I am genuinely surprised at Nicole Friedman’s victory dance over housing prices in the Wall Street Journal:
Home prices aren’t falling anymore.
After declining on a year-over-year basis for five consecutive months—the longest run of declines in 11 years—U.S. home prices rose in July.
The surprisingly quick recovery suggests that the residential real-estate downturn is turning out to be shorter and shallower than many housing economists expected after mortgage rates soared last year.
Scarcity is a big reason. High interest rates have prompted homeowners to stay put rather than buy new homes and take on more expensive mortgages, resulting in an unusually low inventory of homes for sale.
Many potential home buyers have given up their search because mortgage rates recently hit a two-decade high. But the homes that do list often still receive multiple bids, driving up the final sales price.
The result is a market in which the overall volume of transactions has fallen dramatically. Sales of previously owned homes are now down about 36% from January 2022. But prices are generally holding firm outside of a few trouble spots.
For most buyers the price of a home is not the first consideration. The first consideration is the monthly mortgage payment and that is highly dependent on prevailing interest rates.
That’s why we don’t really know what’s going on with the housing market these days. Will the Fed raise interest rates, lower them, or leave them the same?
Consider this:
Taking that into consideration would you say that a crash in the housing market has been forestalled?
I can almost excuse analysts and journalists who’ve never lived through high inflation and attendant high interest rates. Almost.
“a crash in the housing market has been forestalled?”
It depends on how one defines a crash and how to measure it.
If you measure it by prices; I am agreeing more and more that is unlikely. With high inflation, the incentive is to hold onto low-rate fixed term debt which is most existing mortgages and real assets like housing.
If you mean by “activity”; we’ve seen it in the existing housing market. Transactions have decreased by a considerable amount. But transactions involving existing housing generates relatively few jobs.
“Basic Info. US Inflation Rate is at 3.18%, compared to 2.97% last month and 8.52% last year. This is lower than the long term average of 3.28%. The US Inflation Rate is the percentage in which a chosen basket of goods and services purchased in the US increases in price over a year.”
Steve