The real estate market carnage continues with all the major iBuyers pausing home purchases thanks to the coronavirus.
Zillow Offers Pauses Purchases
This morning, Zillow announced that it had stopped home buying via Zillow Offers amid the “market uncertainty” related to COVID-19.
While it’s unclear if it was mandated, they did note that the move was “in response to local public health orders related to COVID-19,”and also to ensure the protection and safety of its staff, customers, and partners.
Specifically, some states like California have implemented emergency orders requiring individuals to stay at home and cease all non-essential business, which includes some real estate activities.
The company said it would continue to market and sell homes through Zillow Offers, despite halting open houses for its homes last week.
Zillow said it ended 2019 with 2,707 homes in its inventory, and as of March 19th, had reduced it to approximately 1,860 homes.
All 24 markets where Zillow Offers currently operates are affected by the move.
Opendoor Cash Offers Suspended
Meanwhile, Opendoor is putting cash offers on hold as a result of COVID-19.
In a statement posted on their website, the iBuyer said, “If you’re currently in our offer process, be on the lookout for communication from us. If you’re not, here’s how we can still help with your home sale.”
In terms of that help, they are still allowing third parties to make a cash offer for your property, as opposed to Opendoor itself.
If you take them up on that option, you can still skip the showings, prep work, and choose you own close date.
They said they’ll get back to customers via email within 2-3 days if eligible.
You can also use one of their partner real estate agents to list your home in traditional fashion, though I think we all know selling right now probably doesn’t make a ton of sense unless absolutely necessary.
Offerpad Might Be on Hold Right Now
I visited Offerpad’s website to see how they were being impacted, but couldn’t get a totally clear answer.
However, they do have an “important notice” posted at the top of their website that reads:
“To ensure that our customers, employees, and third parties are safe to the best of our ability, our processes have been subject to temporary changes.”
“We need to ensure that all services, including third parties, associated with a customer’s purchase or sale will be available. We appreciate your flexibility during this time.:
So there’s a good chance they are following suit and putting new purchases on hold as well.
As reported last week, RedfinNow was the first to temporarily halt home purchases, as indicated in an 8-K filing.
Two Takeaways to Consider
One issue, as mentioned by Zillow, is that real estate isn’t necessarily an essential business activity.
At least when it involves investors trying to make money by buying and selling real estate.
For everyday Joes looking to buy or sell a home, I assume it’s still okay to do so. It certainly can be argued as essential in certain situations.
However, a bigger concern is if this is the canary in the coal mine.
If billion-dollar companies like Redfin and Zillow aren’t interested in buying our homes, what does that say about the health of the real estate market?
I think the worry is if this situation doesn’t improve in the next several months, we might see scores of foreclosures flood the market, which could lead to lower home prices.
Conversely, if the government and loan servicers get ahead of it and work hard to help unemployed homeowners, things might turn out okay.
And really, with all the spending going on, there’s bound to be inflation, which could benefit homeowners as the world recovers.
Maintaining a healthy diet can be challenging, especially when it comes to snacking. However, incorporating the right snacks into your diet can help you achieve your goals by keeping you fuller for longer and preventing overeating at mealtimes. Here are some unusual snacks that fight off hunger and keep you full and satisfied!
This is a popular Brazilian street food consisting of a chicken and cream cheese croquette shaped like a chicken drumstick, breaded and deep-fried. It originated around São Paulo in the 19th century and is now one of the country’s most popular savory appetizers. While there are legends surrounding its origin, it was most likely invented during São Paulo’s industrialization period as a cost-effective and durable snack for factory workers. Coxinha is loved for its crispy exterior and savory filling and is a staple in Brazilian cuisine.
Groundnuts, or peanuts, are a popular snack and appetizer that can help suppress hunger due to their high protein and fiber content. These nutrients provide various health benefits such as regulating blood sugar levels, aiding digestion, and reducing the risk of certain diseases. Groundnuts are versatile food items that can be incorporated into different dishes and are also an excellent source of vitamins and minerals. Overall, adding groundnuts to your diet can improve your health and help maintain a healthy weight.
Greek yogurt is made by fermenting milk with live bacteria cultures and then straining the mixture through a cheesecloth or fine mesh sieve to remove the liquid whey. This process removes some of the lactose, making Greek yogurt a good option for those who are lactose sensitive. It is also higher in protein and lower in sugar than traditional yogurt. Greek yogurt can be eaten plain or used as a base for dips, sauces, and dressings. It is also commonly used in baking and cooking as a substitute for sour cream or mayonnaise.
Pita chips are snacks made from pieces of pita bread that are baked or fried until crispy. They are usually seasoned with salt, herbs, or spices to enhance their flavor. Pita chips can be eaten on their own as a snack or served with dips, such as hummus or tzatziki. They are a popular alternative to potato chips and other traditional snacks and are often marketed as a healthier option due to their lower fat content and higher fiber content. Pita chips are found in many grocery stores and are easy to make at home by cutting pita bread into wedges, brushing them with olive oil and seasoning, and baking them in the oven until crispy.
Moin-moin, also known as moimoi, is a delectable bean pudding that is traditionally prepared by steaming or boiling a mixture of washed and peeled black-eyed beans, combined with onions, fresh ground red peppers, spices, and a choice of protein such as fish, egg, or crayfish. Originating from the culturally rich region of Yorubaland in Nigeria, Benin, and Togo, this protein-rich food is widely consumed and regarded as a staple.
Garri is a beloved and versatile food in Nigeria that transcends class boundaries. Dubbed “edible gold,” it is a cherished commodity that doesn’t require arduous extraction processes or costly expeditions to obtain. In West Africa, garri is a creamy and granular flour made from processing freshly harvested cassava roots. It is readily available in markets across Nigeria and sold by numerous vendors in different packaging options. Renowned as an energy booster, garri is a go-to food for students as it is affordable and easy to prepare—simply add milk, water, and sugar. Garri can be paired with a variety of soups to create a satisfying and nutritious meal.
Sfenj is a variety of fried doughnuts popular in North Africa, particularly in Morocco and Algeria. Sfenj is prepared from a simple dough that is made from flour, water, yeast, and salt. The dough is then shaped into a ring or a spiral and fried in hot oil until it is crispy and golden brown. Sfenj is often served as a breakfast pastry or as a snack, and it can be enjoyed plain or with a variety of toppings such as honey, jam, or Nutella.
