U.S. unemployment fell to 3.4% in January—the lowest rate since 1969—and the Bureau of Labor Statistics reported 517,000 new jobs. With critical labor market indicators suggesting the U.S. economy is still overheated, the prospect of meaningful interest rate tapering in the near term recedes, and another increase seems imminent when the Fed reconvenes.
While recession fears have ebbed and flowed and ebbed again on news of the persistently tight labor market, foreclosure filings ticked up in January—36% year-over-year and 2% month-over-month (according to ATTOM data) and existing home purchases again slowed (down 1.5% in December, with January data expected to deliver another decline). The source of opportunity and optimism in this environment? The build-to-rent sector. Builder sentiment rebounded in January after a quarter of pessimism, with new home sales per community jumping 53% month-over-month in January (per John Burns) and new builds as a percentage of overall single-family inventory steadily climbing according to Picket data. We review this trend and more in today's analysis.
NOTES ON THE DATA SET
Aggregate market data comes from 10 of our operating markets: Nashville, Charlotte, Atlanta, Birmingham, Huntsville, Tampa, Jacksonville, Orlando, Kansas City, and Greensboro. Inventory and price data include single-family residences, townhomes, and duplexes with 2+ bathrooms and 3+ bedrooms priced between $150-$500K.
The volume of new-build inventory as a percentage of active single-family listings has been on an upward slope, a trend expected to continue as BTR proves its merit as the solution (and investment) of choice to meet rising demand for affordable detached housing.
Read more about why 2023 Will Be Another Strong Year for BTR from GlobeSt. >>
With the exception of Charlotte and Nashville, whose new build percentages declined moderately in the last year, our spotlight markets demonstrated strong new build inventory growth. We saw a particularly marked increase in the percentage of new build inventory in Kansas City, which grew from 26.45% last February to 39.59% this January.
Following a trend that began in April 2022 (one month after the Fed began raising interest rates), median days on market in the single-family sector increased from 26.44 to 75.11, highlighting the overall shift away from a seller's market.
Days on market in our spotlight markets eschewed this trendline in January and moved lower, proving the fallibility of painting the housing market with too broad a brush. We await February data for a more definitive picture, but despite notably higher year-over-year DOM, January's moves suggest demand for single-family homes in these markets may be recovering.
Spotlight markets: Atlanta (ATL), Nashville (BNA), Charlotte (CLT), and Kansas City (MCI)
The transition to a buyer's-biased market continues. The ratio of closing price to original list price (now at 95.6% across our markets) is lower than the seasonal average and on a downward trajectory month over month.
While buyer bargaining power is clearly on the ascendant, our five spotlight markets demonstrate the potential for list price resiliency in markets with persistently strong in-migration. Average single-family list prices in Atlanta, Nashville, and Kansas City have been on the rebound since the start of the year, rapidly closing in on Spring and Summer 2022 highs (or besting them significantly in the case of KC).
Spotlight markets: Atlanta (ATL), Nashville (BNA), Charlotte (CLT), and Kansas City (MCI)
Market data brought to you by the Market IQ team
Our team is here with the data you need to make your own assessment of this shifting landscape. For in-depth analysis or a complimentary strategy consultation, please reach out to Picket's Head of Business Growth, James Newgent.
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