In today’s edition:
- Consumer sentiment flirts with optimism
- A sliver of evidence for softening home prices?
- Predictions for 2024
🎯 What's Stirring
I’ll peel back the curtain a little bit. I’m writing this in the first week of January. My December was likely similar to yours - busily waiting to see if Santa would bring gifts (I won’t go into detail there in case there are readers under the age of 9) while simultaneously waiting to see if gifts would also come from Fed Chair Powell. Hopefully, in your case, both came true, but I do know that the latter came through with his end of the bargain.
Now I have the luxury of being a few days into the new year. The Consumer Sentiment Index soared in December. The Santa Claus market rally was fun. And after a challenging 2023, I think we were all ready to simply end the year on a high note. It was refreshing to finally taste a little optimism moving into the new year. Now that the holiday dust has settled, the market has stumbled a bit out of the gate, and reality is beginning to sync back in. “2024 will be a grind” is a quote I heard during an industry conference early in December that I can’t stop playing back in my head. Time to roll up our sleeves and get back to work.
- The Federal Reserve provides an optimistic outlook for interest rates in 2024 following the central bank’s meeting in December. The guidance provided by officials sees the fed funds rate going down 0.75 percentage points by the end of 2024 compared to where it stands today. Fed Chair Powell acknowledged the importance of maintaining a strong labor market as we head into the new year, as the Federal Reserve has two mandates - inflation and unemployment. The markets rallied in a big way following the news and finished the year up 24% (S&P 500) and 13.7% (Dow) for the year, surprising many about the performance of 2023 (Reuters).
- Single Family Rental industry leaders gather for their annual IMN West Conference in Scottsdale. Panelists emphasized that we are now in what should be considered a “normal” market compared with the anomaly of recent years with artificially low rates, and this is no longer an opportunistic trade. The efficient, quality operators who stay focused on their expertise will continue to find success even with tighter yields. They also dove into AI and encouraged the audience to get through the fluff and focus on actual value, and data liquidity was identified as a great opportunity for the industry in 2024.
- Don Mullens expects mortgage rates to reduce beginning in the second quarter of 2024, according to a recent interview on Bloomberg. The Pretium CEO had some interesting insights, but if you don’t have time to watch the video, here are a few: 1) The single-family home supply shortage is a product of boomers staying put, lack of construction, and the demographic wave of millennials. 2) Home prices will either flatten or remain elevated in 2024 due to the lock-in effect - 75% of homeowners have a rate below 4%, and the 30-year fixed is unique to the U.S. And 3) The shrinking of regional banks is likely not over. They carry a lot of risk with land development, construction, etc, and that risk will impact depositors. That capital will move to the private sector to companies like Pretium - “We have long term liabilities against long term assets which creates a very stable outcome for the economy.”
- The National Rental Home Council (NRHC) responds to the recent legislation targeting the housing industry introduced by Sen. Jeff Merkley and Rep. Adam Smith. The legislation seeks to “ban hedge funds from buying single-family homes”, and require existing hedge funds that own single-family homes to undergo a 10-year phase-out where they sell all their inventory. The NRHC makes a few main assertions in their response: 1) The term “hedge funds” is misleading. Single-family homes are owned by a wide variety of owners across the country, most notably - individuals. 2) The implication that these hedge funds can control the market ignores the fact that they only own 0.4% of the overall housing market and 1.3% of the overall rental housing market. And 3) The claim that this somehow negatively impacts homeownership does not take into account recent Census data showing that homeownership rates have increased by 2 percentage points over the last 5 years, and the number of owner-occupied units has increased 10% over that same time period.
- Annual predictions for 2024 are published by Redfin and Zillow. Similarities in their predictions: New listing volume and transaction volume will tick up in 2024, and renting will become more of an accepted option. Redfin predicts that home prices will decrease by 1% (which would mark the first price decline since 2012) and “change will come to the real estate industry” (citing the agent commission litigation), while Zillow predicts that home buyers will be more comfortable buying homes that need renovations and AI will play a key role in the home search experience.
📊 PlanOlabs Insights
Proprietary insights into the SFR industry from our research and consulting team
Last month, PlanOmatic and Rently announced a new integration! Now, this isn’t your run-of-the-mill, ho-hum, “simply for a nice LinkedIn post” integration…no this is something that actually improves the workflow for our mutual clients by eliminating manual steps.
Chart courtesy of PlanOlabs by PlanOmatic
Our PlanOlabs team dives into the integration in more detail and provides ways to get in touch on our blog here.
For more PlanOlabs insights, click here.
🔍 I Like Big Data (Releases) And I Cannot Lie
All the relevant data releases from the past month
- According to the University of Michigan Consumer Sentiment Survey, consumer sentiment soared 14% in December, reversing all declines from the previous four months.
- The Overall PCE Price Index from the Bureau of Economic Analysis decreased -0.1% MoM - the first decrease for the index in 3.5 years.
- Per the National Association of Realtors, the median existing-home sales price was $387,600, a MoM decrease of -1% and the 4th consecutive month of decline.
For the rest of the housing and economic indicators we track, check out the full blog post here.
📰 SFR In The News
Everyone knows this stuff and you should too
The Beaker is a bi-weekly briefing from PlanOmatic on the economy, housing, and the forces shaping both. Have something we should cover? Reply to this email.
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