Existing Home Sales Fall Again. US Homeowners Seen ‘Locked In’
Existing home sales in the US came in slightly better than expected for August, while months' supply was unchanged, data out Wednesday showed.
The mostly uninspired read on America's teetering housing market came on the heels of another dour homebuilder sentiment report and mixed new construction data.
Sales of previously owned homes fell 0.4% last month, the NAR said. The 4.8 million annual rate was the slowest since the pandemic plunge, although the more moderate monthly decline could sugges
This goes back to the Fed winning the battle, but losing the war with regard to housing prices. There might be an oversupply of new homes for the next several months, but once the houses that are already started are completed, new housing supply will likely drop quickly. Add on top of that the dynamic above where homeowners are locked into their house due to higher rates and we might see overall supply dry up over the next year. All the while, the list of people waiting on the sideline will continue to grow. Guess what’ll happen when rates eventually come back down?
They same “tight” supply argument was made in 2007 and we all know how that turned out. Beware “industry professionals” selling the narrative that everything will always be fine in their industry.
The housing market today is nothing like it was 2007. Lending standards and equity are much stronger and delinquencies and distressed sales are almost non-existent.
Millennials (26-41) accounted for 43% of homebuyers in 2022. Up from 37% in 2021. By most reports, there are still many more Millennials who want to purchase a home, who have not yet done so. And Gen Z (18-25) is entering their home buying years – they will be forced to buy a “fixer upper”.
Home ownership is still listed as the top American Dream- ahead of retiring early (FIRE), successful career or having children.
Boomers will help their Millennial/Gen Z family members, where possible.
Therefore, as an example, I don’t think San Diego home prices will decline nearly as much as in central Illinois. Desirable second home communities (where one can rent out a property when not using it) will continue to do well- as a rental property should be a great investment during inflationary times and even during a “mild” recession.
I like higher interest rates, but that is because I invest in debt, much of it invested in BDCs.
I even have a HECM reverse mortgage. The current credit line this month is $346,423 and I only owe $96 on the mortgage. The annual interest rate anniversary date is soon approaching in one week, and I’m currently looking at:
1-year LIBOR of 4.699943% + Margin (constant) 2.875% + MIP (constant) 1.25% = Annual rate of 8.82443%, which will accrue $31,837 in additional credit for the next year.
We haven’t used any of the credit line yet, and don’t anticipate using it. However, should we experience another financial crisis like 2007-2008, I will most assuredly borrow every last penny of it and go all in on stocks.
I am considering taking my house off the market and looking for a renter. Probably smarter financially, though I don’t want to deal with more people.
Have your tax professional tell you what will happen to your taxes and the status of the home as a residence from your perspective. I believe that once you make it a rental, it stays a rental for the IRS.