Rolling in April and May housing data reveals an unprecedented acceleration in the housing market. Recorded a 20.6% year-on-year surge in US home prices Between March 2021 and March 2022 — Suspended or terminated. Don’t be fooled by delays in home price data for the next few months. All signs show a slowdown in house price growth.and luckDubbed this shift Big deceleration..
The driving force behind The big slowdown is the Federal Reserve. For the past 6 months, 30-year average fixed mortgage rates soared from 3.11% to 5.09% The Fed has moved into a mode to fight inflation.Of course, that’s not all Set prices for some prospective buyersNot only that, some borrowers (who must meet the lender’s strict debt-to-income ratio) may be completely disqualified from mortgages.
The biggest signs of cooling come from inventories, a key indicator of the housing market. Due to the pandemic housing boom, inventories (number of unsold lists) have fallen to their lowest levels in 40 years. By March, national inventory levels will be Zillow It was 64% below the level in March 2019. But this spring, inventory levels began to rise again as mortgage rates approached 5%. In fact, between March 26th and May 7th, national inventory levels rose 10%.
“For me, the best part of the 2022 housing story is the increase in inventories, which restrains home sellers and builders. They are too price-determining and push prices too high. “, Said Logan Mohtashami, Lead Analyst at Housing Wire.
Towards 2022, Mohtashami was already on the cusp of higher mortgage rates. In his view, it was the only way to curb the “barbaric and unhealthy” housing market. Logic: Home shoppers temporarily delay their purchases in the face of rising rates, so they can afford to increase their inventory. When those buyers re-enter the market, in theory, they return to find higher inventories and feel less pressure on over-bidding.
“I want higher rates to do them and create more balance,” says Mohtashami.
Back on March 23, luck Obvious economic shock to the housing market labeled as mortgage surge.. Shortly thereafter, inventories finally began to increase. It only picked up steam until April. Overall, inventory levels have risen over the last six weeks in 83% of the 400 largest housing markets in the United States. The largest inventories surge was in Koderane, Idaho (54%). Reno (49.6%); Bend, Oregon (48.7%); Flagstaff, Arizona (48.5%); Manchester, New Hampshire (46.4%).
But homebuyers shouldn’t be too excited.
Inventory levels are rising rapidly as a percentage, but still well below pre-pandemic levels. Take a look at Coeur d’Alene, whose inventory surged 54% as the active list increased from 242 to 373 from late March to early May. However, it’s still 62% below the list of 980 in the first week of May 2019. Simply put, even if a major slowdown gains momentum, it will take some time to return to the pre-pandemic housing market.
“The housing market is still terribly unhealthy. [of low] “American total inventory level,” says Mohtashami. In order for us to return to the “normal” housing market, his economic model shows that we need to see the country’s inventories rise to the range of 1.52 million to 1.93 million units.The latest readings from the National Association of Real Estate Agents are in stock With only 1.03 million unit.
Going forward, Motorshami’s biggest concern is that mortgage rates will begin to fall again and lose momentum. If that happens, Large deceleration can be paused.
“It’s very encouraging that inventories are up year-on-year, but we need to keep inventories much higher. My concern in the future is that we have when interest rates fall again. It’s about eliminating some of the inventory growth that we had, “Mohtashami says.
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This story was originally Fortune.com