US existing home sales fall to lowest level in more than 13 years
US existing home sales fall to lowest level in more than 13 years
The median existing house price increased 3.4% from a year earlier to $391,800, the highest for any October.
So supply is low and home prices are increasing. Not good for home buyers.
The big driver is the interest rate, not the base price increases.
Home price increases, going up about 3%, have pretty much tracked with the inflation rate. 3% on the base will add a bit to your mortgage payment, but no where close to what doubling the mortgage interest rate will do.
Just jump into a loan calculator and see what happens when you bump up the base price 3% vs. shifting the interest rate from 2019 to 2023 values.
But corporate landlords don't pay mortgages...
They buy with cash, and tend to hold houses indefinitely. Which is another reason sales are decreasing. Humans sell their houses for a myriad of reasons. A corporation that rents housing isn't going to sell unless the corporation shuts down. They're going to keep that steady rental income because humans can't afford a mortgage to stop renting.
Yes, the interest rates are much higher, which makes mortgages cost a lot more. But they aren't literally double. A $250k mortgage at 3% is roughly $1200/mo vs $1700/mo at 7%.
I WONDER WHY THAT IS.
Well the market is trying to correct itself it seems. The prices should plateau at some point you would think, unless it’s still just all these cash buyers/corps salivating for property.
House prices never come down unless the local economy crashes.
When stocks dip, you buy up the dip.
I saved for years before I bought my second house (was living in my 'starter home' for wayyy longer than expected) and I didn't think I'd be able to afford a much better house than I already had - prices were exploding, houses didn't stay on the market for more than a few days at the most, and I just couldn't see paying so much more than I could reasonably afford for a house that wasn't much better than I already owned.
Then 2008 happened, and suddenly I was the only buyer and I watched homes prices plumment in their listings. I bought a house that I'd seen listed at $360,000 just six months prior for $219,000 and scooped it up.
It's one of the few times in my life I actually was able to take advantage of 'the dip', but it took 10 years of saving while living in a house that was way too small for my family.
That's how we got into this problem.
i guess corporations with lots of cash on hand just look for ways to put money to work.. they'll continue to put it into real estate as long as it looks like a better long term investment than something else..
I checked the value of my home on Zillow. It's crazy high. Like, ridiculously high. And now interest rates have gone up.
There are still empty homes that aren't owned by venture capital firms?
Thanks for the post!
Interesting to see how the housing market is doing.
Is it artificial low supply, so high demand? Since many laws were implemented to hault building new working class homes in most dense populated areas, or I am just wrong and don't know too much?
No, that's pretty accurate. There is new construction, but not nearly enough, and more importantly not dense enough to satisfy demand.
People still want to live in cities, but often denser buildings are blocked. And people that want to live in suburban areas can't afford the homes being built.
People who want to live in rural areas are fine, because the demand for those homes is so low. Not many people want to live in bumfuck Ohio.
Thank you for taking the time to explain!
Seems cash is becoming king again?
All-cash sales accounted for 29% of transactions compared with 26% a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from the previous year.
This is about existing home sales. From what I can tell (on very limited information) new home sales are still at normal levels. People who don't have a house are buying a new one, as are people looking to upgrade.
I work with a lot of tech directly related to the mortgage industry, and it's kind of crazy to look at the data. Mortgage originations plummeted as interest rates rose (less people buying houses) but new construction - especially on lots that had been cleared but had been sitting undeveloped for several years - exploded in a rush, and it's not clear why.
I've been through previous mortgage corrections and this one is pretty tame by comparison to some others - the hard part about buying a house is that prices will rise for years upon years and waiting for a correction seems risky when you see prices rising out of your affordability. But in the past, it has always been true that the market will level out over time.
I'm guessing a lot of that are townhomes built on old cleared lots. The supply of affordable SFH in a lot of cities is pretty slim but these townhouses are going up all over the place and you can fit 4-6 of them on the same lot some old run down 1950s house used to occupy.
Thank you for the input!
That’s not how supply and demand work. Low supply doesn’t drive demand higher; demand is usually independent of the supply. However low supply for any given demand will cause prices to increase.
And what makes you think the supply “artificially” low? There’s not a big conglomerate somewhere holding on to a large enough tranche of housing to cause a dip in supply, most likely.
It’s low supply because homeowners with record-low interest rates are less interested in selling and moving, since the monthly payment they pay right now be for less house. It’s a side-effect (or maybe the main effect? I’m not an economist) of the fed increases.
I think they're referring more to artificial restrictions like single-family zoning, setback requirements, parking minimums, etc.
To take Manhattan as an example, 40% of the buildings could not be legally built today because they would violate zoning laws. A huge amount of San Francisco is under single-family zoning, and so low density - and given fixed land, low supply - is artificially enforced, which probably has something to do with it being one of the most expensive housing markets in the country.
edit: removed off topic, added blackrock conspiracy video
Thanks for the input!
I have heard of companies buying up 'would be first time buyer' homes and renting them out.
Similar to this moderate random video on subject:
Why Wall Street Is Buying So Many U.S. Homes [12:33 | CNBC] https://www.youtube.com/watch?v=iLsZlrZIFwU
The Blackrock Conspiracy Debunked [20:54 | The Hated One] https://www.youtube.com/watch?v=STYgeA9VScc
OP is calling out the base price increase, but if you do the math, the real culprit is what the article is, rightly, focusing most of its time on. Interest rates.
Interest rate increases are the main reason why mortgage payments have skyrocketed recently. The math doesn’t lie. Any loan calculator will show you that the 2019 to 2023 interest rate changes are like a damn sledgehammer.
That is correct, interest rates are high on purpose to slow inflation. Now I know I'll never sell my house because at 2.4% interest I'd be stupid to do that and then have a 7.9% interest rate on a new home.
Which obviously has knock on effects as people like me will never be able to buy a first home because others aren't selling theirs (understandably) due to the high interest rates...
I was never really ok with the idea that retirement was only for the well off, but now we're getting to "literally anything one considers part of a normal life is only for the wealthy now." Considering home ownership is pretty much a necessity for retirement as you can work on a budget, now both seem like mythical creatures one only encounters in fairy tales. :/