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Housing inventory is ‘at or near record lows’: Miller Samuel Inc CEO

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Jonathan Miller, President & CEO Miller Samuel Inc, joins Yahoo Finance to discuss the hot housing market and outlook on the rental market.

Video Transcript

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- We've got some good news for homebuyers today. Mortgage rates are lower for the third consecutive week according to Freddie Mac. There you have it. The rate down to a 30 year is now 2.88% on average. While the 15 year is averaging 2.22%. This provides some modest relief to borrowers during a time when home prices are near or at record levels. And we continue to have low inventory.

Let's talk it over now with Jonathan Miller president and CEO of Miller Samuel. Jonathan, always good to see you. So let's talk about this hot market. Where are some of the hottest housing markets right now? And are you starting to see signs that things are beginning to cool?

JONATHAN MILLER: Well, we were seeing a little bit of what I would call buyer fatigue, where a little bit of where the housing markets are trying to return after 2020 to normal seasonal patterns. As a result, what-- And I think part of it is also that there's been a tremendous amount of bidding wars across the United States.

For example, in Fairfield County, Connecticut, a suburb of New York 50% of the closings in the second quarter were above the last asking price. So it is tough out there. So, you know, that's driving prices up all over the place really.

- So are there particular pockets of the country, where things are a little more competitive than others right now for potential buyers?

JONATHAN MILLER: You know, I think in a broader sense, not really. There's a universal phenomenon across the country, which is inventory is chronically low. And I cover about 36 different housing markets for a real estate firm Douglas Solomon. And in every market that we cover, inventory is at or near record lows, which is driving prices higher and creating bidding wars.

- I know in Florida, you're seeing a lot of that, right, record prices, record sales, record low inventory. What can you tell us about what's happening in that state right now?

JONATHAN MILLER: Well, you know, Florida is-- you know, and to sort of, you know, back up to what you had asked me earlier. If you had to pick a region that perhaps that is somewhat more intense than other markets not to downplay how intense it is in many of the markets that we cover. But Florida is really benefiting from low mortgage rates, the SALT tax, in terms of migration from higher cost markets like the West Coast and the Northeast.

And they're trying to pivot to the economy, I think they have a long way to go, but to an economy that's less dependent on exclusively tourism. And as a result, you're seeing an unbelievable level of activity at the high end. One of the challenges with Florida over the last, you know, 5, 6 years has been-- the high end of the market is very, very soft.

But since the end of the lockdown, COVID lockdown, we're seeing a reversal. And we're seeing a tremendous amount of high end activity in all the Florida markets that we cover. And just for example, in Palm Beach, there was a sale last week for about $85 million. And that was only the fourth highest sale of 2021. Which tells you something, I think.

- Oh, wow, that is pretty incredible. I want to talk to you, though, about the pluses for potential home buyers right now I mean, we do have mortgage rates trending lower. And now the 30 year dipping back below 3%. Do you think that that is enough to sustain the momentum we're seeing or will that buyer fatigue that you talked about at the top of the interview, you know, start to creep back in?

JONATHAN MILLER: I think it is-- the benefit with a drop in rates is probably more short term. Ultimately, the drop in rates is making housing prices higher and inventory. It's also-- sorry, at the same time, it's stimulating tremendous demand. I mean, rates have been falling sharply for several years now. And we're at this point, you know, where every day is a new record. And it's pulling more and more people in.

I think, the sort of safety metric in terms of, you know, not going into a bubble is that mortgage lenders are defaulting to being tighter than historical norms. And so, you know, I think that's a favorable condition.

You know, if you look at what's favorable to participants in the market is, I think, at some point down the road when-- because lenders are not anywhere near as flexible as they were in the last booms period, that we had the market plateau or cool in the sense of leveling off as opposed to some sort of correction.

- You know, what we're starting to see too, I know, is some baby boomers, for instance, are taking advantage of this hot real estate market. And deciding to sell the big home because they're empty nesters in many cases. And they're renting for a little while.

So I want to talk a bit about the rental market. Is that any better for folks who might say, you know what, I'm not going to buy right now. Markets too crazy for me. And I'm going to rent. Might they find some relief there?

JONATHAN MILLER: To a certain degree, yes. I mean, you know, in markets like New York City, rents after in the summer and into the last fall were down more than 20%. So there has been a massive influx of people into the city in terms of lease up. But now we're seeing that window closing, where the year over year comparisons are not that much cheaper. And we're actually seeing some bidding wars on rentals.

- The rental market [INAUDIBLE]

JONATHAN MILLER: Right. So it is-- so I wouldn't look at it as a heavily discounted market like it was. I think that, you know, the rental market generally across the country has been continuing. It was setback because of the pandemic. But I think we're seeing a return, maybe not fully to pre-COVID levels, but there's clearly been-- rents are clearly rising.

- And what about all those sweet concessions that landlords were throwing in there to entice people? Are those still happening or has that tried up?

JONATHAN MILLER: No, they're still there. Inventory is-- or sorry, concessions are still above normal levels. But they are falling. And like anything, , you know, when you have an inflow of demand-- so one of the drivers in one of the markets we cover in leasing specifically was Manhattan. We've had three months in a row of the highest new leasing activity on record. And that's going back to 2008.

And that's simply absorbing all the excess supply. And as a result, we're having pockets where we're having bidding wars. So I wouldn't look at rentals as being heavily discounted in the near future.

- But would another take away there, Jonathan, be that people are coming back to cities now. That it was a short lived phenomenon, people fleeing the big cities during the pandemic. Are they starting to come back now? And especially as more people have to return to the office now.

JONATHAN MILLER: Oh absolutely. I think that that was one of the, dare I say, massive over exaggerations was the death of the city and sort of air, quotes, "conversation" in the beginning of the pandemic when we didn't know very much about anything related to the pandemic. And what we're seeing now is that across the country, we're seeing urban markets start to see inbound.

And one of the reasons we're seeing inbound is because of vaccine adoption. That the expansion of vaccine programs is creating a more positive consumer sentiment about urban markets and people that are concerned about sort of close proximity to others. And I think that correlates with the big uptick in inbound activity that cities are enjoying.

And corporations haven't even in full call people back. We're starting to see it. Some of the big companies, big Fortune 500 type companies have started in July. But I think the fall is where we're going to see critical mass. And I think that's going to really put cities back nearly to where they were pre-pandemic.

- All right, the conversation will be continued. Jonathan Miller, president and CEO of Miller Samuel, thanks for being with us.

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