When he’s not analyzing macro- and microeconomic data trends within the housing market and the economy at large, Daren Blomquist, VP of Market Economics at Auction.com, is working to tell the story of these data sets in a way that all audiences can understand. Blomquist’s reports and analysis have been cited by thousands of media outlets nationwide—including all the major news networks and leading publications such as The Wall Street Journal, The New York Times, and USA TODAY. Before joining Auction.com, Blomquist directed ATTOM Media, a division of ATTOM Data Solutions that publishes real estate reports and analysis sourced from national public record property data. He sat down with DS News to provide perspectives on the current housing market and the trends that will define the near term.
You have spoken of how home flippers are a good barometer of where the market is heading. What are some of the noteworthy trends occurring in that sector?
Home-flipping volume as a rate of overall home sales took a dive in the second half of 2018, paralleling the decline we saw in home sales volume and the rate of home price appreciation in the retail market. Home flippers are having trouble selling in a market with weakening retail buyer demand, and that is forcing them to hold onto properties longer than they would like. This trend, in turn, is causing the flippers to exercise caution in the acquisition of new flips.
The good news is that downward trend in home flipping reversed itself in early 2019, with the home-flipping rate jumping to a seven-year high in February. That’s a strong positive sign for the health of the overall housing market going forward for the remainder of the year.
What does your typical day look like as VP of Market Economics?
I analyze data—both internal Auction.com data and external market data—and figure out what the data is telling us about the marketplace. Then, I get to take that data-driven message and tell it in innovative ways. That storytelling takes several forms, but primarily through written content, interactive visuals, and in speaking to various audiences. One of the most important audiences is the internal business owners and decision-makers at Auction.com, to help them make the most informed, data-driven business decisions. Sellers and buyers utilizing the Auction.com platform comprise another important audience for my data-driven content about the market. It’s important for both sides of the transaction to be armed with solid information that will promote transparency and reduce friction in our marketplace. My job consists of communicating data-based anaysis to the larger mortgage and real estate industries, helping them gain insight particularly into the distressed disposition niche of the housing market.
What are the key factors impacting inventory and millennial homebuying in the current market?
The interplay between inventory and demand from millennials represents one of the most fascinating chickenand-egg scenarios of the real estate recovery. Millennials represent a critical group of imminent homebuyers, and yet their potential has remained latent for a variety of reasons, ranging from high levels of student debt to later-in-life homebuying triggers such as getting married and having children.
The most significant contributors to the large homeownership deficit for the under-35 generation are concrete and psychological ripple effects from the Great Recession. The psychological effects have caused homeownership to lose its luster for many millennials, and the concrete effects have
made it much more difficult for millennials to get their foot in the door even if they want to become homeowners.
On the inventory side, homebuilders are also impacted by these effects, causing a deficit in inventory built over the last seven years of the recovery. Builders got burned with an overhang of too much inventory in the previous up-cycle and have therefore been cautious in ramping up their production in this time, especially in light of the muted demand for homeownership from millennials and other generations.
Additionally, the housing crash decimated the ranks of construction workers, and many in that field have since found other jobs. That has pushed up construction costs and limited thetype of inventory that is profitable for builders.
The buyerseller pendulum swung back toward buyers in the second half of 2018, but it’s hard to tell if that swing is continuing or if the recent drop in mortgage rates will halt it. We saw a similar swing toward a buyer’s market play out in 2014 when mortgage rates also rose above 4% for an extended stretch. When mortgage rates then dropped, the market quickly flipped right back in favor of sellers in 2015. However, I don’t think we’ll see such a knee-jerk response toward a seller’s market this time around. The market will still be more favorable for buyers in 2019 than it was in 2017, but I also don’t think we’ll see a full-fledged buyer’s market where homes are sitting on the market for six months or more in most areas of the country.
Do you see a recession on the horizon in the near-term?
There is a good chance of at least a mild to medium-sized recession in the next couple years. Housing certainly will be impacted to some degree, but it will not likely be the catalyst for the recession nor bear the brunt of the pain from it. Looking back at previous recessions, the typical impact on housing is a modest drop in home prices—somewhere in the range of a 1% to 5% drop depending on the local market, not the 30% to 50% drop we saw triggered by the Great Recession.