The housing market is in trouble. last explosion Mortgage rates are back at 7%..
But the ongoing problem is a severe lack of inventory. This is very different from the conditions at the time of the Great Recession.
and the higher the mortgage rate The inventory situation will worsen even further. This is because existing homeowners are not motivated to sell and lose out on low rates.
84% of all outstanding mortgages have a mortgage rate at or below 5% per 2022 HMDA data.
and 63% had rates at or below 4%. Simply put, these homeowners didn’t want to give up their low rates. and replace it with a new 30-year fixed price approaching 7%.
The housing market is in trouble due to insufficient inventory.
As noted, the current state of the housing market is It’s very different from what I saw in 2008..
At that time there were too many homes on the market. and countless new housing developments across the country.
In fact, there are many houses that many projects have to be stopped before they are completed.
I clearly remember driving around. Suburbs of Los Angeles and Phoenix by recording new subdivisions Lots of desperate attempts to offload inventory.
There are so many vacant houses that they are almost impossible to sell.
At the same time, disgruntled owners, often the only people living in the street, post warnings to potential buyers.
One owner had a sign in their yard saying: “Don’t buy a house here!”
have regrets and guilt And they don’t want others to fall prey to buying a home at sky high prices in the middle of nowhere.
But then and now Nowadays, it’s hard for prospective buyers to find a place to live.
Existing inventory, of course, costs slightly more. And the creators had a supply of surpluses. but nothing is the same
Housing Inventory Rises but still the least
National Association of Realtors released The existing home sales report for January was reported earlier this week.
They noted that sales fell for the 12th straight month, to a four-millionth seasonally adjusted annual rate.
Existing home sales were down 0.7% from December 2022 and as much as 36.9% from the same period last year.
meanwhile The median physical home sale price increased 1.3% from one year ago to $359,000.
But here’s the most interesting part – the inventory of existing unsold homes stood at 980,000 at the end of January. or equivalent to a 2.9 month supply at the current selling cadence.
Looking back at the beginning of 2009, the housing inventory was 9.6 month supplyper NAR
There were 3.6 million unsold homes, up from 4.5 million a year earlier.
There are currently less than a million of them. Although an increase of 15.3% from the previous year (850,000).
The double-edged sword of low mortgage rates
while low mortgage rates It has been useful to homeowners over the past decade. They’re back to bite now.
first american economist refer let them be “Golden Handcuffs” due to the associated rate lock effect.
They hinder the movement of existing homeowners and also limit prospective homebuyers at the same time.
And the higher the rate, the worse it gets. As the spread widened The original owner has less incentive to sell.
That reduces supply, which in turn inflates property values. But the combination of high asking prices and a 7% mortgage rate doesn’t work for most people.
Although this may prove temporary. But if mortgage rates finally come back to 5%, what do buyers do in the meantime?
Can free and clear landlords improve their inventory situation?
One place to look out for may be free and clear homeowners. who has no debt in his way mortgage.
Per First American, as of 2021, approximately 42% of American homeowners don’t have a home loan.
And almost 78% of these independent and conscientious owners are 55 years or older. There’s a good chance they’ll downsize and buy with cash (using income from sales).
That means current mortgage rates aren’t a factor for them either. The only problem is that a lot of Baby Boomers are getting older.
So their banking to improve housing inventory issues could be a shot in the dark.
What to do is There are too few homes on the market.And the higher the mortgage rate, the worse it gets.
This also explains why house prices are falling despite pulling back from ridiculous COVID peaks.
And why is it 2008? housing market collapse may prove difficult to understand