US Macro Updates

Key takeaway: The US Housing Market is a key component of the overall US economy and often a leading indicator of upcoming economic performance! Mortgage rates have spiked substantially in recent weeks and months. US Residential real estate activity had shown signs of bottoming in the first half of 2023. However, with mortgage rates touching 8%, the outlook seem much worse now. 

• The typical US home price decreased 0.3% m-o-m in October. While the typical home price is still higher when compared to the same period last year, the m-o-m decline is still noteworthy. The decline also accelerated from 0.1% in September to 0.3% in October. The decline is also faster than pre-pandemic seasonal norms. This data point also echoes some of the other recent indicators of the US residential real estate market which show a slow down in activity compared to the first half of 2023.  
• The lack of new listings continues to dominate as the key theme in the US residential market. New listing fell 4.7% m-o-m from September to October. However, similar to other data points, the latest prints point to a slight improvement in listing and inventory trends. Sellers seem more willing to accept the fact that higher rates are here to stay and more willing to list their houses for sale. Despite fewer homes listed for sale, total inventory climbed 2.6% nationally 
• Pending home sales was 5.3% lower than October last year. Similar to other indicators it will be key to track if pending home sales fall substantially through the rest of 2023 and early 2024. Even though inventory is improving slightly, it still remains well below pre-pandemic averages. Attractive listings hence still find interest with buyers which keeps a floor in the market. 
• Nationally, rents decreased 0.1% in October from September. However, one year on year basis, the ZORI Index climbed for the first times since the peak in Feb 2022 (3.2%). While this is still lower than the 7-10% annualized shelter inflation rate in the CPI seen 2022 onwards, the increase is concerning. The lower rent inflation was expected to start reflecting in the CPI from mid 2023. However, it has still not started featuring in CPI data. Even the latest September CPI report shows shelter costs increasing at a 6-7% annual rate. Any rise up in rental costs will keep CPI elevated through the medium term and consequently interest rates will remain higher.
  

Zillow Home Value Index

Zillow Housing Reports

12th Oct 2023

Key takeaway: The US Housing Market is a key component of the overall US economy and often a leading indicator of upcoming economic performance! Mortgage rates have spiked substantially in recent weeks and months. US Residential real estate activity had shown signs of bottoming in the first half of 2023. However, with mortgage rates touching 8%, the outlook seem much worse now. 

• The typical US home price decreased 0.1% from August to September. While the quantum of decrease is quite marginal, it is key to note that this is the first decrease since February 2023. This data point also echoes some of the other recent indicators on the US residential real estate market which show a slow down in activity compared to the first half of 2023.  
• The lack of new listings continues to dominate as the key theme in the US residential market. New listing fell 6.4% m-o-m from August to September. The level also remains substantially below pre-pandemic averages 
• Pending home sales was 14.8% lower than September last year. Similar to other indicators it will be key to track if pending home sales continue to  fall substantially through the rest of 2023 and early 2024
• Nationally, rents climbed 0.2% in September from August . This was slightly higher than the average monthly gain in this time of the year. Annual rent growth decelerated to 3.2% in August. This is lower than the 7-10% annualized shelter inflation rate in the CPI seen 2022 onwards. This lower rent inflation was expected to start reflecting in the CPI from mid 2023. However, it has still not started featuring in CPI data. Even the latest September CPI report shows shelter costs increasing at a 6-7% annual rate.
  

Zillow Home Value Index

Zillow Housing Reports

12th Sep 2023

Key takeaway: The US Housing Market is a key component of the overall US economy and often a leading indicator of upcoming economic performance! Even though mortgage rates have risen by mammoth proportions, US Residential Housing seems to have found a bottom and even turned a corner. There are 2 aspects to be considered in this connection – First, that it is very positive for the economy overall. However, on the other hand, it can still keep pressure on inflation via second order effect through rental inflation! 

• The typical US home price once again increased in August, however, at a slower pace of 0.2% compared to the +1.4% in June and +1.4% in May and +0.9% in July). While an increase in home prices on a m-o-m basis is expected for the usual summer buying season, the recent increases are worth taking note of. After a 6-month streak of falling prices m-o-m from Aug 2022 to Jan 2023, August is the seventh month in a row when the typical home value has climbed on a m-o-m basis. There is a lot riding on the Shelter component of CPI coming down rapidly in the second half of 2023. A resilient real estate market makes that story a bit more difficult. However, there seem to be some signs of a slowdown in activity once again.  
• The lack of new listings continues to dominate as the key theme in the US residential market. However, there was a bit of an upswing in new listings in August (+4.0% m-o-m compared to July). However, new listings in August (349K) still remain lower compared to last year. 
• Pending home sales was 18.9% lower than August last year. This data point also accelerated a bit further from July (14.0%) and it will be key to track if pending listings continue to fall further and dampen volume in the home sales market.  
• Nationally, rents climbed 0.3% in August from July . This was slightly higher than the average monthly gain in this time of the year. Annual rent growth decelerated to 3.3% in August. This is lower than the 7-10% annualized shelter inflation rate in the CPI seen 2022 onwards. This lower rent inflation is expected to start reflecting in the CPI from mid 2023. However, given the huge reliance of falling rents eventually showing up in the official CPI measure, any substantial increase in rents – even though usual for this time of the year – is a cause of concern.
  

