‘Simply Squeezed’: Surging Prices Finally Bite US Housing
Existing home sales fell again in May, even as the pace was a marginal beat versus consensus.
The 5.8 million annual rate was the lowest in a year, but slightly better than the 5.73 million pace the market expected. The range, from more than five-dozen economists, was 5.57 million to 6 million.
May's drop marked the fourth consecutive monthly decline (figure below).
At this point, nobody seems particularly interested in dodging the obvious: Soaring prices are gradually eroding demand.
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From what I have read, the credit rating for people trying to buy homes is still high. If you read what builders said last qrtr, they were laying foundations and waiting on a lumber dip. There should be more and more buying as houses are completed later this year bc builders got their dip. Pretty convient that this happened right before peak building season. Builders can stomach higher prices. They cant stomach out of control volatility of building materis. I think bigger builders will try to buy the top smaller builders especially those that build smaller homes in sunbelt/colorado. KBH reports soon.
While the average American may not be able to afford 350k the average property investor can. And can make their nut renting it out as long as their mortgage rates are low.
People who are buying homes in places like Pocahontas Co WV are buying 2 homes…one to live, 1 to rent.
What you folks are describing isn’t sustainable. The larger the footprint of speculators and “investors,” the more volatile the situation is likely to be. Obviously, real estate can be a great investment, but treating houses like stocks or pseudo-bonds (only with coupons that depend on the increasingly precarious life trajectory of renters, whose economic prospects are notoriously difficult to project), isn’t likely to end well. Those folks don’t have any attachment to the market outside of a financial interest, which means as soon as things go wrong, they’ll look to sell, and before you know it, you’ll have people selling into a falling market (with a long way down thanks to the run-up in prices). While falling prices could help on the affordability front for people who actually intend to live in the homes they buy, nobody wants to think they’re catching a falling knife. A Fed pullback from the MBS market (or any other tightening maneuver) could act as an additional headwind.
The last point is undoubtedly true and I’m all for it. Though from some of your other recent posts i got the impression you may not be in that camp.
One thing to keep in mind, is that when a homeowner takes advantage of a rising housing price market and sells to then in turn buy a new home at a lower price because it’s in an area of lower demand and to pocket the difference to lower his housing indebtedness he is displacing another homeowner who may also be moving even farther from high demand to also pocket the difference and lower his indebtedness. The pool is a very mixed bag.