We are at a unique moment in the history of homebuilding. With interest rates rising rapidly, inventory at historic lows, home prices rising to unprecedented levels above income, and a purchase market that is both highly anxious and digitally dependent, mortgage and real estate professionals must be strategic to take advantage of market opportunities today.
We interviewed more than 25 mortgage industry experts to gather the best insights, strategies and recommendations to navigate and win in today's marketplace. We've teamed up with HousingWire to share some excerpts from the report. To view the full research, click here.
2022 State of the mortgage industry: affordability and inventory
It was no surprise that affordability was at the top of every interview list. Black Knight reported that May was the least affordable housing market in 16 years. Stocks have risen slightly at increasing rates, but economists agree that progress is nowhere near enough to get us out of the current stock crisis. Lead analyst for HousingWire, Logan Mohtashami, calls it "an extremely unhealthy market".
Growth rate of income vs. Home prices. Affordability challenges have not only been caused by low inventory levels. Again, if you look at the market over the last 40 years, debt and income have not kept pace with housing cost increases. Average home prices have increased 60% since 1980, while average family income has increased only 25%.
Slow construction and restrictive zoning laws. One of the main reasons for low inventory was slowing construction activity. Builders and developers across the country have had difficulty obtaining basic materials and labor, resulting in significant delays.
After the 2008 housing crisis, many homebuilders went out of business, and for years after the recovery, construction activity did not rise to the level needed to meet demand. Labor shortages and supply chain issues during the pandemic have further widened the inventory gap. Speaking with NPRsaid one contractor, "If I had twice as many people, I still wouldn't have enough … And my subcontractors, they're all hurting for people."
In addition to labor and materials, builders are struggling to meet the increasing demand for multifamily housing due to restrictive zoning laws. Delayed household formation has increased demand for multifamily housing designed for one- or two-person households (Urban Institute). However, many neighborhoods are restricting construction of multifamily housing or ADUs.
Institutional Investors. In 2021 we saw the highest rate of investor bought real estate than ever before. Austin Niemic, executive vice president at Rocket Pro TPO, said one of the reasons affordability is a challenge in their markets is that "institutional buyers are coming in and buying homes in bulk".
New data published in Business Insider found that investors bought 33% of U.S. homes on the market in January, the highest percentage in more than a decade. In recent months, investors have leveraged real estate more to hedge against inflation and pushed more first-time home buyers out of the market.