The pandemic, which drove geographic shifts in the demand for apartments, as well as the low interest…
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The cost of renting is simply the amount of rent paid every month (blue line). The monthly cost of owning a home includes taxes, repairs, homeowner’s insurance, and the monthly mortgage principal and interest payments (orange line).
The green line shows the monthly cost to own…
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We talk a lot about homeowners being rate-locked into their homes as rates have increased. It's true that 93% of outstanding mortgages were locked in below 6% as of Q2 2022. But 42% of owned homes have no mortgage associated with them, making them immune from the lock-in effect.
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Today’s housing market isn’t anything like the housing market of the mid-2000s – the housing market today is not overbuilt, nor is it driven by loose lending standards, sub-prime mortgages, or homeowners who are highly leveraged. However, the current housing market is similar to…
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A common misnomer regarding the millennial generation once was that they were destined to be a generation of renters. However, millennials are not only interested in homeownership but, as of 2022, the majority of millennials—51%—are homeowners.
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The bigger picture is that shelter is a basic human necessity. The housing market has been underbuilt relative to demand for more than a decade. What we need in the U.S. is to build more housing of all types, rented or owned.
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According to the NMDB Q3 2022 data:
~24% of mortgaged homes have a rate <=3%
~63% have a rate <=4%
~84% have a rate <=5%
~93% have a rate <=6%
~7% have a rate >6%
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85% of outstanding mortgages as of Q1 2022 were locked in at <=5%, rates, 65% at <=4% & 24% at <=3%. The chart below shows the share of outstanding mortgage locked in <=4% by state. New listings in the week ending 9/13 were down 18% YoY. The golden handcuffs of low mtg rates.
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With all due respect,
@USAmbKosovo
: say something, DO something. Why are we appeasing Serbia? Serbia received backing from Russia and China to continue its provocations.
Why is the U.S. supporting those regimes in the Balkans that are least committed to democratic values?
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#Kosova
border police officers are kidnapped today inside 🇽🇰 territory by 🇷🇸 gendarmerie. This is an extension of violent interference of 🇷🇸 in 🇽🇰 after events in the north. Only aggressor in these violent event resides in Belgrade & Int’l community should react accordingly
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Will result in more pullback in demand. House price growth moderation requires a rebalancing of supply relative to demans. Higher rates will do that.
But ~90% of inventory is existing homes & existing owners have golden handcuffs. They’re rate locked in.
No joke the mortgage rate just hit 6.28% today.
Beyond words to express at this point!
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From 2000 up until the pandemic, new homes on average made up ~11% of total inventory. Today, that share is 29% as existing owners are staying put & new home inventory rises. Please note that the new home inventory number includes inventory at all stages of construction... (1/2).
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The demographics for home buying will remain very favorable in the coming years. Today, the housing market suffers from a shortage of housing inventory—a deficit of approximately 2 million housing units in early 2023—due to a combination of decade-long underbuilding and a…
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The first ever birthday I celebrated in the U.S., my parents pointed to the local firework display and told me that it was for me. Today I turn 30 and I know better. But the magic of sharing a birthday with America has never faded. Happy birthday, America 🇺🇸
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Homeowners today have an average of $330,000 in equity in their homes, down from last quarter but still historically high. This equity provides a cushion to withstand potential price declines, but also prevents housing distress from turning into a foreclosure.
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Well if you insist! Coming right up… 🇦🇱 Honored to be rated, and by someone who appreciates Albanian artifacts!
Good shelf setup. Decent depth. Add a few more items. Maybe a few more things from Albania? Like these? 9/10
@odetakushi
*your Room Rater spent a couple months there in the 90’s working for US Govt. Nice bunkers :)
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U.S. pending-home sales down -4.1% MoM, were expected to increase +1%. Pending home sales are forward-looking indicator of home sales based on contract signings. This is the fourth straight month of declines. What's holding back sales?
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The average rate on the 30-year fixed was as low as 3% just two years ago. Holding household income constant at $75,000 and assuming a 20% down payment and 33% DTI, a buyer today with 8 percent rates has $260,000 less purchasing power. Two years ago you could afford up to…
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Big jump in the homeownership rate today, mostly driven by younger households. We saw a spike in the number of owners, and a decline in the number of renters. This is the highest rate of homeownership since 2008.
