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What the Housing Market Slowdown Means for Buyers, Sellers

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  • The fierce US real estate market over the last two years has reached a turning point.
  • Three key factors influence some changes in buyer and seller behavior.
  • There are signs that the housing market is slowing as dynamics change.

The dynamics of the housing market are changing.

Since 2020, American homebuyers have been competing for limited domestic home inventories, and enthusiastic home sellers have raised their prices to historic highs.

Fierce buyer competition has led to a bidding war, spurred by cheap mortgage debt and the need for more space. Crushed Affordable Homes — Especially for first-time homebuyers.

When inflation Consumers in the United States are working to increase costs, with highs for the first time in 40 years and lows for the first time in 10 years. Be vigilant Of owning a house.

As the heated demand in the housing market diminishes, experts said insiders have two important signs that the real estate market is chilling.

Higher mortgage rates are holding back demand

Over the last two years, record low mortgage rates have led many buyers to look for homes, but mortgage transactions in the pandemic era have ended.

Despite having fallen a bit Mortgage rates in May are much higher than in 2021. According to Freddie Mac, the average US fixed rate for 30-year mortgages was 5.09% this week. Pandemic high It’s up 5.30%, a significant increase from the December 2020 pandemic low of 2.68%.

As mortgage rates put more pressure on home costs, more and more homebuyers are on the sidelines, covering unprecedented demand in the home market.

Freddie Mac chief economist Sam Carter told insiders, “Mortgage rates have continued to fall this week, but are still significantly higher than last year, impacting affordability and purchase demand.” Told. “Towards the summer, the potential homebuyers pool is shrinking, supply is increasing, and the home market is normalizing.”

Prices are falling in some markets

As buyers became more and more priced from the market, rising home prices began to slow in certain parts of the country.

This is a price cut More general As sellers reset their price expectations. “The softening of the housing market is increasingly declining as buyers become more cost-conscious, especially as mortgage rates rise,” Redfin chief economist Darryl Fairweather said in a statement. It’s becoming clearer for home sellers who are turning to. “

According to Redfin, 19.1% of homeowners drop Offer price for 4 weeks until 22 May — Marks the highest level since October 2019.

“In many places, such as Boise and Sacramento, where migration has skyrocketed and home prices have skyrocketed over the past two years, demand has plummeted and sellers have come to lower prices frequently,” Fairweather said. Mr. says.

At the same time as prices are falling, housing inventories are rising. The combination of these two factors could further cool the housing market.

“Housing prices depend on the balance between supply and demand, and when demand falls and supply increases as it does today, the sharp rise in prices disappears rapidly,” Fairweather said.

Builders are stepping up homebuilding

While the United States is in the midst of a serious housing shortage, the housing construction sector is increasing production and welcoming more workers to the industry.

According to the real estate database Altos Research, inventories of unsold single-family homes in the United States increased by 8.2%. last week344,000 to —26,000 increase.

“At an absolute level, an increase in inventory of 25,000 in a week is not unprecedented,” Alto founder and creator Mike Simonsen said in a statement. “But as a percentage, it may be the biggest jump we’ve seen, as we’re below record lows. At 344,000 homes, we’re now 6% more than last year. It has become. “

I have experience in the housing construction sector Lack Among skilled workers, the increase in construction in May may be due to the increase in employment.

During the month, homebuilding employment increased by 5,000 and non-homebuilding added 2,400. Overall, residential buildings increased by 7.6% compared to pre-pandemic levels, while non-residential buildings remained 5% below.

“More hammers work and build more homes,” Odetakushi, Deputy Chief Economist at First American, told insiders.

As builders increase employment and production levels, they help eliminate the imbalance between supply and demand in the real estate market. As more homes are built, buyers are less competitive over homes, especially as mortgage rates weaken demand. This change in atmosphere could lead to further declines in home prices, which could ultimately lead to a significant cooling in the market.

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