Housing Market Adjustments

Housing starts rose slightly to a seasonally adjusted annual rate of 1.321 million, coming in just above the consensus expectation of 1.3 million. The 4.6% monthly increase was driven by a sharp 31% rise in the volatile multifamily sector, while single-family starts declined by 4.6%. Permits, a leading indicator of future construction, came in at a seasonally adjusted annual rate of 1.397 million—also beating the consensus expectation of 1.387 million. The story was similar for permits: multifamily activity rose 8.1%, while single-family permits fell 3.7%. This marks the fourth consecutive monthly decline in single-family permitting. The pullback reflects ongoing affordability challenges, rising material costs and tariff-related uncertainties, elevated new home supply, and growing competition from the resale market. The continued decline in single-family permits, combined with weakened builder sentiment, points to a slowdown in future single-family construction. Completions matter because they provide immediate relief to a supply-constrained market. Unfortunately, single-family completions fell 12.5% from last month and 15.5% from a year ago, further limiting additions to the housing stock. Builder sentiment has signaled underlying weakness in the single-family sector. Builder sentiment in July inched higher but remained in negative territory for the fifteenth consecutive month. Optimism about single-family sales for the next six months increased by three points to 43, and current sales conditions improved by one point. Prospective buyer traffic declined from 21 to 20, marking the lowest reading since 2012, with the exception of three months. The July Housing Market Index (HMI) survey revealed that 38 percent of builders reported cutting prices, the highest percentage since NAHB began tracking this figure in 2022. Price cuts are often used as a last resort incentive but have become increasingly necessary in today’s market to offset affordability challenges. Affordability challenges and tariff uncertainty continue to weight on demand. Builders are not only facing growing competition from the resale market, but also grappling with elevated inventories of their own. The months' supply of new homes rose to 9.8 in May- well above the pre-pandemic 30-year average of around 6, and up from 8.3 in April. This is contributing to the slowdown in new construction activity.

San Diego Monthly Housing Update: 🔍 Key Trends: • 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗶𝘀 𝘀𝘂𝗿𝗴𝗶𝗻𝗴: Detached home inventory (count) rose 27.1% and attached inventory jumped 37.3% year-over-year. We’re now at the highest months’ supply since 2019 (3.1 for detached, 3.9 for attached). • 𝗕𝘂𝘆𝗲𝗿 𝗮𝗰𝘁𝗶𝘃𝗶𝘁𝘆 𝗶𝘀 𝘀𝗼𝗳𝘁𝗲𝗻𝗶𝗻𝗴: Pending sales are down 7.1% (detached) and 4.2% (attached). Closed sales followed suit, both down roughly 2–2.5% YOY. • 𝗣𝗿𝗶𝗰𝗲 𝗺𝗼𝗺𝗲𝗻𝘁𝘂𝗺 𝗶𝘀 𝘀𝘁𝗮𝗹𝗹𝗶𝗻𝗴: Median prices slipped slightly—-0.9% for detached and -4.4% for attached properties. • 𝗦𝗲𝗹𝗹𝗲𝗿𝘀 𝗮𝗱𝗷𝘂𝘀𝘁𝗶𝗻𝗴 𝗲𝘅𝗽𝗲𝗰𝘁𝗮𝘁𝗶𝗼𝗻𝘀: The average sale-to-list ratio dropped to 98.0% for detached and 97.2% for attached, a 1.5–2.0% decline from last year. The big takeaway here is that inventory is now in "balanced" territory but is continuing to build in the wrong direction. Assuming the status quo on rates and economy, there appears to be a path to deterioration ahead, although inventory usually drops after summer. Worth keeping an eye on.

America’s Housing Markets Are Flipping Over the past three years, U.S. housing markets have undergone a major shift, one that should make every residential investor and developer rethink their strategies. 🔻 Where prices are falling: The South, once the pandemic-era darling, is now seeing the sharpest declines. Austin, TX leads with a -12% drop, while Florida metros like North Port and Cape Coral are down -10% each. A surge in homebuilding and rising insurance premiums are leaving many homes unsold, cooling demand across Texas and Florida. 🔺 Where prices are rising: Meanwhile, the Northeast and Midwest are on fire. Rochester, NY tops the nation with a +31% gain, followed by Hartford, CT (+29%) and Milwaukee, WI (+27%). Limited housing supply and relative affordability near major job centers are fueling fierce competition. 📊 The Big Picture: Southern inventory is 3.6% above pre-pandemic levels, thanks to overbuilding. In contrast, Northeast inventory has plunged 51%, driving double-digit price appreciation. For developers, this signals a clear message: the next wave of opportunity may not be in the booming Sunbelt metros but in overlooked, supply-constrained Northeastern and Midwestern cities. 👉 Question for investors & builders: Are you repositioning your pipeline toward these rising markets, or doubling down on Southern recovery bets?

