The laws of supply and demand are real, and the housing market is experiencing them at full bore.

 

A simultaneous increase in demand for suburban homes and a decrease in available supply has pushed prices up 8.5% year-over-year. 

 

## Monthly Supply Of For-Sale Houses In the United States

 

As of the date of this article's publication, for-sale housing inventory is at an all-time low at 3.3 months for August 2020.

 

<iframe src="https://fred.stlouisfed.org/graph/graph-landing.php?g=yoba&width=670&height=475" scrolling="no" frameborder="0" style="overflow:hidden; width:670px; height:525px;" allowTransparency="true" loading="lazy"></iframe> 

 

## Existing Home Sales

 

Existing home sales - home sales excluding new construction - from the National Association of Realtors shows just how active home buyers have been in the second half of 2020. The country effectively went from near 10-year lows of monthly existing home sales to 10-year highs in a matter of 3 months.

 

<iframe src='https://d3fy651gv2fhd3.cloudfront.net/embed/?s=unitedstaexihomsal&v=202012072000V20200908&d1=19210101&type=type=line&h=300&w=600' height='300' width='600' frameborder='0' scrolling='no'></iframe> source: <a href='https://tradingeconomics.com/united-states/existing-home-sales'>tradingeconomics.com</a> 

 

## 30-Year Fixed Rate Mortgage Average

 

30-year fixed rate mortgage interest rates are at all-time lows. This makes buying a home more affordable because the amount you pay in interest is lower than ever. For example, a $250,000 home financed with a 30-year mortgage at 2.75 % instead of 4.75% will cost you roughly $225 less per month. Buyers budgeting for a specific monthly expense when interest rates were higher, are now able to buy more expensive homes with savings attributable to lower interest rates. Check out our [mortgage calculator](https://www.offermarket.us/tools/mortgage-calculator) to see the effect of interest rate on monthly housing expenses.

 

<iframe src="https://fred.stlouisfed.org/graph/graph-landing.php?g=ymtM&width=670&height=475" scrolling="no" frameborder="0" style="overflow:hidden; width:670px; height:525px;" allowTransparency="true" loading="lazy"></iframe> 

 

## COVID-19 Housing Market: Cause and Effect

 

Let's list out some of the major themes occurring in the housing market:

 

- People are afraid to show their homes because of health risks => decline in listings, housing inventory
- People want to leave densely populated markets for fear of health risks => increase in demand for detached single family houses and townhomes
- People want to leave apartments with common areas for fear of health risks => increase in demand for detached single family houses and townhomes
- People need more space because they are working from home => increase in demand for larger homes
- Mortgage rates are at all-time lows => home buying demand increases, demand for more expensive houses increases, home prices increase because supply is limited

 

## Off-market real estate is more important than ever

 

The housing market is like an iceberg. Above the surface, you have your on-market for sale listings. Below the surface, you have your off-market properties. The total value of all houses in the United States is roughly $34 trillion. The total value of houses currently for sale is roughly $350 billion. Only 1% of the housing market is on-market, 99% is off-market.

 

## How do you buy off-market properties?

 

You can reach out to property owners and inquire about buying their home. This happens all the time and is commonly assisted by ​real estate wholesalers. You can buy off-market real estate with us at OfferMarket, we are a marketplace for off-market real estate.

 

## Why sell your house off-market?

 

Listing your home on-market is inconvenient and expensive. You need to choose an agent, conduct costly repairs, keep the house clean and ready for last-minute showings. If you are selling a rental property, you may choose to wait for the lease to expire which means you need to carry the cost of a vacant property for an indefinite period of time. The list of benefits of selling your house off-market goes on.

 

| Comparison | Off-Market | On-Market |
|:---------------:|:------------:|:------------------------------:|
| Market value | $34 trillion | $350 billion |
| Commission fees | Low or None | High |
| Inconvenience | Low | High |
| Condition | As-Is | Expensive repairs, concessions |
| Time to close | Fast | Slow |
| Competition | Low | High |

 

OfferMarket has created a marketplace for off-market real estate and we would love for you to participate.

Learn how housing supply shortages and increased demand are affecting home buyers and sellers. 99% of all housing inventory is off-market.

Housing Data: On-Market vs Off-Market Real Estate - OfferMarket

Housing Data: On-Market vs Off-Market Real Estate

Mount Washington is a neighborhood in Baltimore City, Maryland. Learn more about Mount Washington real estate in this market overview.

Mount Washington, Baltimore, MD 21215 - OfferMarket

Mount Washington, Baltimore, MD

According to data provided by the [National Multifamily Housing Council's Rent Payment Tracker](https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/), across the United States, 84% of tenants paid their rent by April 12th. This compares to 90% the year prior, a 7% decline from March rent. We expect May rent performance will be worse, given limited savings, continued record jobless claims and delays disbursing unemployment benefits and payroll protection loans.

 

## Consumer Spending

 

The US is a consumption-driven economy. Consumer spending comprises roughly 70% of GDP. According to Wells Fargo, consumer spending is down 35% at this point compared to same time last year. As you read this and think about your own changes in spending, this probably sounds quite accurate to you.

 

If consumers don't spend, businesses can't pay employees, tenants can't afford rent. Rent rates either need to be reduced or landlords need to accept lower rent revenue vis-à-vis higher non-payment rates. Other things could happen like employees forced to take pay cuts to keep their jobs, which will have a similar effect. Or we see a material shift from homeownership to renting as people lose their homes which might support rent rates... Lots of different scenarios to consider.

 

To put it another way, lower rental income results in lower [net operating income](https://offermarket.us/real-estate-glossary/noi-net-operating-income) (NOI) which results in lower valuation.

 

## Insight From The Public Markets

 

Looking at public markets, Equity Residential (EQR) is down 25%, AvalonBay (AVB) is down 29% from February 21 highs. Income producing properties are valued based on cap rate, so from this perspective we should expect valuations to decline in the near term. This said, the Fed is pumping money into the economy which as we saw in the Great Recession should cause asset values to increase both as means of chasing yield with interest rates near zero and as a hedge against inflation (holding cash is not good in that environment).

 

## Facing Reality

 

We don't see consumer spending snapping back to pre-COVID levels quickly. This will take time as the consumer needs confidence that their health and job is safe before spending on non-necessities, things that bring them out of their homes. We wonder if this economic shock might condition business and consumer spending to be more frugal over a longer time horizon.

 

## Summary

 

We do believe multifamily residential asset valuations will decline in the near term (now through mid-2021), but continue to serve as attractive long-term investments.

 

That's just our 2 cents, we are not economists but we are data-driven buy-and-hold value investors. What are your thoughts? Are you buying now or are you waiting on the sidelines?

 

## About OfferMarket

 

OfferMarket is a marketplace for single family (SFR) and multi-family rental investment properties. If you are a residential real estate investor or looking to start investing, OfferMarket is for you.

Analyze the data on how COVID-19 is affecting multifamily real estate valuations.

How will COVID affect multifamily real estate valuation?

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Luxury Redefined Episode 1 features 5505 Stuart Ave, Baltimore, MD 21215. A distressed listing with so much potential.

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