Originating from the Indian subcontinent, Murukku is a savory snack that has gained popularity in various South Asian countries and regions, including Sri Lanka, Malaysia, and Singapore. To prepare this delectable snack, a blend of rice flour, urad dal flour, and a mixture of spices like cumin seeds, sesame seeds, and red chili powder is combined and shaped into a pretzel-like or spiral form. After shaping, the snack is deep-fried until it turns crispy. Murukku can be enjoyed on its own or paired with chutney, salsa, or other condiments. It is a popular snack, especially during festivals and other celebrations in South Asia.
Dapo Kolo is a popular snack in Ethiopia and Eritrea. It is made from a mixture of flour, water, and spices, such as cumin, fenugreek, and coriander. The dough is rolled into small balls, which are then baked or fried until they are crispy and golden brown. Dapo Kolo is often eaten as a snack with tea or coffee, and it is also served as a side dish with stews and other savory dishes. The snack is known for its crunchy texture and spicy flavor, which makes it a popular choice among locals and visitors alike.
Plantains are a type of banana that are typically larger and starchier than the sweet bananas that most people are familiar with. Plantain chips are a common snack in many countries in Latin America, the Caribbean, and West Africa, and they are often served as a side dish or appetizer. Plantain chips can be seasoned with a variety of spices and flavors, such as salt, pepper, garlic, and chili powder, among others. They can be enjoyed on their own as a crunchy snack, or they can be used as a substitute for potato chips in many recipes.
From coxinha to garri to Greek yogurt, these snacks offer a range of flavors and textures to suit different tastes. By choosing snacks that are high in protein and fiber, you can stay full longer and feel more satisfied throughout the day. Next time you’re feeling hungry, reach for one of these delicious and healthy options!
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This is a guest post from Joanna Lahey, an associate professor of economics at the George H.W. Bush School of Government and Public Service at Texas A&M University and the National Bureau of Economic Research (NBER).
Ellen’s note: Joanna has written four articles about health insurance. This is the first, and every Saturday for the next month, we’ll be publishing one. Given the readers’ concern over the cost of health insurance as well as the ability to get insurance, we think her articles will be a great addition to GRS.
We save for retirement in order to smooth our consumption over time. Money saved now when we have income allows us to eat more than cat food when we’re retired and not bringing in as much.
Insurance works in much the same way, except instead of smoothing our consumption over time, we’re smoothing it over conditions of the world. In the good state of the world, the one in which we haven’t been hit by a bus, we spend money on insurance. In the bad state of the world, the one in which the bus hits us, the insurance company pays out money to help compensate us for our medical care.
People value this insurance because they are risk averse. For most people, losing money hurts us more than gaining the equivalent amount of money makes us happy. We’re willing to pay a little extra during good times to offset the bad times.
Of course, in reality it’s a little bit more complicated than that. Insurance companies have an incentive to keep you from getting into that bad state of the world, so they might pay for annual check-ups and other sorts of preventive care. Additionally, some people like the idea of using health insurance as a prepayment for expected medical expenses. However, preventive care and prepayment are not technically insurance even if they are bundled in with many policies. The point of insurance is to make the bad times less bad by paying for insurance during the good times and accepting a payout during the bad times.
In an ideal world, this insurance system would just work and the free market could handle everything. People would pay their expected cost of insurance into the insurance system and the insurance would pay out for the people who were unlucky enough to get hit by buses or have other health problems.
Unfortunately, there’s a problem. People who know that they are likely to use medical care value insurance more than people who believe they will never get sick. The problem arises when people know their expected medical costs better than insurance companies do. This situation is called “asymmetric information” — one party (you) knows more than the other party (the insurance company) does.
Death Spiral in the Insurance Market
In this world of asymmetric information, there is theoretically no way for an insurance company to make a profit, or to even exist in the private market. If the insurance company sells insurance at the average cost of medical care — what it expects to pay out on average — then people who know deep down that they’re healthy are going to prefer not to buy the insurance. People who know they are likely to get sick are more than willing to pay the average cost of medical care and sign up in droves. When that happens, the average cost of medical care that the insurance company sees goes up, so they have to charge higher rates for coverage. That means that the folks who expect to have ingrown toenails but no other health problems will drop coverage while the people who expect to get diabetes will stay on. That drives up the average cost of health insurance further, which means that the next healthiest group of people will stop buying coverage and only the most expensive stay on. Eventually only the most expensive person will be willing to buy insurance (and he or she probably won’t be able to afford it). The market fails, and insurance cannot be offered. The private insurance market is broken.
Asymmetric information and this “lemons problem” (the term coined in an article by George Akerlof) are why it is so very difficult to get coverage on the private market and why the coverage is so expensive. It’s also why private coverage deliberately doesn’t cover conditions like pregnancy if it can legally choose not to.
Side note: You may have noticed that even though the private health insurance market is broken, it still exists. That’s because of that risk aversion we talked about in the previous section — most people value insurance more than its expected cost. If they value it enough, they’re willing to pay more and are able to get over the death spiral. Incidentally, David Cutler, one of the main architects of the Affordable Care Act, argues that the individual mandate is not needed — we just need to get the price low enough and risk aversion will get people to buy. Jon Gruber, another of the architects, disagrees — he doesn’t think it is likely that risk aversion will overcome the adverse selection problem.
Why is Health Insurance in the U.S. Bundled With Employment?
The solution to the problem? Group markets for insurance. In a group market, people are in a group for some reason that has nothing to do with health insurance. Working for the same employer functions especially well because adults who work are healthier on average than adults who don’t work. Everyone in the group is charged the same amount for insurance, and the average cost is low enough that the downward death spiral doesn’t occur. The bigger the group, the more risk and costs are spread out and the happier the insurance company is. Large companies get cheaper insurance rates than smaller companies because it’s less likely with a large company that the boss is getting insurance because he just found out his wife has cancer (and even if he did, that cost is spread out across more workers).
Doesn’t that argue that we should have just one group for everybody? Well, yes. However, for historical reasons (price controls during WWII, as several folks pointed out in the comments of this Ask the Readers post), we ended up with our groups being attached to employment. That’s fine if you’re employed by a large firm that offers insurance (or married to someone who is), but makes things more difficult if you’re not.
Why don’t we just tear the system down and start from scratch? Well, it is difficult to destroy a private industry that is around 7 percent of our economy, especially when said industry has powerful lobbyists. It may be more efficient to have government-provided health insurance, but the costs of getting to that point would be large.
Given our current political and institutional situation, we can still get to universal health care even if single-payer insurance is unlikely. In the U.S. that means something like the Affordable Care Act, with its universal mandate, subsidies, and regulations prohibiting preexisting-condition exclusions or charging prices based on anything other than age and tobacco status. I will talk more about the basics of the Affordable Care Act in a future post.
