Significant Decline in Institutional Homebuying Activity...Except Columbus 💹

Author

Nick Steinhauer
November 20, 2023

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Read time: ~4 minutes

Rates ended DOWN compared to last week, and volatility was HIGH. Rates remain in the mid to low 7 range for most loan types without paying discount points. Paying discount points can get you in high 6’s.

CPI Lower Than Expected - Rates Pull Back

On Tuesday, Bureau of Labor Statistics released the October CPI report and headline numbers hit 3.2% vs. 3.3% expected.  This was down from 3.7% in September.  Core CPI (excluding food and energy) landed at 4.0% vs. 4.1% expected.  Inflation appears to be slowing.  However, we are still 2x the Fed's target of 2.0% inflation.  The CPI for November will be released Tuesday, December 12th.

Key Takeaway : Off the news, stocks started to take off and mortgage rates started to pull back.  Markets started pricing in the expectation that the Fed is done hiking rates and may shift to cutting rates mid to late 2024.  If we continue to see additional data points suggesting a slowing economy, that will solidify those cuts.

Additional Signs of a Slowing Economy

  • Jobless Claims Hit 3-month High - Weekly jobless claims +13,000 to 231,000.  Continuing claims +32,000 to 1.865M.

  • US Retail Sales -0.1% - This is a big surprise since we haven't had a decline in retail sales in 7 months.  Consumers are starting to pull back on spending.

  • Wal-Mart Cuts Sales Forecast - Their CFO said late October sales slowed dramatically pointing to consumer credit tightening and potentially the repayment of student loans hitting.

Key Takeaway: Consumers are starting to speak with their wallets.  Slowing down spending (whether that due to saving more or lack of funds) will further pull inflation down which is favorable for rates. 

Significant Decline in Institutional Homebuying Activity...Except Columbus!

According to John Burns Research and Consulting, institutional buyers (those who own at least 1,000 homes) bought 1 in every 42 homes purchased.  In Q2 of 2023, that dropped to 1 in 250 purchases.

Parcl Labs (a residential real estate data company) gathered information on metro areas of the US from mid-August to mid-November showing where institutional buyers are still investing heavily.  On top of that list is Columbus, OH followed by Cleveland, OH.

14% of all institutional activity over the last 3 months is happening in Columbus and Cleveland.  Why?  ResiClub spoke to Noel Christopher (a thought leader in single-family rental space and build-to-rent space).  He identified Columbus as good quality of life, relatively affordable and investors can hit a decent profit.  There isn't a lot of crime and incomes are increasing within the area.  The area is also pro-business, which we can all see with the investments from Intel, Amazon, Google, etc.

Key Takeaway: Those of us in the Columbus area (and the outlying regions) need to know that opportunities are everywhere.  This market isn't cooling any time soon.  Double-down your efforts and work to gain market share.

5% Down on Owner-Occupied 2-4 Unit Properties Goes Live

On November 18th, Fannie Mae's new guidelines went into effect allowing individuals to put down just 5% to purchase a 2-4 unit property assuming the buyer will occupy one of the units.   It used to require 15% down on 2 unit properties and 25% down on 3-4 unit properties.

Key Takeaway: This opens up the buyer pool on 2-4 units significantly by lowering the barrier of entry.  To some degree, this also helps affordability as buyers can collect rent from the other units to help pay down their mortgage.  Agents, make sure you keep these selling points in mind when discussing this new guideline with potential clients.

Instagram Posts from Last Week

Don’t hesitate to reach out if you need anything at all. Have a wonderful week!