The Economist April 9th 2022 pp57-58 |Finance&economics|Housing in America|”The property market is once again looking bubbly”
Read The Economist for all the detail
Summary by 2244
Property experts like Ivy Zelman, with a track record of accurate prognostication, warn that housing prices currently are …”’euphoric right now…[and that]...there are definite signs of excess.” Data from selected American markets shows the median number of days to sell a home in March of 2017-2019 was about 70 days, 2020 was about 60 days, 2021 about 45 days and now about 35 days. Meanwhile the average 30-year fixed mortgage rate fell from more than 6% in 2006 to a low of just higher than 2% during the pandemic and now has increased to about 4.5%.
The circumstances likely to fuel a decline in demand are different from what followed the mortgage-loan crisis in 2006. Even though prices have increased sharply of late reflecting the inventory of 726,000 vacant homes which is the lowest level in two decades. Despite this there still seems to be a fear-of-missing-out (FOMO) amongst buyers. The fundamentals now are different thann 2006 in part because 70% of existing homeowners have financed or refinanced to historically low rates of less than 4%. Also today Americans have accumulated wealth resulting in “about a quarter of existing-home sales ... [being]...all-cash transactions now, compared with a fifth before the pandemic.” Further, existing homeowners are benefiting from being qualified under tighter requirements and as a result have “healthier balance-sheets.”
Having noted the facts above, at some point rates will rise enough to slow demand plus the article notes that supply is likely to increase substantially as “nearly 1.6m homes are under construction nationwide, the most since the early 1970s.” Increasing supply though could be sluggish as the building industry too is constrained by labor shortages and supply chain woes affecting all markets currently.
留言