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Just released Q3 2023 NMDB data reveals:
▪️22.6% of mortgaged homes have a rate <= 3%
▪️36.8% have a rate 3.01 - 4%
▪️19.3% have a rate 4.01 - 5%
▪️9.8% have a rate 5.01 - 6%
▪️11.5% have a rate > 6%
88.5% of mortgaged homes have a rate below 6%, that's down slightly…
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2 homes in my area had offer deadlines yesterday, one at noon & the other at 4 PM. 20+ offers on the former & 6 on the latter when the day started. The losers from the noon deadline rushed to submit offers on the other. Both went 35%+ over list. What a time.
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U.S. households own nearly $38 trillion in owner-occupied real estate, just over $11.7 trillion in debt, and the remaining ~$26 trillion in equity. The national "LTV" in Q4 2021 was 30.8%, the lowest in over three decades.
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U.S. new home sales in April come in well below consensus expectations. Consensus was 750,000 while actual was 591,000. This is 16.6% below the revised March rate of 709,000 and is 26.9% below the April 2021 estimate of 809,000.
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Sales of new single‐family houses in November 2023 were at a seasonally adjusted annual rate of 590,000, below consensus expectations of 688,000. The previous month was revised down.
Sales in October were 12.2 percent below the revised October rate of 672,000, but is 1.4…
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The market with the fastest annual house price deceleration from peak was Sacramento, from 23% in July 2021 to 4.6% in Aug 2022. Then comes Phoenix, from 33% in Oct 2021 to ~15%. NYC decelerating the slowest, from 13% in May 2021 to ~12%. This is using a repeat-sales methodology.
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Me explaining the different possible scenarios for mortgage rates.
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Some of the drivers of the widening of the mortgage rate spread will likely remain sticky, which may prevent mortgage rates from meaningfully declining. Read on for more…
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What does housing reset mean?
Powell: What we need in the longer term is supply and demand to be better aligned... so people can afford houses again. We need to go through a correction to get back to that place.
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Homes are less affordable than they were a year ago, but nationally and in most markets they remain much more affordable than at the peak of the 2006 housing boom.
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Nominal house prices are well above the mid-2000s housing boom peak in all top 50 markets, but real, house-buying power-adjusted house prices remain below in all markets thanks to higher household income and lower mortgage rates. (1/6)
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Housing's share of GDP is about 16%, so the slowdown will likely pull down the broader economy. Cooling in the housing market depresses demand for commodities, durable goods, and a whole host of housing services.
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National housing overvaluation is defined as when the median sale price of a home > median house-buying power (how much home one can afford to buy given income & rates). In the new home market, the only time when housing was considered overvalued was 2005-2008...until now.
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Existing-home sales fell 4.1% in October to a seasonally adjusted annual rate of 3.79 million. This is the lowest level since 2010, and below consensus expectations of 3.9 million. How much lower can they go? Probably not much lower as more recently mortgage rates have fallen…
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Housing starts in October were at a seasonally adjusted annual rate of 1.372 million, above the consensus expectations of 1.35 million. This is 1.9% above the revised (down) September estimate of 1.346, and 0.2 % above the October 2022 rate of 968,000.
Single‐family homebuilding…
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Comparing the median sale price to house-buying power in all top 50 markets reveals that 4 markets are considered "overvalued". "Overvalued" is defined by a market where the median sale price > house-buying power. Most markets still "undervalued."
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We can break out all top 50 markets into 4 categories. The first is boom-bust & the example market is Phoenix. Phoenix is emblematic of the expression- the harder they rise, the harder they fall. Prices increased 65% from pre-pandemic to the peak & have declined 10% from peak.
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“Do you think they’ll accept 150k over list?” is a thing I just said out loud.
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When I moved to the US as a child in the late 90s, I would’ve given anything to be able to see my family & friends in Albania. Fast forward 23 years & those people are able to virtually attend my wedding. I’m guilty of taking technological progress for granted,but not on 9/18/21.
