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The savagely unhealthy housing market is now a nightmare

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The housing nightmare continues.The National Real Estate Agents Association (NAR) report Existing home sales in April 5.41 million peopleBelow 3.4% From the previous month 8.6% From last year.However Barbaric unhealthy The data line was that house prices are rising 14.8%.

It’s almost July, so if the mortgage rate goes up, the premise is safe. Four%, Massive panic selling of American homeowners who have to go out at all costs has pushed total inventories to millions of dollars, but hasn’t happened. In fact, it has always been a terrible premise.

On the other hand, my nightmare scenario is Have What happened, this is bad news for everyone. Total housing inventories have fallen to record lows since 2020. This happened between 2020 and 2024, so there was a compulsory bid and the price was well above my value. twenty three% A five-year home price growth model in just two years.

now Mortgage rates Demand is rising and demand is being hit while we are still showing 14.8% Home price growth data. Wow!

NAR Research: Median existing home prices for all home types in May were $ 407,600, up 14.8% from May 2021 ($ 355,000) due to price increases in all regions. This is the 123rd consecutive month of increase over the previous year, the longest consecutive record ever.

Since the summer of 2020, I sincerely believe that if the 10-year yield exceeds 1.94%, that is, if the mortgage rate is added to 4%, the housing description will change. Since then, home prices have risen uncontrollably, creating more damage from the effects of rate movements than ever before.

You can see that every time interest rates rise, it affects demand. Mortgage rates are 6%, not 3% anymore. This is a real demand destruction. Prices and charges are a double pain, and the reason I emphasized is that we need to increase inventory as soon as possible. The only way this happens is at higher rates.

Housing demand has been declining since March of this year, but inventories are still 2010, 2013, 2016, When 2019 Level, this is a nightmare. Homes are shelters, so people don’t sell their homes and become homeless. That is where they live. Of course, when you’re trying to sell your home, you’re also a homebuyer.

In theory, some homebuyers can’t move because prices are rising at the fastest pace ever and homes are becoming more expensive. Equity home sellers are less sensitive to higher rates as they bring a more important down payment. Inventory surged, 2 to 2.5 million, What I think is the best thing ever for a home hasn’t happened this year.

Total NAR inventory data up to 1982:

It will take more time to reach that past inventory level. I emphasized that housing doesn’t move like the stock market. Homeowners are in better financial position than stock traders. Therefore, the idea of ​​mass panic selling does not reflect the reality of housing. You do not receive a margin call at noon and are forced to sell your home in seconds. Real estate investors, on the other hand, do not have such a shelter relationship with homes, like homeowners.

The goal is simple. To reach different ranges, you need a total inventory of your home. 1.52 to 1.93 million people It will return to normal.Currently we are 1.16 million. Demand, weak time, and a big blow to affordability lead us there, but not at the speed people advertised last October.

Keep in mind that inventories are very seasonal and seasonal inventories will decline in the coming months, but before that happens, we need to exceed the previous year’s highs. To end this madness, we all need to support more inventories.

We would like to increase the monthly supply of housing to 4 months or more as soon as possible. This is a more traditional level for the housing market. We have made some progress here, but we still don’t want to go.

NAR monthly supply data prior to this report

A great leap in monthly supply is the seasonal boost in inventory related to sales. This means more months of supply. This is the best part of today’s existing home reports.

NAR Research: The total inventory of homes registered at the end of May was 1.16, an increase of 12.6% from April and a decrease of 4.1% from May 2021. 2.5 months in April and May 2021.

Additional bad news from the report is the day data on the market. The frustrating dataline between this terribly unhealthy housing market has remained stubbornly at the teenage level for days in the market. You need to raise this to a normal state.

We recently paid a tough price for rising home prices across the country. As long as this data line is still at the teenage level, we will not be able to balance the housing market we need.House prices need to go down 17% To return to the peak growth model from 2020 to 2024 — just to have a regular market.

NAR Research: First-time buyers accounted for 27% of May sales. Private investors bought 16% of their homes. Full cash sales accounted for 25% of transactions. Distressed sales were less than 1% of sales. The property usually remained on the market for 16 days.

As for sales trends, this dataline still lags behind the reality of the growth rate environment, so there is still room for lower sales.Mortgage rates 4% -5%, It looked like a traditional decline in sales at higher rates, adapting to the significant price increases since 2020.

However, a 6% plus mortgage rate is seeing a real disruption in demand as the mortgage buyers, the most important homebuyers in the United States, have been double-hit.

The trend of the four-week moving average of purchase application data has not reached the level at which mortgage rates were expected to be so high. 18% -22% It has decreased year-on-year and is currently accelerating, with a four-week average declining. 16.75% Every year.Since October of this year, it will be much more difficult to operate the comp, so compared to the previous year 25% to 35% At that time, it is in play.

The A terribly unhealthy housing market It will continue until we can get inventory levels and lower prices, reversing the significant drop in US home prices since 2020.I wrote if I needed more guides to know when significant changes would be seen in that discussion This article Check what you need to track lately. The rule of thumb to consider is 1.52 – 1.93 million over- Four months Of supply, and then we return to the normal market.

Imagine how much damage you would have suffered this year if your mortgage rate didn’t go up. I fully agree, for example, with Fed Chair Powell. Nothing happens with such a badly unhealthy rise in home prices, so you need to reset your home.

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