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We’re in a housing recession in terms of home sales and building, not home prices, expert says [1]
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Date: 2022-09-05
Lawrence Yun, a chief economist with the National Association of Realtors (NAR), said in an August report that, while existing-home sales decreased 5.9% from June to July—with year-over-year sales falling 20.2% from July 2021—the “ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June."
"Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers,” Yun said.
That purchasing power may not mean much in terms of home affordability, though. The median existing-home price increased from about $364,699 in July 2021 to $403,800 this July, marking the 125th consecutive month of "year-over-year increases, the longest-running streak on record,” NAR reported.
"We're witnessing a housing recession in terms of declining home sales and home building," Yun said. "However, it's not a recession in home prices. Inventory remains tight and prices continue to rise nationally, with nearly 40% of homes still commanding the full list price."
Shawn Tully, a reporter at Fortune Magazine, said in his analysis of real estate data the American Enterprise Institute’s Housing Center released for July that America has "reached a pivot point where the market’s flipped from record appreciation this spring to substantial real-time declines across a number of the most overheated metros."
"The key revelation is that from August through the close of 2022, prices on a national level are tracking for the first substantial pullback in any six-month period for well over a decade," Tully wrote.
That, according to a new Consumer Affairs survey, is what 84% of Gen Z survey respondents are hoping for—a housing crash—and it’s not because they're mean. They've been long priced out of the housing market and are waiting for something to change their fortune. “Many Gen Z college students go into debt to pay for college, only to graduate into a saturated job market offering rates that fall short of the cost of goods and housing,” Consumer Affairs reported. “The prospect of meeting milestones like getting a degree, finding a job, owning a home and someday retiring can seem far-fetched at best.”
Of those reportedly saving for a home, Gen Z survey respondents reported the smallest savings balances, of $15,601 on average, Yahoo! Finance reported.
Put that into the context of a housing market that saw a median home price of $228,000 in mid-2012, one in the $300,000s by 2021, and one now in the $400,000s.
“Investors snatched up homes in foreclosure during the Great Recession and converted them to rentals, a trend that continues today, severely limiting the number of homes available for sale,” journalist Brian J. O’Connor wrote for Yahoo! Finance.
The pandemic also led to a huge demand for homes, egged on by low interest rates that as of March, are a thing of the past. The Federal Reserve started increasing rates to offset increasing inflation. So now Gen Z has similarly priced homes and significantly higher interest rates to contend with. Even drops in home prices aren’t expected to be significant.
"As of August, new mortgage applications had fallen to a 22-year low, sales of existing homes had declined for six straight months, and home price growth slowed for three straight weeks, from a peak of 16.6% in July to 13.3% in mid-August," O’Connor wrote. "So far, forecasters don’t see home prices making significant declines, although some see a small drop in prices coming during 2023."
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https://www.dailykos.com/stories/2022/9/5/2119339/-We-re-in-a-housing-recession-in-terms-of-home-sales-and-building-not-home-prices-expert-says
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