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Last updated on July 11th, 2022 at 09:33 am
There has been a shift in the housing market.
After more than a year of rising demand, explosive house prices, and increasing real estate sales, the market seems to have finally cooled.
“The housing market has not collapsed, but it has experienced a catastrophe because it is at an unsustainable peak,” said Taylor Marr, Redfin’s chief economist.
Interest rates on loans have risen by more than two and a half percentage points this year.
And the higher cost of financing the house has changed the calculations of many home buyers. As a result, home sales have declined year on year in recent months.
In a Fannie Mae survey of sentiment to buy a house, a record 79% of respondents said it was not the right time to buy a house.
“While many home sellers are already lowering their prices, many homeowners are likely to choose to stay now because the level of credit for a new home is much higher than it is now,” he said.
While the market is still very strong by historical standards, there are five reasons to believe the influx is back.
1. The stock of homes for sale is growing
Each year, says Danielle Hale, chief economist at Realtor.com. “We’re talking about low stocks in 2019, and it’s getting worse.”
In May, however, inventories began to move in a different direction, according to Realtor.com, and last week active offers recorded 13% more than last year.
“Seeing the number of homes grow is good news for buyers,” Hale said. “It has reversed the trend and seen a lot of homes. It should help balance the market, slow down real estate prices and prolong market times.”
In addition to the high costs that drive potential buyers out of the market, one of the reasons there are so many ads is that so many homeowners choose to sell, Hale said.
According to Realtor.com, more new offers were launched in May than in any month since June 2019.
“But house prices show a lot of pressure,” Hale said. “Price growth will slow down, but I expect prices to remain high. If domestic sellers don’t get the price they want, they probably won’t bring it to market.”
2. Further price reductions
When you look at houses, you may have noticed something you haven’t seen in a long time: lower prices. For a time, houses sold quickly and there were always bidding wars, with sellers often receiving more than they demanded.
But because affordable challenges are pushing buyers and there is not much competition to buy, some sellers have decided to cut prices.
According to Realtor.com, 10.5% of households fell in May, compared with 6.2% in May 2021.
However, this does not mean that there will be a liquidation sale of houses.
“The share of houses with reduced prices is now higher, but the share in May is lower than in any of May 2017,” Hale said. “It’s less competitive than last year, but it’s quite competitive.”
3. Real estate companies lay off people
With little activity in the housing market, real estate companies are announcing layoffs.
Redfin said it had laid off about 8% of its employees this week, and Compass said it would reduce its staff by 10%.
Demand for Redfin’s services was 17% below expectations in May, said Redfin CEO, Glenn Kelman. As a result, the company could not do enough work for agents and support staff.
“The current layoffs are the result of redundancies for Redfin, not the people who were laid off,” he said.
According to the company, 450 of its 4,500 employees will be laid off at Compass “due to clear signs of a slowdown in economic growth.”
These cuts follow other contracts in the real estate sector as the housing market begins to smoke.
4. Loan applications are no longer available
With rising loan fees, home buyers are asking for small loans. According to the Association of Mortgage Bankers, in the week ending June 10, the number of mortgage applications decreased by 16% compared to the previous year.
“Purchasing applications have declined compared to last year as persistent inventory shortages and affordable challenges have cooled demand along with a rapid jump in lending rates,” said Joel Kan, co-founder, MBA vice president of economics and forecasting.
With lending rates above 5%, refinancing activity burned as rates rose during the pandemic, more than 70% lower than last year.
5. Fewer people will buy into households
With very high prices and ever-rising interest rates on loans, fewer people seem to be buying houses today.
The Redfin Index, which assesses demand for home buyers – by measuring home travel requirements and other home buying services from Redfin agents – is down 14% a year in the week ending June 12. This is the ninth week in a row with the index declining.
“If mortgage payments had not been increased, the housing market would still flourish now,” said James Cappello, Redfin’s Bay Area agent.
“Demand from home buyers was even higher in February than recently, but rates make it very difficult. Switching from 3% to almost 6% is almost immediately worrying for many people. In the current market.”
Reference Source: Fox 40