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The strength of the rate lock-in effect can be estimated using the diff btwn the avg rate for all outstanding mtgs & the prevailing mkt rate. Today more than at any other point in the last 30 years, homeowners have very little financial incentive to sell.
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Privately‐owned housing starts in November were at a seasonally adjusted annual rate of 1.56 million, above consensus expectations of 1.36 million. This is 14.8 percent above the revised October estimate of 1.359 million, and is 9.3 percent above the November 2022 rate of 1.427…
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Setting: Family trivia
Category: Sports
Question: What does MLS stand for?
Me, excitedly: MULTIPLE LISTING SERVICE
It was not that.
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Homebuyers are feeling the squeeze as rates rise alongside house prices. Out of the top 50 markets in the US, affordability on an annual basis declined the most in sunbelt markets: Charlotte (46.6%), Raleigh (43.5%), Tampa (43.3%), Phoenix (42.0%), and Jacksonville (41.2%).
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It will be difficult for existing-home sales to meaningfully increase while homeowners remain chained to their homes by their golden handcuffs and confounded by the prisoner’s dilemma of whether to sell or not.
Read below for more on these dynamics.
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@scottf200
Here you go:
23.6% of mortgaged homes have a rate <= 3%
39.5% have a rate 3.01 - 4%
20.8% have a rate 4.01 - 5%
8.8% have a rate 5.01 - 6%
7.4% have a rate > 6%
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Homeowners had an average of $320,000 in inflation-adjusted equity in their homes in Q2 2022, an all-time high. The annual growth in equity in Q2 was historically high, but has slowed from the peak in Q3 2021.
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Home sales likely have further to fall. Mortgage applications so far in August point to another decline in existing-home sales. This month's number of 4.81 million puts us at about 2014 sales level.
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Where have market rents declined the most from their recent peaks? Las Vegas, Austin, Seattle, and NYC according to the latest (December) Zillow Observed Rent Index. Just 4 of the top 50 markets- Jacksonville, Milwaukee, Cleveland, and Louisville- have yet to experience declines.
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Are we past the housing market 'trough' (for sales not prices)? It's difficult to call the bottom, but some measures are indicated that we're past the worst of it. The Jan. NAHB index, for example, outpaced consensus expectations and all 3 components of the index ticked up. (1/2)
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Over the last half century, there have only been two other times when core inflation was higher than the 30-year fixed-rate mortgage. Both in the 1970s. Today, we are experiencing the rare phenomenon of “real” negative mortgage rates.
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Honored to have been named a 2023 Woman of Influence. Homeownership is the primary driver of wealth creation in the country, and I’m proud to have the opportunity to educate and inform others.
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Today marks my family’s “coming to America” anniversary- 23 years! On March 5, 1998, not knowing a word of English and with $100 in my dad’s coat pocket, we boarded a plane to the country of freedom and opportunity. Today and every day, I’m proud to be an Albanian-American. 🇦🇱🇺🇸
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U.S. households own nearly $34 trillion in owner-occupied real estate, $11 trillion in debt, and the remaining nearly $23 trillion in equity. The national "LTV" is at its lowest level in more than three decades. (1/6)
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Our first Halloween in the U.S. We didn’t speak English and weren’t sure what to do, so we just knocked on doors and stood there in silence, which I’m realizing in hindsight was probably creepy.
@SiditaKushi
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U.S. pending-home sales for August were expected to fall 1.4% from the prior month. But they came in 2% lower from July and 24% lower than one year ago. Pending home sales are forward-looking indicator of home sales based on contract signings.
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An hour into my first social event in over a year and someone says: “wow, you really seem to like real estate.” Does this make me passionate about my job or have I simply lost all of my social skills?…
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Nominal house prices declined in Sep from their recent peaks in 15 of the top 50 markets we track. The market with the biggest decline was San Francisco, where nominal house prices peaked in March 2022, but have since declined by 6.8% as the housing market rebalances. (1/3)
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Homebuilding is a leading economic/housing indicator, & homebuilder confidence dipped lower in May for the 5th month in a row. Home affordability is declining as rates rise alongside house prices & builders continue to face higher material prices & shortages. But context is key..
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Overheard at a DC open house:
“It’s been sitting on the market for 11 days, what’s wrong with it??”
