Flipping homes is a nuanced business which often relies on contractor connections and local market knowledge. After 3.5 years Zillow is throwing in the towel on their algorithm based model in a market where values are up 20% year over year. After laying off 25% of its workforce Zillow is now looking to offload their $2.8B portfolio of roughly 8,000 homes. Don’t get too excited for an influx of inventory though as A) the market could easily absorb that many homes and B) according to Bloomberg they will likely sell in bulk to institutional investors.
Rates – improved again this week as Mortgage Backed Securities (MBS) pushed upward and ended the week in September levels. This improvement happened in spite of the Fed announcement that they would begin tapering their purchasing of MBS & Treasury bonds in November which was earlier than expectations. Rates are up approximately 1/8% from this time last year.
Jobs – the all important jobs report was released for October and it showed stronger growth than expectations (531K job gains) and a reduction of unemployment rate. Additionally initial jobless claims is down to 269,000 – the lowest level since the pandemic and near pre pandemic numbers of 220,000. Unfortunately the labor force participation rate reached a 50 year low at 61.6% so even though the unemployment rate dropped, more people have stopped looking for work for at least 4 consecutive weeks. Normally with a strong jobs report we would anticipate a negative impact on the bond market but it’s possible that because folks are leaving the workforce investors are skittish.
Home Prices – increased another 1.1% in September and are up 18% year over year. Interestingly Core Logic is forecasting meager gains moving forward but they also predicted a 6% reduction in values when values increased 20% so they haven’t been accurate in their forecasts recently.
Rents grew by 0.8% from September to October, which is the lowest month over month increase since February. Since January the median rent has increased a staggering 16.4%. Rent growth over the first 10 months of the year averaged 3.2% pre-pandemic.
Mortgage Applications to purchase homes were down 1.6% and are down 9% year over year. Cash buyers are up. Refinance applications declined 4% week over week and are down 33% year over year.