Zillow Home Value Index

Zillow Housing Reports

9th Aug 2023

Key takeaway: The US Housing Market is a key component of the overall US economy and often a leading indicator of upcoming economic performance! Even though mortgage rates have risen by mammoth proportions, US Residential Housing seems to have found a bottom and even turned a corner. There are 2 aspects to be considered in this connection – First, that it is very positive for the economy overall. However, on the other hand, it can still keep pressure on inflation via second order effect through rental inflation! 

• The typical US home price once again increased in July, however, at a slightly slower pace of 0.9% compared to the +1.4% in June and +1.4% in May). While an increase in home prices on a m-o-m basis is expected for the usual summer buying season, the recent increases are worth taking note of. After a 6-month streak of falling prices m-o-m from Aug 2022 to Jan 2023, July is the sixth month in a row when the typical home value has climbed on a m-o-m basis. There is a lot riding on the Shelter component of CPI coming down rapidly in the second half of 2023. A resilient real estate market makes that story a bit more difficult. The typical home value now sits at an all-time high ($349,679), which is 1.4% higher than last July. After June’s 0.8% year-over-year growth, this marks the first acceleration in annual growth since April 2022, ending a 16-month streak of decelerating annual price gains.  
• The lack of new listings continues to dominate as the key theme in the US residential market. There were 26% lower new listings in July compared to the same month last year. New listings added in June were approx 336K compared to a pre-pandemic average of approx. 473K.
• Pending home sales was 14.5% lower than July last year. This data point best expresses the unique situation in the US Residential Market. While pending listings have fallen, they have fallen far lower than inventory levels or new listings. Buyers are still continuing to purchase homes.  
• Nationally, rents climbed 0.5% in July from June . This was slightly higher than the average monthly gain in this time of the year. Annual rent growth decelerated to 3.6% in July. This is lower than the 7-10% annualized shelter inflation rate in the CPI seen 2022 onwards. This lower rent inflation is expected to start reflecting in the CPI from mid 2023. However, given the huge reliance of falling rents eventually showing up in the official CPI measure, any substantial increase in rents – even though usual for this time of the year – is a cause of concern.
  

Zillow Home Value Index

Zillow Housing Reports

11th Jul 2023

Key takeaway: The US Housing Market is a key component of the overall US economy and often a leading indicator of upcoming economic performance! Even though mortgage rates have risen by mammoth proportions, US Residential Housing seems to have found a bottom and even turned a corner. There are 2 aspects to be considered in this connection – First, that it is very positive for the economy overall. However, on the other hand, it can still keep pressure on inflation via second order effect through rental inflation! 

• The typical US home price once again increased +1.4% m-o-m in June (similar to the 1.4% increase in May). While an increase in home prices on a m-o-m basis is expected for the usual summer buying season, an increase as large as 1.4% is worth taking note of. After a 6-month streak of falling prices m-o-m from Aug 2022 to Jan 2023, June is the fifth month in a row when the typical home value has climbed on a m-o-m basis. There is a lot riding on the Shelter component of CPI coming down rapidly in the second half of 2023. A resilient real estate market makes that story a bit more difficult. 
• The lack of new listings continues to dominate as the key theme in the US residential market. There were 28% lower new listings in June compared to the same month last year. New listings added in June were approx 376K compared to a pre-pandemic average of approx 500K.
• Pending home sales was at 279K in June 2023 – slightly lower than May. Buyers are still opportunistically taking advantage of drops in mortgage rates to execute purchases.  
• Nationally, rents climbed 0.6% in June from May . This is comparable to the average monthly gain in this time of the year. Annual rent growth decelerated to 4.1% in June. This is lower than the 7-10% annualized shelter inflation rate in the CPI 2022 onwards. This lower rent inflation is expected to start reflecting in the CPI from mid 2023. However, given the huge reliance of falling rents eventually showing up in the official CPI measure, any substantial increase in rents – even though usual for this time of the year – is a cause of concern.
  

Zillow Home Value Index

Zillow Housing Reports

8th Jun 2023

Key takeaway: The US Housing Market is a key component of the overall US economy and often a leading indicator of upcoming economic performance! Even though mortgage rates have risen by mammoth proportions, US Residential Housing seems to have found a bottom and even turned a corner. There are 2 aspects to be considered in this connection – First, that it is very positive for the economy overall. However, on the other hand, it can still keep pressure on inflation via second order effect through rental inflation! 

