It was a false dawn. Another one.
Following a blockbuster gain to kick off the spring home-buying season, contract activity across the perpetually vexed resale US housing market turned down dramatically in April, data released on Thursday showed.
The 6.3% decline on the NAR’s widely-cited gauge of pending home sales was the most pronounced since June of 2022, underscoring the notion that recent supply increases aren’t nearly enough to ameliorate an escalating affordability crisis.
As the figure shows, the index is now basically back to record lows. Every region saw a MoM decline.
NAR Chief Economist Lawrence Yun, God bless him, is fresh out of spin. “It is all about mortgage rates,” he said Thursday. “Despite an increase in housing inventory, we are not seeing higher home sales.”
Nope. We aren’t. Because — and I’m a broken record here — if people can’t afford it, they can’t afford it. That’s a tautology, but it’s too often ignored by the fortunate among us.
If you’re making a quarter of a million dollars or more in low-cost areas of the country or half a million and up in higher-cost areas, it’s easy to forget that for average people surviving on the median household income, there’s not a lot of “stretch” room in the monthly budget if there’s any at all.
A generalized failure to appreciate that simple reality goes a long way towards explaining why so many people continued to assume that once home-owner hopefuls gave up on lower mortgage rates, they’d hold their nose and take the plunge. That assumption failed to account for the possibility that the math simply doesn’t work for most people who want a house but still don’t have one.
The average 30-year fixed rate rose to within a whisker of a seven-handle on the MBA’s index over the past week, and as noted here on Wednesday, families making $75,000 a year can afford just one in five home listings.
Yun had a subtle suggestion: “Home buyers have a better chance to purchase homes in affordable regions such as the Midwest,” he said, adding that onerous financing costs (by post-GFC standards, anyway) aside, more inventory means prospective buyers “are in a better position to negotiate more favorable terms.”
There you go. If you want a home but can’t afford one where you live, just move to the Midwest and drive a hard bargain. Or maybe not, because as Redfin noted a couple of months back, the Midwest is now “home to three of the five metro areas where home prices are rising fastest.”
This article points out why it will be difficult for the US to avoid a recession or low growth window soon.
Mortgage rates need to drop at least 100-150 bps to move the needle. A slowdown where inflation drops and the fomc cuts aggressively could do it, at least for 5-7 year ARMs.
But for now, this is the worst of all worlds – prices are high and rates are high and prices are rolling over and rates are not.
Agreed
Yeah I make about half a mill and it’s still not worth buying in Manhattan. Rent is ~6k for 2 bedroom or 10k for mortgage+fees. I would pay ~50k extra/year to own and would pay ~50k/year in interest alone, so literally 100k/year lost opportunity cost that I can invest. The only way it makes any sense is either buy in cash in full or bank on the next decade of price increases mirror the last (not fkn likely I say esp with the demographic shift).
Typo in my math but point stands