Even as the stock market approaches an all-time high, there is a big dark cloud hovering over the economy: the housing market.
Why it matters: Home sales are hovering at historic lows, as economic uncertainty and high mortgage rates hold back buying…
Existing home sales fell year-over-year in May to their slowest pace since 2009 (when the market was in tatters during the financial crisis), per NAR.
Home prices are now rising at the slowest annual pace in two years, per Case-Shiller data.
Housing starts, or new homes beginning construction, dropped nearly 10% in May, the weakest since May 2020 — a sign that home builders are losing confidence in the economy… [end quote]
The article shows many reasons that the housing market is in the dumps.
Not to mention ICE visiting home building sites where many immigrants work in construction.
Labor rates are elevated from pre-covid times.
Material prices are still up from the same
Interest rates are high enough to make average mortgage payments nearly double those of pandemic times
Home prices are still elevated to astronomic prices
Builders are running labor shortages
Builders are also running razor thin margins while also offering inducements (discount interest rates, discounts, etc.)
Homeowners are staying in place vs moving to condo/rentals
potential homebuyers are struggling with tight budgets and astronomical monthly payment realities.
Seems like a pretty straightforward scenario, IMO.
Until rates come down, prices come down or wages go WAAAAY up, we will continue to be at an impasse.
In most desirable areas, real estate is land locked. Since there is no suitable additional supply, there is no building our way out of this.
I hear land has recently become available in Pacific Palisades, CA however.
Without the weasel words “seems like a pretty” how would you form that sentence for Andy? Something like hitting him over the head with a two by four. LOL
Meanwhile prices are still rising in CT. My parents just moved to MA. Tide sum made on their CT property.
The solutions seem obvious. Lower interest rates and lower tariffs from trade deals will help. Mr Trump also talks of help for home construction. Easier permitting.
Investors have funds to invest once conditions show signs of improvement.
During the no doc loan crisis this was a common problem. But those days are behind us. With prices rising rapidly you would think equity is increasing too.
Or are you talking about people who paid too much 6 months ago and now want to sell?
Permitting is a local issue, also, when the inventory is not moving homebuilders are not going to apply for permits.
I was looking for an apartment in the bay area… the prices are shocking… A 3 bedroom condo is $1.5M, this is not an individual house, but a condo… sheesh…
Good point. It’s difficult to generalize conditions, the housing market varies depending on location. That said - the current US housing market reflects the conditions in many Colorful Colorado communities!
More availability + fewer homes selling = downward price pressure. This isn’t a recipe for a building boom. Lower home values deter owners from selling as well. Feels like we’re stuck.
Anecdotally, my real estate broker buddy talks frequently about Colorado being a buyers’ market. Problem is…nobody’s buying.
The home owners are not under the water. However, when you sell a house, most folks buy another one. You cannot carry your current mortgage with you to the new house, that is a huge problem for most folks.
