U. S. Real Estate Prices may collapse
2023.01.20 12:36
U. S. Real Estate Prices may collapse
By Kristina Sobol
Budrigannews.com – In December, existing home sales in the United States fell to a 12-year low, but falling mortgage rates gave cautious hope that the housing market might be close to finding a bottom.
In addition, the median house price increased at the slowest rate since the beginning of the COVID-19 pandemic, as sellers in some areas of the country turned to discounts, according to a report released on Friday by the National Association of Realtors.
Housing has entered a recession as a result of the Fed’s most rapid cycle of interest rate increases since the 1980s.
According to Conrad DeQuadros, senior economic advisor at Brean Capital in New York, “Existing home sales are somewhat lagging.” The fall in mortgage rates may support housing activity in the coming months.”
When a contract is signed, existing home sales are counted. Last month, they fell 1.5% to 4.02 million units at a seasonally adjusted annual rate, the lowest level since November 2010. That marked the eleventh consecutive month of sales decline, the longest such streak since 1999.
In the Northeast, South, and Midwest, sales decreased. In the West, they remained unchanged. Reuters polled economists and predicted that home sales would fall to 3.96 million units.
In December, resales of homes, which make up a significant portion of housing sales in the United States, decreased by 34.0% year-over-year. In 2022, they fell 17.8 percent to 5.03 million units, which was the sharpest annual decline since 2008 and the lowest annual total since 2014.
The latest sign that residential investment probably fell for the seventh consecutive quarter in the fourth quarter was the continuing decline in sales, which resulted in lower broker commissions.
Since the Great Recession began with the burst of the housing bubble, this would be the longest such stretch.
This week, a survey by the National Association of Home Builders found that single-family homebuilders’ confidence increased in January, but morale remained low.
Although single-family home construction rebounded in December, permits for future construction fell to levels not seen in more than two and a half years—excluding the pandemic plunge—and to their lowest level since February 2016.
Stocks traded higher in the United States. A basket of currencies saw the dollar appreciate. The prices of US Treasurys dropped.
The housing market’s worst downturn is probably behind us, though. According to information provided by the mortgage finance organization Freddie Mac (OTC:), the 30-year fixed mortgage rate fell to an average of 6.15 percent this week, the lowest level since the middle of September.
The rate has decreased from an average of 7.08 percent early in the fourth quarter, which was the highest since 2002, and was down from 6.33 percent the week before. But it’s still a lot higher than the 3.56 percent average from the same time last year.
In December, the median price of an existing home increased by 2.3 percent from the previous year to $366,900. Even so, it remained December’s median house price record holder. However, much would depend on supply, but the pullback in mortgage rates and the smallest price increase since May 2020 may help to improve affordability in the future.
According to NAR chief economist Lawrence Yun, “markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”
A severe shortage of available homes contributed to a 10.2% increase in house prices in 2022. Last year, there were 970,000 housing units on the market. Even though that was an increase from the 880,000 units that were sold in 2021, supply was the second lowest it had ever been.
Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina, stated, “The available supply of homes for sale will likely shrink for the first part of this year as demand cools and households settle.” We should anticipate that median prices will continue to rise, particularly affecting first-time buyers, if the supply of available homes for sale decreases from here.”
970,000 previously owned homes were on the market in December, down 13.4% from November but up 10.2% from a year earlier. Compared to 1.7 months a year ago, it would take 2.9 months to sell all of the homes on the market at the pace of sales in December. That’s a lot less than the 9.6 months of inventory at the beginning of the recession from 2007 to 2009.
The housing market is unlikely to experience the dramatic collapse that occurred during the Great Recession due to the absence of a significant inventory overhang.
A healthy equilibrium between supply and demand is thought to exist between a four- and seven-month supply. Last month, properties averaged 26 days on the market, up from 24 days in November. In December, less than a month was required for the sale of 57% of homes.
31% of sales were made by first-time buyers, up from 30% last year. 28% of transactions were made in cash, up from 23% a year ago. In December, distressed sales, foreclosures, and short sales only made up 1% of sales.
