Posted on 05/26/2022 7:20:09 AM PDT by Browns Ultra Fan
Alarm!
US pending homes sales in April tanked -11.5% YoY and down -3.9% MoM which was greater than expected.
Not really surprising when you see that REAL home prices are growing at an 11.55% YoY clip while REAL hourly earnings are declining at a -2.8% YoY pace.
Do you feel like I do with Bidenflation crushing my check book and The Fed crushing my hopes for an affordable home.
(Excerpt) Read more at confoundedinterest.net ...
POP!
Interest rate hikes will tend to make home purchases less affordable. That’s the purpose.
My reaction too.
I sort of disagree. Artificially low interest rates have overstimulated demand, and made home prices higher than they otherwise would have been. After a while, prices will come down and homes will become as affordable as they were before the interest rate rise, without the frantic month to month inflation causing a "gotta buy now" attitude.
Also, although housing is a very important component of the economy and living costs in the CPI, it's not the only one. So, damage will be caused in all sorts of asset pricing, but the alternative of letting inflation accelerate is even worse.
No surprise to anyone with over two functioning IQ points.
So far in Scottsdale, it has just slowed purchases and reduced sale prices to a more reasonable range.
This is actually a good thing as you can’t sustain 30% per year growth.
This is big news because this time of year usually has high demand with school years winding down.
That’s only the April numbers.
There is going to be some serious cr8tr going on for the rest of the year.
Everyone will just switch to 5/1 and 7/1 ARMs as is already happening.
And yet inventory is still low. People are holding tight. That is why sales are down. You generally can’t sell what is not listed.
Next door:
Date Event Price
5/25/2022 Pending sale $869,900$305/sqft
5/19/2022 Listed for sale $869,900 (+37%)$305/sqft
8/6/2021 Sold $635,000 (-2.2%)$223/sqft
5/20/2019 Sold $539,000$189/sqft
Source: BHHS FLORIDA PROPERTIES GROUP
What you said does not in any way contradict what I said.
They will, but at least some people may not be that stupid.
Ping !
In the short term, I think we agree... before prices move down to compensate for higher rates, houses will be less affordable.
I thought you were framing it as a more permanent state of affairs.
I don’t think that will work out because labor & material costs are on the rise. Older homes may come down but new homes will not.
Unexpected. LOL
I sold a home in Surprise last summer when the prices were way up. That same home is going for 10% to 15% more one year later.
“I sort of disagree. Artificially low interest rates have overstimulated demand, and made home prices higher than they otherwise would have been. After a while, prices will come down and homes will become as affordable as they were before the interest rate rise, without the frantic month to month inflation causing a “gotta buy now” attitude.
Also, although housing is a very important component of the economy and living costs in the CPI, it’s not the only one. So, damage will be caused in all sorts of asset pricing, but the alternative of letting inflation accelerate is even worse.”
______________________________
Good points. As others much more informed than me have stated the problem here is overpriced home costs, raising interest rates, inflation in general and the real possibility of a recession.
Those buying homes right now at inflated purchase prices and at interest rates north of 5.5% and if they have to sell or if they loose their income stream they will maybe have to walk away from an underwater mortgage or struggle to keep the lights on. This will put defaults on the banking industry and a strain on the already stressed out rental market.
I think it is hard to be optimistic with respect to the immediate future. For me personally I’m so thankful that as we head into this economic mess that I have my mortgage paid off, no consumer debt and a few dollars in the bank. I know there are differences of opinion on paying off mortgages early or going full term and having consumer debt in general but worse comes to worse all I have to worry about is paying my property taxes and keeping the roof from leaking.
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