Did America’s Housing Recession Just End?
For the third straight month, pending home sales in the US surprised to the upside, underscoring just how sensitive pent-up demand is to lower rates, even if "lower" still looks high by the (low) standards of the past 10 years.
Contract activity rose 0.8% in February, the NAR said Wednesday. Consensus expected a 3% drop. By region, only the West notched a decline.
Those of you following along will recall that pending home sales surged in January by the most since June of 2020.
Pending sales a
The most likely outcome is we are entering a period of flattish nominal prices. Nominal incomes likely will outpace prices and that will balance the affordability in markets. Demographics are a tailwind. If employment does not crater, we are likely to see a balanced market for the next few years in most places. Boring story, but the most likely.
I’d say that’s true with a big UNLESS…it’ll be very dependent on interest rates. If interest rates hold reasonably steady, this is the most likely scenario unless interest rates start dropping even a percent or two, at which point it’ll be off to the races again. Owning a house is effectively becoming a luxury good.
As they say, you can’t go home again…
The Fed has completely lost control over inflation. We’re in the midst of QT and housing is rallying at 7% rates and the highest valuations ever? Rates alone aren’t doing the trick and the Fed seems hesitant to impact liquidity in any material way so what are we doing here? Entrenching housing inflation or executing the slowest tightening that is imaginable? Either we should get used to the median price at 500k or current buyers are being setup for an ’08 style stripping of wealth.