It has been well documented and discussed that housing shortages have been the main cause of rising house prices and the drop in affordability. However, little attention is paid to the necessary adjustment in house prices, incomes and interest rates that would be required to restore affordability.   Unsurprisingly, the adjustments needed in cities such as Toronto, Vancouver, Montreal and Ottawa, are much bigger than in cities where affordability has remained higher (Calgary, Edmonton, and, to a lesser extent, Winnipeg).   At current levels of income and interest rates, house prices would need to decline by 50% in Toronto, by 43% in Montreal, by 38% in Ottawa and 35% in Vancouver to restore affordability to its long-term average.   At current house prices and interest rates, income in Toronto would need to more than double to restore affordability. Assuming a yearly increase in income of 4%, house prices would have to stagnate for almost 18 years. In Vancouver, incomes need to rise by 83%, requiring 15 years of stagnant prices.   At current house prices and income levels, interest rates would need to be negative in Toronto to restore affordability. Similarly, mortgage rates in Ottawa and Montreal would need to be below their lowest point in history.   With monetary policy in restrictive territory and interest rates expected to be lowered later this year, we also look at what adjustments in house prices and incomes would be required if mortgage rates were to return to their average pre-pandemic level.   The adjustments remain sizeable (chart below), with house prices needing to decline by 39% in Toronto, 33% in Vancouver, 30% in Montreal, and 23% in Ottawa, at current income levels. Interestingly, no decline in house prices would be needed in Calgary, Edmonton, and Winnipeg.   Holding house prices constant, incomes would need to rise by 65% in Toronto, 50% in Vancouver, 43% in Montreal, 30% in Ottawa. Again, assuming income increases of 4% per year, restoring affordability requires 13 years of stable prices in Toronto, 10 years in Vancouver, 9 years in Montreal, and 7 years in Ottawa.   What is clear is that restoring affordability will come at a cost for current homeowners as the value of important assets stagnates for a long period or declines, with significant financial consequences for some.   It is unclear whether current homeowners understand these costs and whether they are ready to bear them. If they are not onboard, policies that are being put in place to restore affordability could backfire and lead to a homeowner revolt, derailing the push to improve affordability.   The significant house price underperformance necessary to restore affordability could prove to be a disincentive for homebuilders to increase the supply of new homes, meaning fewer housing units built, prolonging the issue.   There is a clear risk that housing is permanently unaffordable in Canada with significant costs on the rest of the economy.

The housing market is shifting. Nearly 15% of U.S. home purchase agreements fell through in June, according to Redfin—up 1% from a year ago and the highest June figure since tracking began in 2017. At first, this stat might seem puzzling. After all, isn't there supposed to be pent-up demand, especially among Millennials and Gen Z? So, what’s behind this? Well, according to the report... • Some buyers are using inspection contingencies to walk away after spotting an issue or discovering a better home • Mortgage rates remain stuck in the upper mid-6% range, and some buyers are hoping for a drop • And in some cases, shoppers are simply more cautious amid economic uncertainty Still, the Redfin data isn’t revealing a sudden change—it’s part of a broader trend I’ve been tracking throughout 2025: the shift to a buyer's market. In my latest Housing Market Predictions piece, I covered how home price growth has been slowing and inventory has been steadily improving since the start of the year. That extra supply, combined with sticky mortgage rates, has given buyers a little more breathing room and negotiating power in a still-pricey housing market. Even so, it's important to remember that housing trends remain deeply regional. For example, affordable markets in parts of the Midwest and Northeast, which didn’t experience the extreme price surges of the pandemic years, are seeing strong buyer demand and competitive conditions. In contrast, areas like Florida and parts of the West, where insurance costs and high home prices are causing concern, and where rapid home building in recent years is now offering buyers more choice, are experiencing more deals falling through. If you’re wondering where the housing market is headed for the rest of 2025, here’s the breakdown of the trends I’m watching: https://lnkd.in/eAfHPdQn Forbes Advisor

