The real estate frenzy is over
With surging home prices and mortgage rates, we are approaching housing affordability levels not seen since the housing bubble that led to the Great Financial Crisis. The chart below from Bill McBride’s Calculated Risk newsletter shows this effect accelerating throughout the past few years.
But signs of relief are signing to show. According to Mike Simonsen of Altos Research, immediate sales are slowing dramatically. In late June, only 1 in 5 homes sold within a few days of listing, down from 1 in 3 homes earlier this year.
Mike also believes median home prices have peaked for 2022 and it “might be two years before we see this record high price again.“
We are also seeing a significant pickup in price drops across the country. Some of the hottest markets during the pandemic are now beginning to cool fastest, including Seattle, Boise, Denver, and San Francisco. Nationally, nearly 7% of homes have dropped their listing price over the last four weeks, the highest rate since 2015.
To be clear, things are still historically hot. We used to have 50 bidders for every listing, and now it’s down to just 5.
Housing inventory, while up 31% versus this time a year ago, is still less than half of what it was in 2019 (Altos Research).
So after two plus years of tipping heavily in the sellers’ favor, the scales of the housing market are finally starting to balance out.