• The typical US home price increased (1.4%) in May from April. While an increase in home prices on a m-o-m basis is expected for the usual summer buying season, an increase as large as 1.4% is worth taking note of. After a 6-month streak of falling prices m-o-m from Aug 2022 to Jan 2023, May is a fourth month in a row when the typical home value has climbed on a m-o-m basis. There is a lot riding on the Shelter component of CPI coming down rapidly in the second half of 2023. A resilient real estate market makes that story a bit more difficult. 
• Pending home sales was at 294K in May 2023. In line with past months, newly pending listings were  fairly lower (~100K) than 2021 and 2022. Pending listings for May were also mostly in line with pre-pandemic levels (2018 and 2019). Buyers are still opportunistically taking advantage of drop in mortgage rates to execute purchases. The key aspect to watch out for will be whether the usual seasonal pattern of a slow down in sales starts showing from August onwards. Or whether the strength in the residential real estate marker continues well past the usual summer season. 
• Nationally, rents climbed 0.6% in May from Apr . This is comparable to the average monthly gain in this time of the year. Annual rent growth decelerated to 4.8% in May. This is lower than the 7-10% annualized shelter inflation rate in the CPI from 2022 onwards. This lower rent inflation is expected to start reflecting in the CPI from mid 2023. However, given the huge reliance of falling rents eventually showing up in the official CPI measure, any substantial increase in rents – even though usual for this time of the year – is a cause of concern.
  

Zillow Home Value Index

Zillow Housing Reports

8th May 2023

Key takeaway: The US Housing Market is a key component of the overall US economy and often a leading indicator of upcoming economic performance! Even though mortgage rates have risen by mammoth proportions, US Residential Housing seems to have found a bottom and even turned a corner. There are 2 aspects to be considered in this connection – First, that it is very positive for the economy overall. However, on the other hand, it can still keep pressure on inflation via second order effect through rental inflation! 

• The typical US home price increased (1.0%) in April from March. After a 6-month streak of falling prices m-o-m from Aug 2022 to Jan 2023, April is a third month in a row when the typical home value has climbed on a m-o-m basis. While this is normal from a seasonality perspective (spring home buying season), it is also a cause for concern from an affordability perspective as well as from a rent inflation perspective.
• For-sale inventory of homes in the US was at 845K in Apr 2023. While that is almost 75K higher than Apr 2022, it is still substantially lower (~400-600K) than pre-pandemic levels – highlighting the continuing shortage of homes. In percentage terms, the level of inventory is a massive 46% below April 2019 levels!
• Pending home sales was at 269K in April 2023. In line with past months, newly pending listings were  fairly lower (~100K) than 2021 and 2022. Pending listings for April were also mostly in line with pre-pandemic levels (2018 and 2019). Buyers are still opportunistically taking advantage of drop in mortgage rates to execute purchases.
• Nationally, rents climbed 0.6% in April from March . This is comparable to the average monthly gain in this time of the year. Annual rent growth decelerated to 5.3% in April. This is lower than the 7-10% annualized shelter inflation rate in the CPI from 2022 onwards. This lower rent inflation is expected to start reflecting in the CPI from mid 2023. However, given the huge reliance of falling rents eventually showing up in the official CPI measure, any substantial increase in rents – even though usual for this time of the year – is a cause of concern.
  

Zillow Home Value Index

Zillow Housing Report

6th Apr 2023

Key takeaway:

• The typical US home price increased slightly (0.9%) in March from February. After a 6-month streak of falling prices m-o-m from Aug 2022 to Jan 2023, March is a second month in a row when the typical home value has climbed on a m-o-m basis.
• For-sale inventory of homes in the US was at 834K in Mar 2023. While that is almost 108K higher than Mar 2022, it is still substantially lower (~400-600K) than pre-pandemic levels – highlighting the continuing shortage of homes. In percentage terms, the level of inventory is 36% below Mar 2020 levels!
• Pending home sales was at 263K in Mar 2023. Once again, while this was fairly lower (~100K) than 2021 and 2022, it was still substantially higher (~30K-40K) than pre-pandemic Mar levels – highlighting still resilient demand. Buyers have been opportunistically taking advantage of drop in mortgage rates to execute purchases.
• Nationally, rents climbed 0.5% in Mar from Feb. This is comparable to the average monthly gain in this time of the year. Annual rent growth decelerated to 6.0% in Mar. This is lower than the 7-10% annualized shelter inflation rate in the CPI from 2022 onwards. This lower rent inflation is expected to start reflecting in the CPI from mid 2023
  

Zillow Home Value Index

Zillow Housing Report

21st Mar 2023

Key takeaway:

• The typical US home price increased slightly (0.1%) in February from January. This breaks a 6-month streak of falling prices m-o-m.
• For-sale inventory of homes in the US was at 830K in Feb 2023. While that is almost 130K higher than Feb 2022, it is still substantially lower (~400-600K) than pre-pandemic levels – highlighting the continuing shortage of homes
• Pending home sales was at 221K in Feb 2023. Once again, while this was fairly lower (~50K) than 2021 and 2022, it was still substantially higher (~30K-40K) than pre-pandemic Feb levels – highlighting still resilient demand. Buyers have been opportunistically taking advantage of drop in mortgage rates to execute purchases
• Nationally, rents climbed 0.3% in Feb from Jan. This is comparable to the 0.4% average monthly gain in February from 2016 through 2020. Annual rent growth decelerated to 6.3% in Feb. This is lower than the 8-10% annualized shelter inflation rate in the CPI. This lower rent inflation is expected to start reflecting in the CPI from mid 2023

Zillow Home Value Index

Zillow Housing Report