How Much Insurance Should be Provided?
In the ideal world, insurance companies would provide full insurance. They would pay 100 percent of your medical care and maybe something to compensate you for pain and suffering. You’d have to pay a larger premium to get the insurance, but it would be worth it because if you got hit by a bus you wouldn’t be out of pocket for anything. Unfortunately, this is not an ideal world and people are flawed.
If you knew you were going to get compensated, you might be less careful about looking both ways before crossing the street.
If going to the doctor is completely free, you might go in for a sniffle right away just to be on the safe side rather than waiting a few days.
If someone else is paying, you might move to more expensive infertility treatments faster than if you have to pay the bill yourself.
Your doctor might decide to do extra tests that only have a small chance of finding anything, because why not?
We call these changes in behavior caused by the program availability “moral hazard.” Moral hazard occurs when people do bad things they wouldn’t have done if they were bearing the full cost of their actions.
Political economy side note: The trade-offs caused by moral hazard are one of the main points of disagreement between political parties. Public programs help deserving people who need help, but they can also cause people to do bad things in order to qualify for the public programs (through moral hazard). Programs that help children tend to be popular with politicians on both sides because children don’t have moral hazard with respect to government programs — they’re not the decision-makers.
In order to keep moral hazard down, it is optimal to provide less than full insurance. So insurance companies don’t pay the full amount of every bill. That’s why we have deductibles and co-payments and coinsurance.
Terms You Need to Know
Premium: The (usually monthly) amount that you pay to the insurance company to buy insurance. (Mine is $693/month for my dependents and me.)
Deductible: Some amount of money that you have to pay before the insurance starts paying anything. (Mine is $750.)
Co-payment: A flat dollar amount that you pay when you show up at the doctor (or the hospital) no matter how much your visit actually costs. (Mine is $35 for in-network and $45 for out-of-network.)
Coinsurance: After you reach your deductible, you may still be responsible for some of the costs. Coinsurance is a percent of the costs that you pay. (Mine is 30 Percent.)
Sometimes economists will group all three of these together: deductible, co-payment, and coinsurance under the umbrella term of “co-payment.” We do this because they’re all ways of cost-sharing and thus reducing moral hazard. Living in Texas, I get all three types. The bill for my daughter’s birth was $750 for the deductible, $35 co-payment for the doctor, and 30 percent coinsurance of $2,345 + $191 + $218 is $826 for my share of the rest (assuming that all of the bills have finally come in). So a total bill of $1,611.
That’s a lot of information about the basics of health insurance. Next time I will talk about the pros and cons of different kinds of insurance you can get in the U.S. (PPO, HMO, HDHP, ACO).
All 12 Federal Reserve districts have seen issues with a lack of housing inventory, which is largely due to existing homeowners holding back on listing their homes after previously locking in low mortgage rates.
Demand from the buyer side has remained steady or increased, however, and new home builders have responded to inventory shortages by increasing speculative inventory production, according to the Federal Reserve Beige Book, released Wednesday.
The Beige Book is a compilation of data and interviews with bank and branch directors, community organizations and economists from on or before May 22.
“Residential real estate activity picked up in most Districts despite continued low inventories of homes for sale,” the report states.
The Beige Book also notes that “home prices and rents rose slightly on balance in most Districts, after little growth in the prior period.”
In return, the lack of inventory of homes for sale pushed demand for rental properties in some areas — including New York, Chicago, St. Louis, Kansas City Federal Reserve districts.
Following are excerpts of statements on housing conditions from each of the 12 Federal Reserve districts.
Boston – Contacts around the District attribute the still-low sales numbers to low inventories more than to weak demand, as slightly lower mortgage rates have helped bring more buyers to the market.
House price appreciation has slowed on average but remains slightly positive, with the exception that home prices in Massachusetts (not including Boston) have experienced modest declines from a year earlier. The modest price growth in the Boston area marks a trend reversal from the preceding few months.
Contacts anticipate that, despite healthy buyer demand, home sales are likely to experience only a modest seasonal increase moving forward, owing to extremely low inventory levels.
New York – The residential sales market has been strong across the District. A New York City-area contact reports that the sales market in and around New York City has picked up strongly in recent weeks after a brief pause in early April, which was due to uncertainty in the banking sector.
After a slow start to the year, housing markets in upstate New York have also started to pick up, with bidding wars and multiple offers becoming more common. Inventory remains exceptionally low and is restraining sales activity in much of the District. A key factor suppressing new listings is the prevalence of homeowners with historically low interest rates on their existing mortgages, reducing the incentive to sell and move.
A strong economy and relatively high mortgage rates have pushed some movers to the rental market, boosting demand.
Philadelphia – High interest rates have continued to dissuade existing homeowners from listing their house and losing their low interest rate. Existing home sales have fallen moderately in this district, and prices have continued to rise as the market heats up again. New home builders have benefited from the unseasonably modest sales of existing homes as the resale market has slowed.
Cleveland – Demand for residential construction and real estate has stabilized in this District, and contacts attribute this stabilization to the arrival of spring and flattening interest rates.
Homebuilders have reported an increase in speculative construction projects in this District, as many buyers want to purchase and move into homes immediately, in part to avoid further rises in interest rates.
Richmond – Residential real estate respondents indicate in the report that the spring market is off to a good start, with sales prices continuing to appreciate, but not at the same pace as last year. For-sale inventory remains constrained due to fewer people putting their homes on the market, but buyer traffic has been steady while the days on market has increased slightly in the last month.
However, fluctuations in mortgage rates have caused buyers to pull back, with pending sales and closed sales both down in this District. Builders have been offering strong incentives to close deals.
Atlanta – Housing demand throughout the District has remained strong despite interest rate and home price volatility. Though home sales are down compared to a year ago, sales in many markets in this District have increased on a monthly basis, as buyer sentiment has modestly improved.
The supply of existing homes for sale has remained low as homeowners have showed increased hesitancy to list homes for sale, especially if they financed at a low interest rate. Home prices remain down from peak levels but have recently shown month-to-month improvement.
New home builders have responded to inventory shortages by increasing speculative inventory production, and some have begun to reduce buyer incentives.
Chicago – Residential construction activity has been down modestly in this District. Contacts report that high-interest rates have led some projects to be postponed or canceled and that while construction costs had fallen, the decline isn’t enough to offset higher financing costs.
Residential real estate activity has decreased modestly as well. Prices and rents have declined, and the low inventory of homes for sale has helped to prevent larger declines.
However, there have been reports of rising retail rents in some areas because of a lack of high-quality new construction.
