A Housing Reset Is Hurting More Than Just Homebuyers

Home sales are slowing across the U.S. as mortgage rates remain elevated, but the Federal Reserve’s strategy to rein in inflationary pressures is working in more ways than one, says John Burns Real Estate Consulting. Higher borrowing costs are also hurting investors, who are seeing deals fall through at an accelerated rate as the pool of available home buyers continues to shrink.

Apart from homebuyers and investors, rising borrowing costs are also slowing the single-family rental market and creating new obstacles for builders, who are dropping land deals or renegotiating terms and prices to adjust to current market conditions.

“We evaluate each land deal through our portfolio investment committee to determine the optimal financing vehicle by weighing cost of capital, duration, and underwriting assumptions to maximize our long-term risk-adjusted expected returns. Going forward, further expansion in our controlled share will be dependent on market dynamics as we are pleased with the current balanced mix of our portfolio.” Taylor Morrison (2Q22 Earnings Call)

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