The state of homeownership

Like many people, we came to this country in pursuit of the American Dream. While that phrase might have different meanings for many people, we know that it usually involves one specific thing: owning a home.

In our third story, we have some interesting data on where that part of the American Dream is thriving, and where it is unfortunately not a reality for many people. We think it does provide an interesting look at the state of homeownership in this country. 

Also, in today’s Foundation Plans, we begin our two-part series on tips for creating a smart business plan for 2025. We are now about two months away from the start of the new year, so if you haven’t started building your plan, we hope these tips will help you get moving.

With that, let’s get into today’s Blueprint.

– James and David

Jump in pending home sales

In September, pending home sales jumped 2.5% month over month on a seasonally adjusted basis, the largest increase since January 2023. That’s according to Redfin’s latest sales update. They also rose 3.1% YOY, the biggest annual increase since May 2021. Here are some of the other key takeaways from September:

• Closed sales of existing homes fell 0.5% MOM and 3% YOY to a seasonally adjusted annual rate of 4,023,067, the lowest level on record aside from the start of the pandemic in 2020 (note: many of these sales were negotiated before the latest drop in mortgage rates).

• Overall closed home sales – which includes existing and new homes – fell 0.2% month over month on a seasonally adjusted basis and declined 1.6% year over year—to the lowest level since December.

Our take

The bump in pending sales is entirely in line with expectations. September’s Fed rate cut gave buyers more purchasing power. Unfortunately, the drop in mortgage rates was short-lived because bond markets had already priced in aggressive expectations for rate cuts, and employment data came in hotter than expected. Nonetheless, most experts expect interest rate cuts and mortgage drops to continue throughout 2025, albeit at a slow pace.

Single-family homebuilding hits five-month high

Single-family housing starts, which account for the bulk of homebuilding, increased 2.7% to a seasonally adjusted annual rate of 1.027 million units last month, according to the Commerce Department via Reuters. That’s a five-month high in homebuilding. Here’s what else Reuters reports:

• Single-family housing starts are up 5.5% YOY, though they are down 15.5% YOY in Q3

• The inventory of single-family housing under construction rose 0.3% to a rate of 642,000 units.

• Data for August was revised higher to show single-family homebuilding rebounding to a rate of 1.0 million units, up from the previously reported 992,000-unit pace.

• By region, there were increases in housing starts in September in the Northeast (+10.6%) and South (+6.6%) but declines in the West (-2.3%) and Midwest (-10.4%). For reference, the Midwest is considered the most affordable region.

Our take

We expect a bumpy ride for both single-family and multi-family housing starts going forward. However, these numbers show there is some good news. We also might see a slight uptick in residential investment in Q4 from the reconstruction efforts after the recent hurricanes. Overall though, we expect that the number of housing starts will decline in 2025.

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Markets with the highest and lowest homeownership rates

The nation’s homeownership rate is 65.2%, down 4% from the all-time high of 69.2% in Q4 2004. The number of owner-occupied housing units in 2023 totaled 85,685,869. This is according to the latest stats from the Census Bureau, However, the homeownership rate does vary massively across the country. 

Among the 200 largest housing market metros, these are the top 10 metros with the highest and lowest homeownership rates, according to researchers at ResiClub:

Our take

These homeownership rate trends are relatively simple to understand. In housing markets with low homeownership rates, home prices tend to be high in relation to local incomes. These areas often feature higher-than-average incomes but have limited large-scale homebuilding. They also face geographic or regulatory challenges that hinder new construction. Conversely, housing markets with high homeownership rates are generally more affordable when compared to local income levels. They also tend to have a larger proportion of older residents. This is logical, as older Americans are more likely to be homeowners compared to adults in their 20s. Overall, this is an excellent report for agents to keep handy. It lists homeownership rates at the metro and county levels, and also provides the number of renter-occupied residences.

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Foundation Plans

Advice from James and David to win the day

As part of our prep 2025 series, today we’re giving you Part 1 of a two-part series of tips for formulating a business plan for next year. We can’t emphasize enough: don’t wait to prepare. You’ll want to hit the ground running when January comes around. 

1. Have realistic growth expectations –  Avoid setting unrealistic expectations by anticipating massive growth rates of 50-100%. Achieving year-over-year growth of 10-15-20% is an excellent outcome for any business. This kind of steady progress is both scalable and sustainable. Keep this in mind as you develop your strategy.

2. Have an accurate assessment of how you did this year – Before you start planning and revising your growth for next year, you need to accurately assess how well your business performed this year. Accurately assessing your performance means answering the following questions in clear and quantifiable terms.

• How many homes did you sell? 

• How much money did you make? 

• What was your pre-tax income? 

• What lead sources worked for you? 

• How many appointments did you go on? 

• How many conversations did you have? 

• How many offers did you write?

Make sure that going forward you have a simple and reliable method for tracking your activity. It doesn’t have to be fancy. Just something that you can easily access and use.

3. Focus on net profits, not gross commission income – Real estate agents tend to highlight gross commission income (GCI) as a key figure, but the real focus should be on net profits and pre-tax earnings. The most important question: what are you actually keeping after covering your expenses? If you spend $12,000 to bring in $15,000, you're only left with $3,000 in profit, which is not a great return on investment. It's crucial to evaluate how much of your earnings truly translate into take-home income and overall business profit.

We’ll have more to say in the next part of our series regarding business plans on Friday, but in the meantime, check out these resources when planning for next year.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“You’ve got to keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life.” — Warren Buffett

Thanks for reading. Drop us a line. We love hearing from you, and we’ll see you back here on Friday!

– James and David