Housing market: ‘Demand has changed’ amid interest rate hikes, expert says

DLB Financial Services CEO Debbie Boyd joins Yahoo Finance Live to discuss the decline in new U.S. homebuilding activity and why demand has shifted so much among homebuyers.

Video transcript

DAVE BRIGGS: Another indication of a slowing housing sector today as homebuilding activity falls to a nine-month low. Debbie Boyd is the CEO of DLB Financial Services. She joins us now. Debbie, nice to see you. Housing starts out today, they fell 2% to their lowest level since September 2021, indicating what is coming?

DEBBIE BOYD: You know, I think people are tired. Thanks so much for having me. I think people are tired. They've been looking for houses for a long time. And, you know, what happens if you can't buy a house back in February or March, you had to have somewhere to live. You've got to lease. So you leased, and you took a year off, basically, in a lease. You're not going to buy your way out of the lease, not when prices and the economy is doing what it's doing now.

So you see now the builders that could not build fast enough in February have an onslaught of inventory now. And now they're doing specials, trying to get you to come back and buy. But think of the money that you've got to save. If you've got to buy your way out of a lease or sublease something, someone's got to want your place. And you've got to have somewhere to go. It's a timing issue, always supply and demand. But they can't go any faster. There's just too lack of supplies and workers and, of course, demand. Demand has changed now.

SEANA SMITH: Yeah, demand has changed. And Debbie, just taking a look at some of these numbers, the number of housing deals that are falling through over the last month or so have ticked up significantly higher than what we've seen at any point during the pandemic. What kind of ripple effects do you see this having on the industry?

DEBBIE BOYD: Well, you know, I don't think a lot of people were paying attention. I said, if you don't look at the news, like what we talk about here every day, you don't notice that interest rates are up until you start going looking for a house. We said last year in the mortgage business, the rates were going to double. Buy. Buy now. Buy now. And people said, no, inflation isn't going to be what you say. Rates aren't going to go up that high. There's just no possible way. They ignored the signs.

So what we say now is real estate is always location specific. So if you're in a market, like I'm in Texas, a lot of people are moving here. We still have high demand. Now we don't have 10 offers and we're not going 30,000 above asking price, but homes are getting sold.

But people aren't moving for no reason. They need a reason. So COVID gave them that reason. They're now working remotely from home. And they can freely move around the country, but at a price. Now that interest rates are a little bit higher, people can't afford the houses that they could have afforded last year. So it is changing people's supply and demand ideas.

RACHELLE AKUFFO: And you raise an interesting point about Texas. We saw that single family homebuilding rose in the Midwest, but fell everywhere else, the Northeast, South, and West, by about 25.4% there, the largest drop since January of 2021. Why do you think that the Midwest is the outlier from these other areas?

DEBBIE BOYD: Because I don't know that people are moving there. What's drawing people to the Midwest? So people are wanting to move near family and friends. Maybe they want to be location specific, or they want to be in states that don't have an income tax. But there's that corridor of Oklahoma, Kansas. You've got to have a want to go there. They're not the-- I hate to say, they're not the prettiest parts of America, you know? So you've got to have a reason to go there.

And if your industry-- it's not one of the top places. Now, if you're looking to save money, if you're looking to slow down a little bit, if you're in the financial sector-- a lot of insurance companies and security companies are based there-- then you're going to want to go there. But if you're starting a thriving business, or you're moving to work remotely, you're going to be wanna near things. What COVID has taught us is that now we want to be near things. Either it's people or locations, or it's a tax benefit to us.

DAVE BRIGGS: And most cities, you're coming back to a level that I would just call sane. But you're seeing some markets-- Boise, Idaho, Austin, Texas, Phoenix, Arizona, Tampa, Florida probably the top four that rose to astronomical levels over the last year or two. What are the implications of this cooling or crash in those type of markets?

DEBBIE BOYD: You know, I don't think we're going to have a crash. What I think what we're going to do is just go back to normal. But, you know, who remembers normal? Before COVID, you would put your house on the market. It may stay there two or three months. You'd get a couple offers. That was normal. People have a short memory. They didn't remember that.

So now, when people only get two offers and there's not an appraisal waiver, they lose their mind. Well, that was just for such a short time. And that comes and goes. So if you sold during that time, thumbs up, right? But if you are selling now, you've just got to remember, this is two or three years ago. We're back to normal. And normal means things are going to go a little bit slower.

But it also means that people are tighter with money. So the experts, they have to listen to the experts more. And it really comes down to your family's finances. What's happening for you and your family, not the economy? Some families are doing really well. They've got two employed people. They've got secure jobs. Other families are still struggling. So it all comes down to your personal finances, I think.