U.S. home prices surge, what could cool the hot housing market

Tim Rood – SitusAMC Managing Director and former Chairman of the Collingwood Group, joined Yahoo Finance to discuss the booming real estate market.

Video transcript

SEANA SMITH: Let’s talk a little more about real estate. As US home prices continue to rise in the first few months of the year, they seem to be rising almost everywhere. And when you look at what’s going on, there is little evidence that it is about to fade away.

We want to involve Tim Rood. He is the managing director of SitusAMC. And Tim, we’ve talked to you about this in the past, but housing is still so resilient. I guess you see this momentum wear off in the short term?

TIM RED: Hey Seana, I am happy to be with you. You really don’t know. You know it’s funny I was thinking about it this morning. You know, it’s a shame the Dickens guy didn’t really catch on because this is really the best and the worst time. Obviously, the best time is when you are a salesperson. I mean the values ​​are rising parabolically and there is unlimited demand it seems. But of course when you’re a buyer you know you’re running the gauntlet trying to figure out how the hell you’re going to find a property that you can afford and ultimately one that you can get under contract, you know? .

ADAM SHAPIRO: Well, Tim, it could be the story of two cities, so to speak, that continues with this Dickens guy. I mean you could have some real price spurt. Take a look at Miami, for example. We just heard in the last block that at least residential properties are going through the roof. But then you get a place like New York where prices have dropped. Does that pull people back to where prices may be lower, especially when you have urban centers that have everything you would want in New York or Chicago?

TIM RED: Yeah it’s interesting. We are trying to find out whether the exodus from the hot urban areas is short-lived, ephemeral or not, or whether it is some kind of secular change. My money, you know, would be a fleeting change. But if you just look at hard data on migration patterns, it’s definitely clear that the most immigrant states are Texas, Florida, North Carolina, a bit in Phoenix, Arizona. And the drains come from at least the top 4, New York, San Francisco, San Jose, and LA.

The story goes on

So Miami is certainly a benefactor of this. And one thing that these southeastern and southwestern states have a lot of is land. So it looks pretty good. It’s sunny. It’s affordable. And they have a good economy.

SEANA SMITH: Hey Tim, we hear about it all the time. I think most people know someone who might have been looking for a home in the past few months. You are involved in these bidding wars. The house goes way beyond asking price with a very, very attractive offer. If you take a look, maybe for how long, not so much that we’ll see a massive drop in house prices, but until things at least normalize a little more, I mean, what is a potential timetable for that?

TIM RED: Well I think it’s really a matter of interest rates and economic recovery. You know, supply is a difficult thing. Ultimately, we are probably short of 5 million units where the demand is. And while President Biden has some very ambitious plans to invest hundreds of billions of dollars in fixing this problem, this is one big oil tanker to change. It will take years for this to work, even if the states, the counties, the towns get around to getting a religion to change their zoning and land use rules.

So I think this will take a while. And right now you can see that the pace is unlikely to change anytime soon. It appears that 50% of the homes are being sold at above asking price. And the sales pace is really unprecedented, 80% were signed in the first year.

So if we continue to have growth, if we continue to have relatively low interest rates, if the pandemic continues to take a back seat, then I can think of no reason why the housing market should stall. It could moderate. And God knows we need it to moderate. You cannot have revaluation rates of 15% per year. But the good news is that interest rates have come down, you know, even a 15% year-over-year increase in house price index, the value of an average home, because interest rates are still down 3/4% to 1 / 2%, i.e. 3/4 of 1/2% basically–

ADAM SHAPIRO: Hello Tim.

TIM RED: — covers. Yes.

ADAM SHAPIRO: Very quickly, that’s a yes or a no. After everything you’ve just said, it’s time to buy a home, do it now, don’t you wait?

TIM RED: You should buy a house. But I wouldn’t. No, of course I think if you can find something affordable in a place that you like, you should buy it. I don’t see the values ​​drop in the foreseeable future. And the opposite when it comes to renting out, especially for single-family homes. You are not in any better shape because there is no inventory there. The occupancy rate is going through the roof and the values ​​are rising. Because the landlords have real pricing power.

SEANA SMITH: All right Tim Rood. It sounds like we have a lot to talk about over the next few months. The General Manager of SitusAMC, nice to speak to you and we will speak to you again soon.

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