St. Louis – Rental rates for residential real estate have increased slightly in this District. The number of new listings in residential real estate have dropped sharply in Louisville since our previous report, while new listings in the Memphis and Little Rock regions have remained unchanged. Seasonally adjusted home sales have remained unchanged since the previous report.
Minneapolis – Residential construction has remained subdued. Single-family permitting in April was more than 40 percent lower year over year in the Minneapolis-St. Paul region; most other large markets in the District saw even bigger declines. Discounts have started to appear for some speculative developments.
Closed (residential real estate) sales in April fell notably year over year across the District, with many larger markets seeing declines of 30 to 50 percent. Median sale prices have declined in western and central Montana and have been flat in several other markets.
Kansas City – Housing rental rate growth has remained elevated in several western District states, but the pace of increases has declined broadly and swiftly from the growth rate experienced during the past year.
Dallas – Housing demand broadly has held up in the Dallas District, though sales have continued to be weaker than a year ago. Contacts have noted a decent spring selling season, with prices largely stable, and builders have been able to raise prices slightly in selected areas.
Outlooks have been cautious, however, with some voicing concern about whether demand would hold up beyond the spring selling season.
San Francisco – Activity in residential real estate has slowed further in this District. Contacts across the District have reported stable demand for single-family homes, although high mortgage rates have restrained prices. Existing single-family inventory has been low, and owners appeared hesitant to forego their existing low-rate mortgages by listing their homes.
Despite reported improvement in the availability and cost of materials, construction of new homes has been flat-to-down as developers responded to higher financing costs.
Boston fintech firm Knox Financial plans to expand its lending business and loan products with $50 million in funding it received from a real estate advisory firm.
New York-headquartered Saluda Grade provided the funding in forward flow capital which Knox will use to expand its lending business into Georgia, Knox representatives said Wednesday. The fintech also will offer additional loan products, including home equity lines of credit (HELOCs), new purchase loans and cash-out refinancings.
“A homeowner’s best investment is the home they live in — far better than the returns we’ve seen from the stock market in 2022, and a great hedge against record-high inflation,” said David Friedman, co-founder and CEO of Knox Financial.
Established in 2018, Knox aims to help manage residential rentals with its algorithm-based platform. Its rental pricing and projection model also calculates the rate of return an investment property is expected to produce over time. When a property is enrolled in the platform, Knox automates and oversees the property’s finances and taxes, insurance, leasing, banking and bill pay, according to the company’s website.
The funding comes shortly after Knox launched its first mortgage product, dubbed the Knox equity access program (KEAP), in April. KEAP loans give homeowners access to capital, based on the equity in the home, to turn it into an investment property with Knox. Homeowners can then use their KEAP loan to fund a downpayment on their next home and to pay for repairs on their investment property.
In return, Knox charges an origination fee and third-party costs to the borrower. Knox also keeps 10% of the rental income generated from properties listed on its platform.
Prioritizing home equity solutions in a rising rate environment
The 2022 housing market has been underscored by interest rate spikes and refi decline and lenders are working hard to adjust to new borrower trends. HousingWire recently spoke with Barry Coffin, managing director of home equity title/close at ServiceLink, about the ways lenders can capitalize on these trends by revving up their home equity solutions.
Presented by: ServiceLink
Knox’s expansion comes amid a shrinking mortgage origination market. As mortgage rates began increasing this year, lenders, mortgage tech firms and real estate brokerages started laying off employees, often citing rapidly declining market conditions.
With rising mortgage rates, company representatives said Knox has seen growing interest in second lien products such as home equity loans or HELOCs from borrowers who have tappable equity but don’t want to refinance.
“As mortgage rates have risen, more inventory will become available at more competitive pricing,” said Matt Marra, chief growth officer at Knox.
Knox Financial raised $10 million in Series A funding in April 2021, led by G20 Ventures, following a $3 million seed round in January 2020. The largest markets for Knox are metropolitan areas of Boston, Atlanta, Houston, Dallas and Austin, Texas. According to Marra, Knox oversees a portfolio of $150 million in combined value.
Mortgage rates rose at their fastest pace in decades in 2022 and if only one thing could take the blame, it would be inflation. There are several ways to link inflation to upward pressure on rates, but the simplest is to consider that rates are based on bonds and inflation lowers the value of bonds.
In other words, if you are an investor who buys mortgages, you might be willing to accept a 6.5% rate of return today. Now let’s say inflation skyrockets. If you still charge 6.5%, the payments you receive will buy a lot less “stuff.” So you have to increase your rates in order to get the same financial benefit.
Because of the inflation focus, the biggest inflation reports have been closely-watched indicator for rate momentum for more than a year now. None are bigger than the Consumer Price Index (CPI), and the latest installment will be out on Wednesday morning, May 10th, at 8:30am Eastern Time.
There is always a catalog of multiple professional forecasts for big economic reports. Markets adjust to those forecast levels, or close to them well ahead of the official release of the data. Then if the data hits the forecast, markets don’t need to move much. But if CPI were to fall much higher or lower than forecast, the market would view this as an indication that inflation was trending higher or lower relative to previous expectations. Rates would react accordingly (i.e. higher for high inflation and lower for low inflation). The farther from forecast the actual number falls, the bigger the reaction could be.
As for today, there was just a bit of extra upward momentum for interest rates with the average lender moving up by less than an eighth of a percent for a conventional 30yr fixed loan. This level of volatility isn’t really worth writing home about considering how big Wednesday might be.
While it’s hard to compare the current possible housing crisis to the very real one experienced about a decade ago, there are fears of negative market impact due to COVID-19.
We’ve already seen listing prices fall, along with a big jump in delistings, where home sellers pull their properties off the market.
And home purchase mortgage applications continue to plummet, especially in large metros like LA, NY, and Seattle, per the MBA.
Meanwhile, real estate brokerage Redfin revealed via an SEC filing that it was laying off 7% of its workforce, which could result in roughly 236 job losses.
Then we have Wells Fargo curtailing its mortgage menu, and ARMs pricing higher than fixed-rate mortgages.
The number of mortgages in forbearance has also surged 1000%, and is likely to get a lot worse the longer this goes on.
The real estate and mortgage industry certainly isn’t operating as usual, and it’s even reminiscent of times back in the early 2000s.
Temporary Inability to Pay the Mortgage?
The housing crisis a decade ago was driven by shoddy financing
Such as stated income, option ARMs, interest-only loans, and so on
This potential crisis is being driven mostly just by loss of income due to COVID-19
As long as it’s temporary it shouldn’t create too many problems for the housing market
This time around, the number one issue is inability to make mortgage payments due to loss of income or unemployment as a result of coronavirus.
