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A leading economist has issued a warning that the U.S. home market is currently experiencing a "meltdown" and that sales will continue to fall precipitously.
Homebuilder confidence, which is at a two-year low, still has "further to fall." according to Ian Shepherdson, the founder and chief economist of the British company Pantheon Macroeconomics, in an interview with Forbes.
He informed Forbes that "Pretty soon, anyone who has bought a home in recent months will be sitting on a loss..."
New Construction Sputters
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index published new research on Monday that indicated builder confidence in the housing market declined for the seventh consecutive month in June, plummeting 12 points for the second-largest monthly decrease in history.
In a statement, organization head Jerry Konter claimed that "Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,"
A significant number of prospective homebuyers have been priced out of the market, according to NAHB Chief Economist Robert Dietz, who also cautioned that supply-side problems must be resolved in order to address the issue of affordable housing.
In his opinion, Dietz is not alone. Mark Zandi, the chief economist at Moody's Analytics, recently said to Newsweek, "Affordability is being crushed by high housing prices and high mortgage rates. Therefore, first-time homeowners are being shut out of the market."
Changes in market demand have put new construction builders in a precarious situation. While some of the recent rises in home prices were driven by limited inventory, a good bit of it was also driven by increased costs for new construction and renovations. If the market takes a nose dive, it’s not likely that the prices of building supplies will as well. The impact on new construction could be massive if builders are unable to sell homes for at least what they cost to build.
Resale Regression
In many North Carolina Markets, the days of fielding multiple offers for your just listed property are over. If you go to Zillow and filter for “Price Reductions Only” you are likely to see many results. Luxury and affordable listings alike have been dropping their prices. It will be a few months until we get data from current sales, but we are all wondering, how far will prices drop?
Offers are coming in slower and lower, but for most homes, they are still coming. While one would hesitate to proclaim that we are already in a buyer’s market, it certainly looks as if things are heading in that direction.
What are your thoughts on the changing market? Let us know in the comments below or discuss it with a colleague in an upcoming CE class!
Sources:
Fung, Katherine. “U.S. Housing Market Is in a ‘Meltdown’: Economist.” Newsweek, 19 July 2022.