Telling of the times.
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This week's
#REconomy
episode: a one percentage point decline in rates has the same impact on affordability as an 11% decline in house prices. Historically, rates are much more likely to move by a percentage point than prices are to move by 11%. (1/2)
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I’m excited to share that I've been recognized as a 2024 Inman Future Leader in Real Estate.
Award winners are industry achievers under the age of 40 that are forging new paths and pushing the envelope. The Future Leaders in Real Estate award celebrates the next generation of…
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I love this country & there’s not a day that I’m not thankful to live here & to be able to write tweets such as this one. But today I am heartbroken that many have lost the fundamental right to make informed decisions about their bodies. Bodily autonomy should not be negotiable.
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Our nominal house price index hit a new record high in March. The reacceleration in house prices alongside higher mortgage rates dampened affordability. Housing supply remains so restricted, that any uptick in demand will put upward pressure on prices.
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Our repeat-sales First American Data & Analytics home-price index reaffirms that real estate is local. In some markets (e.g. San Francisco), house prices have declined from recent peaks by double-digits, while house prices in other markets have yet to decline (e.g. Miami).
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Median mortgage origination credit scores were basically flat at 786 in Q2 2021. Housing is the hottest its ever been, but credit quality has improved to the best its ever been. Those qualifying for mortgages have great credit, which reduces risk in the housing market.
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What a year. I have never had so many of my friends be interested in the Federal Reserve AND soccer. Suddenly we have so much more in common.
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In the week ending June 3, 2022, the 30-year fixed-rate mortgage increased to 5.4% after three consecutive weeks of decline. SA purchase applications decreased 7.1% compared to last week, and are down 20.6% year-over-year...a thread.
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Seasonally adjusted purchase applications are at the lowest level since 1995. Cumulative mortgage applications (purchase and refi) through this point in the year are at the same level as in 1992.
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Apparently my phone has started to autocorrect my name to “Oregano.” Totally out of the blue. I’ve counted 3 emails I’ve sent just this morning where I didn’t catch the autocorrect. Happy Friday, everyone. - Oregano
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Family: Innocently and casually ask what’s going on in the bond market and what it all means for mortgage rates.
Me:
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The S&P CoreLogic Case-Shiller national home-price index for November reported a 7.7% annual gain, down from 9.2% in October. This is the 7th consecutive month of slowing price growth. Likely more price declines to come as there is significant lag to this data. .
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When you account for the size of the market (total number of households), existing-home sales are the lowest in over 3 decades.
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The number of job openings decreased to 8.7 million in October, below consensus expectations of a decline to 9.4 million. September job openings were revised down from 9.6 million to 9.35 million. Demand for new hires is slowing. The gap between labor demand and labor supply is…
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U.S. housing starts come in above consensus expectations at an annual pace of 1.427 million. This is 0.5% below the revised October estimate of 1.434 and 16.4% below the November 2021 rate of 1.706. Single‐family starts fell 4.1% MoM and 32.1% YoY. (1/n)
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The current spread between the 30YR FRM & 10 YR Treasury is ~300 bps. The historical avg is 170 bps. We broke down the spread into primary (GOS, servicing, gfees, etc.) & secondary (investor risk premium/duration risk). Primary has consumed more of the total over the last decade.
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Compared to their respective mid-2000s housing boom peak, how much higher are nominal house prices today? The graphic ranks top 50 markets from highest growth from the previous peak to the lowest. Nashville CBSA tops the list, while Chicago comes in last.
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Breaking down the January CPI report. Consumer prices increased 0.5% in Jan, the biggest monthly move since Oct. The index for shelter was the largest contributor to the monthly all items increase, accounting for ~half of the monthly all items increase.
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Asked a local (DMV area) real estate agent if he's seeing any slowdown in the market, his answer: 25% have dropped out, 50% are paralyzed or unwilling to do what it takes to win deals & 25% have become more aggressive (not inspecting, offering 400-600k above asking, high caps).
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U.S. households own $36.8 trillion in owner-occupied real estate, $11.5 trillion in debt, and the remaining $25 trillion in equity. The "national LTV" is the lowest it's been in over 3 decades.