Either companies have laid off staff due to a loss of business, or small business owners have taken a hit because they’ve had to close up shop.
Others might just be experiencing a temporary loss of income or a pay cut while companies navigate the uncertain waters ahead.
Whatever the situation, the problem seems to center around capacity to pay, as opposed to being overleveraged, or holding a home loan with some creative financing terms like interest only or an exploding ARM.
Homeowners could mostly afford their monthly mortgage payments before this unforeseen event took place, unlike the crisis that took place in the early 2000s.
Back then, borrowers took out mortgages they couldn’t afford, and serially refinanced them as their inflated home values grew.
Today, many homeowners have a sizable equity cushion, partially because cash out refinance volume has been very low, and also because home prices have risen a ton over the past decade.
This puts them in a much better position than those homeowners from 2006 who purchased a property with zero down financing and stated their income on the application.
That’s the good news. The bad news is many housing markets were already vulnerable before COVID-19 hit, and thus could see some an uptick in foreclosures if this plays out for a long period of time.
Almost Half of the 50 Most Vulnerable Counties Are in Florida and New Jersey
14 of the highest risk counties can be found in New Jersey
Several are also located in the NYC suburban area
Another 10 are in Florida, mostly in the central and north part of the state
Others are scattered along the Mideast coast
So where are the potential foreclosure hotspots, once any coronavirus-related moratoria disappear?
Well, a new “Special Coronavirus Market Impact Report” released by ATTOM Data Solutions found that half of the most vulnerable counties reside in Florida and New Jersey.
They rank market risk by looking at three main factors:
– Percentage of housing units receiving a foreclosure notice in Q4 2019 – Percentage of homes underwater (LTV 100 or greater) in Q4 2019 – Percentage of local wages required to pay for major homeownership expenses
As we know from the prior mortgage crisis, payment default was driven by homeowner equity to some degree, with underwater borrowers often throwing in the towel because they had nothing to lose.
This was further exacerbated if they didn’t have the money to make mortgage payments, or if they were simply overextended.
Finally, if a foreclosure notice was already received before the coronavirus pandemic took place, it’s clearly a bad sign for a situation that likely just got worse.
As for which counties are on alert, there are 14 in New Jersey, such as Camden and Ocean, along with five in the New York City suburban area: Bergen, Essex, Passaic, Middlesex, and Union counties.
And there are 10 counties in Florida, mostly in the northern and central portions of the state, including Clay, Flagler, Hernando, Lake, and Osceola counties.
Additional New York counties include Orange, Rensselaer, Rockland, and Ulster.
There are also a handful of counties in the top 50 in Delaware, Louisiana, Maryland, North Carolina, South Carolina, and Virginia.
Only Seven Risky Housing Markets in the Midwest and West
The housing markets in the Midwest and West appear to be stronger overall
The only high-risk markets are in Illinois, mostly the Chicago metro
Along with Shasta County, CA, which is just south of Oregon
And Navajo County, AZ, in the northeast part of the state
Things appear to be a lot better in the Midwest and West, with just seven counties total landing in the top-50 most vulnerable list.
Every single Midwestern county can be found in Illinois, including Kane, Lake, McHenry, Tazewell, and Will.
Most are in the Chicago metropolitan area, a region that has never really seen massive amounts of home price appreciation since the crisis.
In terms of the West, only two counties made the top-50, including Shasta County, CA and Navajo County, AZ. Both aren’t major metros.
The report also revealed that counties where median home prices range from $160,000 to $300,000 account for 36 of the most vulnerable counties.
Meanwhile, counties with median home prices below $160,000 or above $300,000 made up just 14.
This is because those with median prices below $160,000 are among the most affordable, while those priced above $300,000 have some of the highest home equity amounts, and thus the lowest foreclosure rates.
The takeaway here is that most of the country looks pretty good overall with regard to housing market risk.
That could change depending on how long things play out, but there are plenty of mortgage relief programs available, including a 6-12 month forbearance via the CARES Act.
As long as this is somewhat temporary, and most homeowners get back to work, it should be a momentary blip.
One thing I love about Millennials and Zoomers is how freely we share advice.
Case in point, there are now countless wealth coaches and personal finance gurus on TikTok recording their best tips on saving, investing, and achieving financial freedom faster.
And we’re hungry for their advice. According to CNN, the hashtag “#personalfinance” alone has a total of four billion views, with “#financialliteracy” and “#financetiktok” not far behind.
However, while the intent is always sound, the tips themselves aren’t. There are some misguided and potentially devastating personal finance myths being perpetuated on TikTok these days, so I am here to address them head-on.
Let’s debunk seven of the most common TikTok money myths before you make a potentially dangerous financial move.
1. “You can (and should) get rich quick”
“Get rich quickly and easily by following my personal finance advice.”
Here’s how to instantly spot a personal finance influencer who abides by a “get rich quick” philosophy: just look for the lime green Lamborghini in the background.
Once they’ve given you a few seconds to lust after their six-figure Italian whip, they’ll start telling you how they “turned $5,000 into $723,000” by following “three simple rules of investing” or some such promise. Sounds appealing.
Multiplying money on that scale, in that little time, always involves a staggering amount of risk, luck, or both. This is assuming, of course, that the influencer is even being 100% truthful – and that background Lambo isn’t a rental.
It’s entirely possible that this person really has gotten extremely lucky on some clandestine investing opportunity, but lottery winners aren’t financial advisors.
Actual financial advisors, and their very rich clients, will give you this advice:
“Get rich slowly.”
If you wouldn’t spend your life savings on lottery tickets, you shouldn’t get your financial advice from TikTok influencers who got lucky, either. The key is to get rich without the risk, and here’s exactly how to do it, step-by-step.
2. “Day trading is easier than you think”
Historically, only the rich and well-connected could make money on the stock market. But now that we have apps like Robinhood and Webull, everyday investors like you and me can buy, sell, and trade stocks ourselves, getting rich in the process just like day traders on Wall Street.
97% of day traders lose money.
That’s according to a large-scale study of day traders, where the researchers concluded:
“We show that it is virtually impossible for individuals to day trade for a living, contrary to what course providers claim.”
By contrast, “only” 70% or so of gamblers in Vegas lose money, according to the Wall Street Journal. So your money is safer on the roulette table than taking a TikTokers’ investing advice (but still, don’t gamble).
3. “Rich people look rich”
Earn big, spend big. As your income level rises and you start to feel “rich,” it’s time to start acting like it. Get a luxury apartment, lease a Mercedes, and don’t hesitate to buy that $2,000 purse.
