, and others is that 30-year rates will remain above 5%.While Torres is bearish on the direction of home prices, he recently adjusted his call to a 15% total declineOne of the reasons Torres thinks home price declines will be less severe now is because new home starts and permits haven't grown as much as he thought they would, meaning new supply coming onto the market is stalling along with stagnant demand.
Plus, he said, many of the new homes that are being built are part of apartment complexes owned by commercial real-estate firms, so they'll be for the rental market. "Initially it seemed improbable that construction activity would fall that sharply. It has fallen faster than I expected," he said."On top of that, almost all construction activity has gone into multifamily, into apartment rentals."
The below chart shows in red the number of permits for new privately owned single-family housing units. It's fallen off a cliff over the last year. Permits for multifamily units are shown in blue — they've jumped recently.Another reason for Torres' milder call is that potential home sellers are staying put amid high mortgage rates, crunching supply alongside the drop in demand.
"Folks that are in their homes, they have very little incentive to sell," he said."What are they going to do, they're going to get out of their 3% mortgage and go move out to one that's 6.5%? That's not a good value proposition."
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