“Over the long term, supply and demand will need to be better aligned for housing prices to rise at a reasonable level and at a reasonable pace so that people can afford to buy homes again. , will have to undergo adjustments to return to its original state.” Powell told reporters last week.
essentially, The current housing adjustment is boosting the US housing market— which surged based on historically low 3% mortgage rates — toward a new equilibrium in the face of higher mortgage interest ratesInventory levels will continue to rise, home sales will continue to decline, and home prices may fall.
But it’s not a one-size-fits-all housing modification.apart from Mortgage interest rates soared across the country, house price resets vary widely by market. In some rural housing markets, pandemic housing boom Like failed. Other housing appears to be moving straight from the pandemic housing boom to the pandemic housing recession.
for better understanding How Housing Amendments Change Nationwide, take a look at the inventory data. Reading inventory data is very easy. A spike in inventory levels indicates a rapid transition from a seller’s market to a buyer’s market.
Inventory finally surged as the housing market began to change this summer. nationwide, Stock levels jumped 53% between March and August.
Inventory levels have risen but are still well below pre-pandemic levels. August 2022 active listings were 41.5% lower than August 2019That’s why some housing bulls believe house prices won’t go down. After all, historically speaking, house prices are sticky. Sellers are reluctant to offer deep discounts until they are economically forced to do so. That “economic power” is usually oversupply.
But the problem is: Just because inventory levels are tight doesn’t mean house prices will stop falling. in July, U.S. home prices fall month-over-month for first time since 2012.
“Our view is that even if supply levels aren’t rising, home prices will fall,” said Rick Palacios Jr., head of research at John Burns Real Estate Consulting. increase.
How can house prices fall? not oversupply Aren’t you going to be inundated with troubled sellers? In short, squeezed and affordable. Combining higher mortgage rates — 6.82% (as of Thursday)-When bubbled house prices New monthly mortgage payments are far beyond what many buyers can afford financially. Signs of falling house prices.
On the one hand, tight inventory levels haven’t stopped house prices from falling.Meanwhile, markets with the biggest inventory spikes were at Home prices are currently declining the mostSimply put, we should continue to pay close attention to inventory changes.
Markets with significant inventory spikes of over 150% fall into one of two camps.
The first group is the high-cost tech hubs. Hard to beat San Francisco (378% inventory increase) and San Jose (177% increase). The reason for their sharp adjustment is simple. Not only is their high-end real estate market more rate-sensitive, so is their tech sector.
The second and largest group is the vibrant housing market.to be ‘Overvalued’ compared to underlying economic fundamentals There is no guarantee that housing prices will fall. That said, when the housing market is sluggish, it is usually the significantly ‘overvalued’ housing market that is most at risk of a sharp correction. Over the past five months, inventory levels have surged in booming markets such as Boise (stocks up 298%), Austin (up 435%), Phoenix (up 317%) and Las Vegas (up). 192%).
Vibrant markets like Boise, Las Vegas, and Phoenix are not only changing rapidly, but also look like the early collapse of the housing market. Let’s take a closer look.
Even before the pandemic stay-at-home orders were lifted, White-collar professionals living in cities such as San Francisco and Seattle In 2020, we were already taking off for our Mountain West vacation. The poster child is Boise. Its outdoor lifestyle, tech scene, and relatively affordable prices (at least for Californians) have made it a go-to place for telecommuting techs.
It was not welcomed by all locals. Some people with California license plates have found cards printed on their windshields that read: “Go back to California, you don’t want to be here” It’s easy to see why some locals were unhappy. The pandemic housing boom that has pushed Boise home prices up more than 50% of his has forced many Boise residents to give up on buying a home.according to Moody’s Boise is actually the nation’s most “overvalued” major housing market, according to the analysis.Home prices are trading 72% higher than underlying fundamentals would normally support.
Fast forward to September and the Boise Boom is long past. Boise’s stock surged 297% of his this summer, Home prices fell 5.3%The fix is not finished yet.industry insider talks luck Boise is flooded with new construction coming to market soon. If no buyers are found, home prices could fall further.
There is no doubt about it.It has suffered heavy losses in some of its recent “reversals”. The epicenter of these losses could be Las Vegas.
example is This North Las Vegas home was purchased by Opendoor in May for $540,800Just weeks later, Opendoor put the home up for sale for $581,000. But apparently there weren’t many bites.As of Thursday, the list price is Down to just $490,000That’s 10.4% less than what Opendoor paid for the house this spring.
Las Vegas continues to change rapidly — faster than it has ever been before. From March to August, Las Vegas stock surged 192% of his.Meanwhile, lagging Las Vegas home prices 3% already down from peak in 2022.
In the early 2000s, home flippers were targeting fast-growing Sunbelt cities like Phoenix. This speculation ultimately worked against Phoenix when the housing bubble burst in 2008. Of course, that inventory pile-up only put more downward pressure on Phoenix.
Fast forward to today and Phoenix is again at the center of a cooling housing market. Between March and August, Phoenix’s inventory increased by 317%. It has already led to a sharp drop in house prices.according to Jirothe Phoenix home value is 4.4% decrease from peak in 2022.
Moody’s Analytics Chief Economist Mark Zandy forecasts home prices for the vastly “overvalued” housing markets such as Boise, Phoenix and Las Vegas. 10% to 15% drop from peak to troughBut that assumes there is no recession.If a recession hits the country, Zandi says it will set prices on markets like Boise, Las Vegas and Phoenix May decrease by 20% to 25%.
Let’s be clear, not all US housing markets are changing like Boise, Phoenix or Las Vegas.
In the New York metropolitan area, the surge in mortgage rates certainly affected the market, but inventories are still down year-over-year. And according to Zillow, Greater New York house prices fell only 0.2% between May and August.
cause? Unlike the bubbly markets of the South and West, New York is not cut off from its underlying fundamentals. According to Moody’s Analytics, Las Vegas and Phoenix are overrated by 53.3% and 53.8% respectively.in the meantime Greater New York is ‘overvalued’ by just 7.4%.
Simply put: Housing adjustments in progress It teaches us that housing basics still matter.
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