Besides, what’s the point of working hard if you’re not playing hard?
This one is definitely more of an implication than a direct piece of advice. I don’t know of any TikTokers who are outright saying “spend all of your money” – but there are certainly plenty who are leading by example.
Rich people become rich precisely because they don’t spend money – they invest it. There’s a saying by famous-yet-frugal YouTuber Scotty Kilmer that I think about all the time:
“Broke people buy BMWs, and rich people buy Toyotas.”
Rich (or soon-to-be-rich) people know that if they buy a Toyota instead of a BMW at age 30, and invest the $30,000 difference at 10% APY, they’ll have:
$77,812 when they’re 40.
$201,825 when they’re 50.
$843,073 when they retire at 65.
The point of this anecdote isn’t to throw shade at Bimmer, but rather, to highlight how rich people think differently before making a purchase. They don’t think:
“How much can I afford?”
“How much can I save and invest?”
In short, rich people don’t lead extravagant lifestyles – they lead frugal, yet comfortable lifestyles now so they can live however they want later.
4. “Live on a shoestring budget”
On the complete other side of the spectrum, there are TikTokers who advocate a shoestring lifestyle, where rigorous budgeting and extremely limited pleasure spending are the only viable pathways to financial freedom.
It’s totally OK to buy nice things and treat yourself.
In the previous example, yes, a BMW costs $30,000 more than a Toyota – and if you invest that money instead of buying a fancier car, you’ll have a fortune waiting for you by retirement.
That being said, if the BMW brings you joy and makes you happy (and you can afford it), buy it.
The key to achieving financial mindfulness isn’t to spend less – it’s to spend more mindfully on the things that truly matter to you. There are influencers out there who say you should stop going out to eat cold turkey because a restaurant meal for two can easily exceed $60 or even $100.
But financial mindfulness says that if that meal helps you build a relationship with someone, it’s worth it.
Draconian saving can be just as misguided as wanton spending. The key, then, is to determine how much you can safely spend each month, and then to spend that money on the people and things that bring you the most joy.
5. “Cryptocurrency will make you rich”
This one’s pretty straightforward, and I have heard it straight from countless TikTokers’ mouths: crypto will make you rich.
Forget the corrupt, manipulated stock market – Bitcoin, Ethereum, and Dogecoin will bring prosperity and financial salvation to Millennials and Zoomers.
I mean, what other investment vehicle has provided anything even close to the 750,000,000% ROI that Bitcoin has since 2011?
I got rich off crypto and you will, too – hop aboard before it’s too late.
Cryptocurrency is like a fast-moving, rickety roller coaster at the county fair. The foundation hasn’t completely crumbled, but the wooden boards and screws holding it up are falling off with each passing car.
Hop aboard the crypto train at your own peril.
It’s true that Bitcoin has had a miracle run since 2011, rising from $0.008 to a peak of around $65,000 in April 2021 and making a lot of people very, very rich. But even diehard crypto fans have acknowledged that a “Bitcoin winter” is coming – that is, if it hasn’t already.
The Bitcoin winter is just one of the many huge risks to a crypto investment. The others (like China’s clampdown on mining) are fast approaching the roller coaster’s foundation with a sledgehammer.
Can Bitcoin still make you rich? Maybe, but there are plenty of safer rides at the carnival.
6. “Just copy the investments of rich people”
You can’t copy athletes to win gold medals, nor can you copy New York Times Best Sellers to sell more books.
However, you can totally copy the investing strategy of rich people to get rich.
In fact, they want you to copy them – either because your investment makes their investment more valuable, or simply out of the goodness of their heart. Warren Buffet famously shares his trades with the public so they can borrow and benefit from his wisdom.
So why spend 14 hours a day researching good trades when you can just copy someone else’s homework – especially when they ask you to?
Rich people can afford to make extremely risky investments and lose money that you and I can’t afford. For that reason, they shouldn’t always be followed into battle.
Warren Buffet is also famous for admitting when he’s made a mistake. In 2014, he confessed that he’d held onto shares of Tesco for way too long, costing him and his investors $444 million. Berkshire Hathaway’s investors may have been able to shrug off the loss, but any outsiders emulating Buffet’s moves may have been screwed.
Copying the investments of rich people may be a viable strategy if their investments fit within your financial goals and risk tolerance. For help determining whether that’s the case, you want to talk to a wealth advisor.
7. “You don’t need a wealth advisor”
Thanks to zero-commission trading platforms, you no longer need to buy and trade stocks through a sweaty stockbroker in some Manhattan office.
By that same logic, the emergence of robo-advisors and the fountains of free financial advice on TikTok have eliminated the need for old-fashioned wealth advisors. After all, why give someone 2% of your hard-earned gains when it’s never been easier to invest your money yourself?
The recent trifecta of online brokers, robo-advisors, and personal finance gurus on social media has done wonders empowering Millennials and Zoomers to handle our money better. The TikTok DIYers certainly have one thing right: it’s never been easier to make your own trades.
However, despite birthing a renaissance in financial literacy, nothing on TikTok can replace the tailored, one-on-one advice you’d get from a professional wealth advisor.
Robo-advisors can personalize your investing strategy to an extent, but they can’t play a direct role in helping you navigate the markets and make good decisions.
There’s plenty of sound personal finance advice on TikTok, but it only takes one bad tip to cost you money.
For that reason, it literally pays to separate the wheat from the chaff. Not everyone who’s made money is a skilled investor – some are just lucky.
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43k salary is a solid hourly wage when you think about it.
When you get your first job and you are making just above minimum wage making over $43,000 a year seems like it would provide amazing opportunities for you. Right?
The median household income is $68,703 in 2019 and increased by 6.8% from the previous year (source). Think of it as a bell curve with $68K at the top; the median means half of the population makes less than that and half makes more money.
The average income in the U.S. is $48,672 for a 40-hour workweek; that is an increase of 4% from the previous year (source). That means if you take everyone’s income and divided the money out evenly between all of the people.
But, the question remains can you truly live off 43,000 per year in today’s society since it is below both the average and median household incomes. The question you want to ask all of your friends is $43000 per year a good salary.
In this post, we are going to dive into everything that you need to know about a $43000 salary including hourly pay and a sample budget on how to spend and save your money.
These key facts will help you with money management and learn how much per hour $43k is as well as what you make per month, weekly, and biweekly.
Just like with any paycheck, it seems like money quickly goes out of your account to cover all of your bills and expenses, and you are left with a very small amount remaining. You may be disappointed that you were not able to reach your financial goals and you are left wondering…
Can I make a living on this salary?
$43000 a year is How Much an Hour?
