RETAIL SALES CONTRACTING

The December retail sales figures show sales contracting in most categories:

GOLDMAN FORECASTS 6% DECLINE IN HOME PRICES

Housing starts are forecast to decline to 1.25 million in 2023Q4 before recovering, with completions at 1.5 million this year, the most since 2007. This will result in a modest increase in homeowner vacancy rate. Home prices are expected to decline by 6% and stop declining by mid-year, with larger declines in Pacific Coast and Southwest regions and more modest declines in Mid-Atlantic and Midwest regions.

HOME CONSTRUCTION: WORST MAYBE BEHIND US

Higher rates and lower home prices will increase the drag on GDP growth from negative wealth effects and declining mortgage equity withdrawal, but we believe that the aggregate drag on GDP growth from the housing sector peaked in 2022Q4 at 1.1pp and will moderate to just 0.25pp by 2023Q4.

LOW INVENTORIES LEAD TO BIDDING WARS IN SOME MARKETS

The 6% mortgage rate has become more accepted by buyers, leading to a rise in mortgage applications by 28%. Average 30-year-fixed mortgage rates have declined to 6.15% from 7.08% causing a typical homebuyer's payment to decrease by 10%. Pending home sales rose 3% in December and listings that were stagnant are suddenly getting offers. Buyers are more motivated now that the holidays are over and sellers are more willing to negotiate.

The main factor driving bidding wars is low inventory, as sellers are slower to embrace the market shift compared to buyers. This effect is expected to be pronounced in 2023 as most mortgage holders have rates far below current levels and high rental prices motivate potential sellers to become landlords. There has been a slight improvement in people contacting Redfin agents to sell their home, but not a significant boost in listings nationwide. New listings have fallen 18% YoY and homeowners are scared to list due to shrinking home-price growth and buyers regaining power. The lack of inventory is making the market competitive.

2023 WILL SEE MOST DELIVERIES SINCE 2007

Most new home inventory is under construction – to be expected for this time of year.

PEOPLE APPEAR TO STILL BE BUYING THEM THOUGH

Although new houses sold-under construction does appear to be holding steady:

NO ONE IS SOLVING THE REAL PROBLEM

The gap between home prices and wages remains elevated. This is the core problem that none of the moves by the Fed will address.

WOULD YOU STILL HAVE THAT MEETING?

Everyone's under significant margin pressure now, and we're all looking for ways to economize and be more efficient. I've never been big on meetings unless they have a defined purpose and agenda -- I often say that I'm sitting in a very expensive meeting. I wonder how many of us would reconsider scheduling that meeting if Google reminded us of its opportunity cost instead of everyone's availability.

JOBS!

Completely refreshed this week!

Remote

• Managing Director, Head of Real Estate

Houston

• PM&A - Real Estate Lead
• Director of Land Acquisition
• Director of Forward Planning - Land Development
• Land SuLand Superintendent - Build To Rent
• VP of Sales and Marketing
• Consumer Insights & Research Manager
• Area Sales Manager
• Community Development Manager
• Development Analyst
• Community Development Manager

Dallas

• Land Acquisition Director
• Vice President of Construction
• Director, Pre-Construction (Project Executive) (23085)
• Land Development Project Manager
• Director of Land Entitlement
• Director Real Estate and Facilities U.S
• Sr Client Strategy Conslt Dir - Real Estate
• Sr. Real Estate Representative