The Housing Market Is About to Drag the Economy Down—Here’s What Smart Capital Is Doing About It Moody’s just dropped the truth bomb: housing is no longer a tailwind—it’s dead weight. And most investors are still acting like it’s 2021. Let’s break it down: 1. Mortgage Rates Are Stalling Demand We’re 18 months into a high-rate environment and 30-year fixed mortgages are holding around 6.7%. That’s more than double what buyers were paying in 2021. And it’s not coming down anytime soon—Goldman has rates pegged at 6.75% through Q4 2025. The result? Buyer demand is down 35% from peak levels. Mortgage applications are hovering near 1995 levels. Homebuilders are offering 3-2-1 buydowns just to move inventory. 2. Inventory Is Locked and Supply Is Shrinking You can’t buy what no one’s selling. 92% of mortgage holders are locked in under 5%. New listings are down 18% YoY. Housing starts have fallen 19%—a 10-year low. That means even if you wanted to buy, the choices are shrinking—and what’s available is often overpriced and underperforming. 3. Housing Is Becoming an Economic Drag Mark Zandi (Moody’s) said the quiet part out loud: housing is no longer driving the economy—it’s dragging it down. Historically, housing contributes ~15–18% of GDP. In 2025? That number is falling fast. Price growth is expected to be +0.5% this year and +1.2% in 2026—barely pacing inflation. Consumer confidence tied to housing is dipping. CRE construction has stalled. The housing slowdown is bleeding into retail, lending, and labor markets. This isn’t a correction. This is a prolonged, grinding reset. What We’re Actually Doing at Thrivegate Capital: Underwriting exit cap rates 150–200bps wider than entry—no fantasies. Targeting sub-60% LTV with fixed-rate debt or interest rate caps baked in. Avoiding speculative metros and focusing on renter-heavy markets with below-replacement-cost housing. Bottom line: If you’re still underwriting deals like it’s 2021, you’re setting capital on fire. Housing may be dragging the economy, but operators who can create yield in this climate will dominate the next cycle. #privateequity #realestate #usmarketupdates

The latest State of the Nation’s Housing report from Harvard Joint Center for Housing Studies is a sobering reminder that simply building more homes isn’t enough. Yes, increasing supply matters, but unless we deliver the right supply in the right areas, the affordability crisis only deepens. The US experience shows that even with record levels of new construction, most of it has been concentrated at the higher end of the market. Rising land, construction, and infrastructure costs, combined with developer return expectations, are pushing rents and sale prices ever higher. At the same time, the stock of genuinely affordable rental homes has collapsed, homeownership rates for younger and lower-income households have fallen, and homelessness has surged to record levels. The clear takeaway for New Zealand? Market-led housing delivery alone cannot solve our affordability challenges. Without targeted Government, CHP, iwi, church, and philanthropic intervention, the market will continue to underserve those on lower incomes, locking more whānau out of secure, affordable homes. Perpetuating our long and continued social and economic decline. We need bold, coordinated action to deliver a better mix of supply: * Affordable rentals in the right locations * Smaller, more attainable homes for first-home buyers * Supported pathways into homeownership for those excluded by deposit and mortgage hurdles * Investment in social and community housing for those most in need The US housing system reminds us: the market will chase profit (as it is meant to do). But a just, inclusive housing system takes leadership, intentionality, and public investment. There are signs of progress in New Zealand — the Government’s new Flexible Fund, the rise of philanthropic and impact investment in housing, the growth of papakāinga and iwi-led developments, and Councils across the country beginning to allocate land and resources for more affordable homes. But let’s be clear: it’s not nearly enough. If we want to change the trajectory, we need more than good intentions. It’s time to get serious about building more of the right type of homes, and building equity for all. Doing so is good for us all.

An increase in the supply of homes, whether newly built or sold by owners, is generally positive in the US. Low inventories since the 2008 financial crisis have made many areas unaffordable for most people. The pandemic triggered a wave of people relocating to the South, and with homeowners hesitant to let go of low-interest mortgages, the situation escalated, leading to fierce bidding wars. Currently, the national supply of previously owned homes remains below 2019 levels, though nine states in the South and West have surpassed those levels. Homebuilders who ramped up production during the pandemic-driven housing boom in the Sun Belt are now forced to slash prices and offer significant concessions to sell off surplus homes. Homeowners are giving up on dealing with rising mortgage rates and putting their homes up for sale. Nationwide, more than 70% of owners had mortgage rates below 5% in the first quarter, giving them little incentive to sell and buy elsewhere in a market with rates near 7%. However, more and more people are having to relocate for work or family reasons and can no longer afford to wait for borrowing costs to drop. #Homeowners