When jumping from an hourly job to a salary for the first time, it is helpful to know how much is 43k a year hourly. That way you can decide whether or not the job is worthwhile for you.
$43000 a year is $20.67 per hour
Breakdown Of How Much Is 43k A Year Hourly
Let’s breakdown, how that 43000 salary to hourly number is calculated.
For our calculations to figure out how much is 43K salary hourly, we used the average five working days of 40 hours a week.
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, divide the yearly salary of $43000 by 2,080 working hours and the result is $20.67 per hour.
43000 salary / 2080 hours = $20.67 per hour
Just above $20 an hour.
That number is the gross hourly income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
You must check with your employer on how they plan to pay you. For those on salary, typically companies pay on a monthly, semi-monthly, biweekly, or weekly basis.
Just an interesting note… if you were to increase your annual salary by $5K to $48k per year, it would increase your hourly wage to over $23 an hour – a difference of $2.41 per hour.
To break it down – 48000 salary / 2080 hours = $23.08 per hour
That difference will help you fund your savings account; just remember every dollar adds up.
How Much is $43K salary Per Month?
On average, the monthly amount would be $3,583.
Annual Salary of $43,000 ÷ 12 months = $3,583 per month
This is how much you make a month if you get paid 43000 a year.
$43k a year is how much a week?
This is a great number to know! How much do I make each week? When I roll out of bed and do my job of $43k salary a year, how much can I expect to make at the end of the week for my effort?
Once again, the assumption is 40 hours worked.
Annual Salary of$43000/52 weeks = $827 per week.
$43000 a year is how much biweekly?
For this calculation, take the average weekly pay of $827 and double it.
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x 52 weeks = 260 working days
Annual Salary of$43000 / 260 working days = $165 per day
If you work a 10 hour day on 208 days throughout the year, you make $206 per day.
$43000 Salary is…
$43000 – Full Time
Yearly Salary (52 weeks)
Weekly Pay (40 Hours)
Bi-Weekly Pay (80 Hours)
Daily Wage (8 Hours)
Daily Wage (10 Hours)
Net Estimated Monthly Income
Net Estimated Hourly Income
**These are assumptions based on simple scenarios.
43k a year is how much an hour after taxes
Income taxes is one of the biggest culprits of reducing your take-home pay as well as FICA and Social Security. This is a true fact across the board with an all salary range up to $142,800.
When you make below the average household income, the amount of taxes taken out hurts your hourly wage.
Every single tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
So, how much an hour is 43000 a year after taxes?
Gross Annual Salary: $43,000
Federal Taxes of 12%: $5,160
State Taxes of 4%: $1,720
Social Security and Medicare of 7.65%: $3,290
$43k Per Year After Taxes is $32,830
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$32830 ÷ 2,080 hours = $15.78 per hour
After estimated taxes and FICA, you are netting $32,830 per year, which is $10,170 per year less than what you expect.
***This is a very high-level example and can vary greatly depending on your personal situation and potential deductions. Therefore, here is a great tool to help you figure out how much your net paycheck would be.***
In addition, if you live in a heavily taxed state like California or New York, then you have to pay way more money than somebody that lives in a no tax state like Texas or Florida. This is the debate of HCOL vs LCOL.
Thus, your yearly gross $43000 income can range from $29390 to $34550 depending on your state income taxes.
That is why it is important to realize the impact income taxes can have on your take home pay. It is one of those things that you should acknowledge and obviously you need to pay taxes. But, it can also put a huge dent in your ability to live the lifestyle you want on a $43,000 income.
43k salary lifestyle
Every person reading this post has a different upbringing and a different belief system about money. Therefore, what would be a lavish lifestyle to one person, maybe a frugal lifestyle to another person. And there’s no wrong or right, it is what works best for you.
One of the biggest factors to consider is your cost of living.
In another post, we detailed the differences of living in an HCOL vs LCOL vs MCOL area. When you live in big cities, trying to maintain your lifestyle of $43,000 a year is going to be much more difficult because your basic expenses, housing, transportation, food, and clothing are going to be much more expensive than you would find in a lower cost area.
To stretch your dollar further in the high cost of living area, you would have to probably live cheap and prioritize where you want to spend money and where you do not. Whereas, if you live in a low cost of living area, you can live a much more lavish lifestyle because the cost of living is less. Thus, you have more fun spending left in your account each month.
As we noted earlier in the post, $43,000 a year is below the average income that you would find in the United States. Thus, you have to be wise with how you spend your money.
What a $43,000 lifestyle will buy you:
If you are debt free and utilize smart money management skills, then you are able to enjoy the lifestyle you want.
You are able to rent in a decent neighborhood in LCOL and maybe a MCOL city.
You should be able to meet your expenses each and every month.
Participate in the 200 envelope challenge.
Ability to make sure that saving money is a priority, and very possibly save $3000 in 52 weeks.
When A $43,000 Salary Will Hold you Back:
However, if you are riddled with debt or unable to break the paycheck to paycheck cycle, then living off of 40k a year is going to be pretty darn difficult.
There are two factors that will keep holding you back:
You must pay off debt and cut all fun spending and extra expenses.
Break the paycheck to paycheck cycle.
It is possible to get ahead with money!
It just comes with proper money management skills and a desire to have less stress around money. That is a winning combination regardless of your income level.
$43k Salary to Hourly
We calculated how much $43,000 a year is how much an hour with 40 hours a week. But, more than likely, you work more or fewer hours per week.
So, here is a handy calculator to figure out your exact hourly salary wage.
$43K a year Budget – Example
As always, here at Money Bliss, we focus on covering our basic expenses plus saving and giving first, and then our goal is to eliminate debt. The rest of the money leftover is left for fun spending.
If you want to know how to manage 40k salary the best, then this is a prime example for you to compare your spending.
You can compare your budget to the ideal household budget percentages.
recommended budget percentages based on $43000 a year salary:
Sample Monthly Budget
Recreation / Entertainment
0% – Goal
Government Tax (including Income Tatumx, Social Security & Medicare)
Total Gross Monthly Income
**In this budget, prioritization was given to basic expenses and no debt.
Is $43,000 a year a Good Salary?
As we stated earlier if you are able to make $43,000 a year, that is a decent salary. You are making more money than the minimum wage and close to double in many cities.
While 43000 is a good salary starting out in your working years. It is a salary that you want to increase before your expenses go up or the people you provide for increase.
However, too many times people get stuck in the lifestyle trap of trying to keep up with the Joneses, and their lifestyle desires get out of hand compared to their salary. It is okay to be driving around a beater car while you work on increasing your salary.