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U.S. households own about $45 trillion in owner-occupied real estate, $13 trillion in debt, and the remaining $32 trillion in equity. The national "LTV" in Q4 2023 was 29%, up slightly from a recent low of 27.5%.
In inflation-adjusted terms, homeowners have an average of $324k…
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Seasonally adjusted purchase mortgage applications point to further declines in existing-home sales in the month of July. It's possible for sales to come in below 5 million SAAR, which excluding the spring of 2020, would be the lowest level since 2015.
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The shift to the suburbs, exurbs, & smaller cities continues. 2021 population estimates show that only large cities lost population in 2021. Population growth boosts demand for all housing and for CRE. We can already see the demand shift to the suburbs for office & retail space.
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Housing starts in March were at a seasonally adjusted annual rate of 1.321 million, below consensus expectations of 1.485 million. This is 14.7% below the revised February estimate of 1.549 million and is 4.3 percent below the March 2023 rate of 1.380 million. The decline starts…
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Told my family repeatedly to get their holiday shopping done early this year because of supply chain and inventory issues. They listened!
Who didn’t listen? Me! As I frantically start my shopping… today.
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Me: Economic forecasting in this environment is useless.
Also me: Spends all weekend running worst-case scenario forecasts.
The dismal science indeed.
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Nominal house prices increased by 21.7% YoY in January. Once adjusting nominal house prices for income and mortgage rates, the Real House Price Index (RHPI) jumped by 26.8% YoY- that's the fastest growth (growth indicates declining affordability) since 2004.
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Total nonfarm payroll employment rose by 528,000 in July, far exceeding consensus expectations of 250,000. The unemployment rate edged down to 3.5 percent. As of July, all of the 22 million jobs lost in the pandemic have been regained. Wow.
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Housing starts beat consensus expectations in March and increase to 1,793,000. This is 0.3% above the revised February estimate and is 3.9% above the March 2021 rate. More groundbreaking means more homes for a supply constrained market.
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Q2 homeownership rate data is here! I will not be comparing to Q2 2020 (pandemic-driven data collection changes), but compared to Q2 2019 it's clear that younger households (millennials!) are driving homeownership growth.
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Housing starts in February were at a seasonally adjusted annual rate of 1.521 million, above consensus expectations of 1.44 million. This is 10.7% above the revised January estimate of 1,374,000 and is 5.9% above the February 2023 rate of 1.436 million.
Weather can impact…
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The median renter, who can also be considered the median first-time home buyer, could afford 34% of the homes for sale nationally in the first quarter of 2023, down from 45% a year earlier...
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As a proud Albanian American, I am thrilled to discover and be featured in The Albanian Business Journal. It's an honor to contribute to a publication that uplifts and showcases the Albanian community. Check out the interview below!
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As rates rise, some buyers are choosing to apply for ARM loans. The ARM share of applications last week increased to 7.6% by loan count, which is the highest since Dec. The avg contract rate for 5/1 ARMs increased to 5.66%, ~a full percentage point lower than the rate on 30Y FRM.
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Purchase applications show 54% recovery since early April, now 9% higher than one year ago. Pent up spring demand is clear, but severe lack of inventory is the problem. The continuation of this dynamic will result in further house price appreciation.
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In the week ending Sep 9, 2022, the 30-year fixed-rate mortgage increased to 6.01% from 5.94%. That's the highest level since 2008. (1/4)
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Housing starts come in below consensus expectations and fall to a seasonally adjusted annual rate of 1,549,000. This is 14.4% below the revised April estimate and is 3.5% below the May 2021 rate. SF starts declined 9.2% MoM to the lowest since Aug. 2020.
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For the hundredth time, spell check: I never intend to write mortgage rats. Please spare me the embarrassment of sending an entire document full of mortgage rats.
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To determine if the housing market is in a recession, we created a comprehensive, rule-based model based on the NBER BCDC method of calling recessions, which relies on 8 economic indicators. We can begin to form a definition of a housing market recession.
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U.S. pending-home sales for November are expected to fall 0.5% from the prior month. Excluding April 2020, that would bring pending sales to the lowest level in nearly 22 years. We'll find out in 10 minutes. (1/n)
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