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U.S. home prices surge, what could cool the hot housing market

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Tim Rood - SitusAMC Managing Director and former Chairman of The Collingwood Group, joined Yahoo Finance to discuss the booming housing market.

Video Transcript

SEANA SMITH: Let's talk a little bit more about real estate. Because US home prices, they continue to rise, climbing nearly everywhere, it seems, during the first several months of the year. And there's little sign, when you take a look at what's going on, of it fading anytime soon.

We want to bring in Tim Rood. He's SitusAMC's Managing Director. And Tim, we've talked about this with you in the past, but housing continues to be so resilient. I guess, do you see any of this momentum starting to fade at all over the short term?

TIM ROOD: Hey, Seana, happy to be with you. You know, really not. You know, it's funny, I was thinking about it this morning. You know, it's too bad that Dickens guy didn't really catch on, because this truly is the best of times and the worst of times. It's obviously the best of times if you're a seller. I mean, values are going up parabolic and there's unlimited demand, it seems like. But if you're a buyer, of course, you know, you're running a gauntlet trying to figure out how the heck you're going to find a property that you can afford and ultimately one you can get under contract, you know.

ADAM SHAPIRO: Well, Tim, it might be the tale of two cities, so to speak, continuing with that Dickens guy. I mean, you might have real price acceleration. Look at Miami, for instance. We just heard in the last block about how, at least residential real estate is through the roof. But then you get a place like New York, where prices have fallen. Does that attract people back to where prices might be lower, especially when you have urban centers which have everything you would want to live in, whether it be New York or Chicago?

TIM ROOD: Yeah, it's interesting. We're trying to figure out whether or not, you know, the exodus from the hot urban areas is, you know, ephemeral, fleeting, or whether it's some sort of a secular change. My money would be on, you know, a fleeting change. But if you're just looking at hard data in terms of migration patterns, what's definitely clear are the states that are getting the most inflow of people tend to be Texas, Florida, North Carolina, a little bit in Phoenix, Arizona. And the outflows are coming from, at least out of the top four, New York, San Francisco, San Jose, and LA.

So Miami is certainly a benefactor of that. And one thing that those, you know, Southeast and Southwest states have a lot of, which is land. So it bodes pretty well. It's sunny. It's affordable. And they've got good economies.

SEANA SMITH: Hey, Tim, we hear about it all the time. I think most people know someone who maybe has been looking to buy a home in the past several months. They've been caught up in these bidding wars. The house goes for way over what the asking price was with a very, very attractive offer. When you take a look at maybe how long, not so much that we'll see a massive pullback in the price of homes, but until things at least start to normalize a little bit more, I mean, what's a potential timeline for that?

TIM ROOD: Well, I think it's really a matter of interest rates and the economic recovery. You know, supply is a difficult thing to fix. Ultimately, we're probably 5 million units of housing short of where the demand is. And while President Biden has got some very ambitious plans to invest hundreds of billions of dollars into fixing that problem, that is a big oil tanker to turn around. It's going to take years for that to work, even if the states, the counties, the localities come around to, you know, get some religion around changing their zoning and land use rules.

So I think that's going to be a while. And right now, you're looking at the pace is not likely to change anytime soon. Seems like 50%, I think, of homes are selling for above asking price. And the pace of sales is really unprecedented, with 80% going under contract in the first year.

So if we continue to have growth, if we continue to have relatively low interest rates, the pandemic continues to fade to the background, then I can't envision any reason why the housing market would stall. It might moderate. And God knows we need it to moderate. You can't have 15% a year appreciation rates. But the good news is because interest rates have come down, you know, even a 15% increase year-over-year in housing, in terms of home price index, the value of a median home, because interest rates are still down 3/4% to 1/2%, that 3/4 of 1/2% basically--

ADAM SHAPIRO: Hey, Tim.

TIM ROOD: --covers off. Yeah.

ADAM SHAPIRO: Real quick, this is a yes or no. Given everything you just said, is it time, if you're going to buy a house, do it now, don't wait?

TIM ROOD: You should buy a house. But I wouldn't. No, I think obviously if you can find something that's affordable in a place that you like, you should buy it. I don't see values going down anytime soon. And the opposite in terms of rentals, particularly single family rentals. You're not in any better shape because there's no inventory there. Occupancies are through the roof and values are going up. Because the landlords have got real pricing power.

SEANA SMITH: All right. Tim Rood. It sounds like we have a lot to talk with you about over the next couple of months. SitusAMC's Managing Director, great to speak with you and we'll talk to you again soon.