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Real Estate Titan Zillow Sees Tough Times Ahead in Housing

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The residential real estate market surged in the first 18 months of the coronavirus pandemic, but is now in a slump. Home prices and mortgage rates are skyrocketing, demand is plummeting, and sales are plummeting.

On the price side, the median resale home price reached $416,000 in June, up 13.4% year-over-year. According to the National Association of RealtorsJune’s figures marked the 124th straight month of year-over-year growth, the longest streak on record.

In terms of mortgage rates, 30-year fixed mortgage rates averaged 4.99% for the week ending August 4. That’s up from his 2.77% a year ago, but down from 5.3% the week before. According to Freddie Mac.

“The tug-of-war between inflationary pressures and a clear slowdown in economic growth has left mortgage rates volatile,” Freddie Mac Chief Economist Sam Cater said in a statement.

“High uncertainty around inflation Other factors are likely to keep interest rates volatile, especially as the Federal Reserve tries to navigate the current economic environment.”

house sales slip

In terms of sales, pre-owned home sales fell to their lowest level in two years in June, According to the NARSales were down 5.4% from May and down 14.2% from June 2021. June was his fifth straight month of decline.

“Purchase demand continues to decline as the cumulative impact of higher interest rates, rising home prices increases. recession The risks and eroding consumer confidence will hit home buyers,” Khater said in a statement.

Looking to the future, online real estate brokerage Jiro (Z.)- Get the Zillow Group Inc. report foresee some weakness in the third quarter. The company expects revenue from its platform serving realtors (premier agents) to fall 21% year-over-year.

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In a letter to shareholders, Zillow said a number of trends are making it more difficult for customers to trade.

“The recent rise in interest rates has reduced the demand for home purchases and reduced the affordability of buying a home.

“Mortgage applications have been declining at double-digit rates in recent years.

“Home price gains are slowing due to softer demand and inventory levels are widening but still below pre-pandemic levels.”

trouble ahead

Bottom line: “While demand indicators stabilized in July compared to June, we expect total industry transaction volumes to contract significantly year-on-year in the second half of 2022,” said Zillow.

So the outlook is not good. If the Federal Reserve continues to raise short-term rates, long-term rates could rise again, causing mortgage rates to rise.

If long-term interest rates do not recover, the economy may be headed for recession. Of course, a recession would hurt the housing market and drive down demand.

If you are considering buying a home, we recommend waiting until market conditions improve. But that could take a year or two, during which time rents are skyrocketing.

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