This $43k salary would be considered a lower middle class salary. This salary is something that you can live on if you are wise with money.
Check: Are you in the middle class?
In fact, this income level in the United States has enough buying power to put you in the top 95 percentile globally for per person income (source).
The question you need to ask yourself with your 43k salary is:
Am I maxed at the top of my career?
Is there more income potential?
What obstacles do I face if I want to try to increase my income?
In the future years and with possible inflation, many modest cities a 43,000 a year will not a good salary because the cost of living is so high, whereas these are some of the cities that you can make a comfortable living at 43,000 per year.
If you are looking for a career change, you want to find jobs paying at least $65000 a year.
Is 43k a good salary for a Single Person?
Simply put, yes.
You can stretch your salary much further because you are only worried about your own expenses. A single person will spend much less than if you need to provide for someone else.
Learn exactly what is a good salary for a single person today.
Your living expenses and ideal budget are much less. Thus, you can live extremely comfortably on $43000 per year.
And… most of us probably regret how much money wasted when we were single. Oh well, lesson learned.
Is 43k a good salary for a family?
Many of the same principles apply above on whether $43000 is a good salary. The main difference with a family, you have more people to provide for than when you are single or have just one other person in your household.
The costs of raising children are high and will steeply cut into your income. As you can tell this is a huge dent in your income, specifically $12,980 annually per child.
That means that amount of money is coming out of the income that you earned.
So, the question really remains is can you provide a good life for your family making $43,000 a year? This is the hardest part because each family has different choices, priorities, and values.
More or less, it comes down to two things:
The location where you live in.
Your lifestyle choices.
You can live comfortably as a family on this salary, but you will not be able to afford everything.
Many times when raising a family, it is helpful to have a dual-income household. That way you are able to provide the necessary expenses if both parties were making 43000 per year, then the combined income for the household would be $86,000. Thus making your combined salary a very good income.
Learn how much money a family of 4 needs in each state.
Can you Live on $43000 Per Year?
As we outlined earlier in the post, $43,000 a year:
$20.67 Per Hour
$165-206 Per Day (depending on length of day worked)
$827 Per Week
$1654 Per Biweekly
$3583 Per Month
Next up is making $45000 a year.
Like anything else in life, you get to decide how to spend, save and give your money.
That is the difference for each person on whether or not you can live a middle-class lifestyle depends on many potential factors. If you live in California or New Jersey you are gonna have a tougher time than Oklahoma or even Texas.
In addition, if you are early in your career, starting out around 34,000 a year, that is a great place to be getting your career. However, if you have been in your career for over 20 years and still making $43k, then you probably need to look at asking for pay increases, pick up a second job, or find a different career path.
Regardless of the wage that you make, if you are not able to live the lifestyle that you want, then you have to find ways to make it work for you. Everybody has choices to make.
But one of the things that can help you the most is to stick to our ideal household budget percentages to make sure you stay on track.
Learn exactly how much do I make per year…
One of the best ways to improve your personal finance situation is to increase your income. Here are a variety of side hustles that are very lucrative. With time and effort, you can start enjoying the lifestyle you want.
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Surging interest rates and building costs in 2022 led single-family construction to plummet by the first quarter of this year, while the multifamily sector experienced growth, the National Association of Home Builders said.
All types of markets measured in NAHB’s newly released Home Building Geography Index saw single-family building continue to decelerate in the first quarter to varying degrees, prolonging their fall since the start of 2022. The trade group’s moving average growth rate is determined based on the past five quarters of activity.
“The latest findings illustrate that labor shortages, supply shortages and higher mortgage rates continue to hamper the industry, particularly the single-family market: Single-family home building experienced negative growth rates in all submarkets,” the NAHB said.
The pace of construction in core-county large metros decreased the most, at 25.6% compared to 16% in the fourth quarter and a positive growth rate of 7.9% a year ago.
Large metropolitan areas in suburban counties followed with a drop of 23.7%, reflecting further slowing from 16.3% three months earlier, while a year ago activity had increased by 5.4%. Meanwhile, growth diminished by 22.7%, compared to 12.1% in the fourth quarter, within similarly sized metros of outlying counties. The submarket also experienced the largest year-over-year reversal after numbers surged by 17.4% a year ago.
Small metropolitan communities also saw slowdowns by double-digit percentages. Single-family construction within small metros of core and outlying counties dipped 22.1% and 19.4% in the first quarter, respectively, compared to 14% and 11.7% three months earlier, and positive growth of 10.5% and 13.5% a year ago.
Single-family home building in micro and rural counties likewise dropped by 2.9% and 8.3%. In the fourth quarter, the rate of single-family construction in micro counties had grown by 6.8% but fell 1% in nonmetro communities. The latest quarterly numbers are down from positive growth of 15.4% and 18.9% last year.
Single-family construction in large metro areas also fell to a 49.7% share relative to total activity, suggesting that builders continue to see potential in smaller markets after the pandemic-fueled housing boom.
The decline seen in NAHB’s latest index comes even as data from the homebuilding industry shows some hints of a rebound emerging in 2023. Single-family housing starts, as well as permits, rose in the past few months this year, as scarce existing-home inventory led more consumers to consider purchases of new units.
The early-year increase in numbers thus far has also led to an upswing in homebuilder sentiment, after it darkened consistently throughout 2022. NAHB’s latest gauge of industry sentiment came in higher for the fifth month in a row in May, reaching a neutral mark of 50 on its 100-point scale since July last year.
But the single-family construction industry is likely to face ongoing economic pressures that could blunt current momentum, according to housing researchers.
“We continue to expect the economic backdrop to weaken, and many smaller homebuilders are likely facing tighter construction loan credit amid the fallout from recent banking turmoil,” said Fannie Mae Chief Economist Doug Duncan in a recent research statement.
Duncan also said a resurgence of interest rates cannot be ruled out. “If this occurs, we believe the current strain on affordability could worsen and work to suppress future demand.”
But the multifamily segment told a different story. Although growth slowed over the past 12 months, activity was still up across all submarkets in the past year, according to the homebuilding geography index. The smallest annual pace of growth showed up within large metro areas of core counties at 3.2%. But multifamily activity in the same-sized markets in suburban and outlying counties surged 8.5% and 24.5%.
Among small metropolitan communities, multifamily building grew 11.5% and 13.2% in core and outlying counties.
Meanwhile, construction in metro and nonmetro areas of rural micro counties accelerated 20.2% and 19.1%.
But as in the single-family segment, multifamily builders are confronting economic headwinds likely to slow annual growth by 14% in 2023, according to recent data from the Mortgage Bankers Association.