We’re Enduring ‘Housing Recession,’ Homebuilders’ Economist Says
The housing market is in trouble, as prices and mortgage rates remain elevated.
So it’s no surprise that builder confidence fell for the eighth straight month in August, marking the worst period since the housing crisis began in 2007.
The National Association of Home Builders/Wells Fargo index of builder confidence slid 6 points in August from July to 49, breaching the break-even measure of 50 for the first time since May 2020, early in the covid pandemic.
“Elevated interest rates, ongoing supply chain problems and high home prices continue to exacerbate housing affordability challenges,” the NAHB said in a statement. It’s “another sign that a declining housing market has failed to bottom out.”
The continued rise in construction costs also hurt, NAHB Chairman Jerry Konter said. “And in a troubling sign that consumers are now sitting on the sidelines due to higher housing costs, the August buyer traffic number in our builder survey was 32, the lowest level since April 2014, with the exception of the spring of 2020 when the pandemic first hit.”
Things are bad enough that NAHB Chief Economist Robert Dietz said we’re suffering a “housing recession.”
Looking forward, “the total volume of single-family starts will post a decline in 2022, the first such decrease since 2011,” he said.
Given all the bad news, it’s no wonder that homes are becoming unaffordable for many prospective buyers.
The median existing-home sales price hit $416,000 in June, jumping 13.4% from a year earlier, according to the National Association of Realtors That marked 124 straight months of year-over-year increases, the longest streak on record.
And the 30-year fixed-mortgage rate averaged 5.22% in the week ended Aug. 11, up from 2.87% a year ago, according to Freddie Mac.
“Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” NAR Chief Economist Lawrence Yun said in a statement.
The Silver Lining
On the bright side, “as signs grow that the rate of inflation is near peaking, long-term interest rates [will] stabilize, which will provide some stability for the demand side of the market in the coming months,” Dietz said.
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Meanwhile, online bank Tangerine lists the cities where homes are selling fastest, using data from real estate brokerage Zillow. Tangerine measures the number of days from when an offer is made until a sale is closed.
Here’s the list:
1. Seattle: 41.92 days,
2. Salt Lake City: 42.24 days,
3. Olympia, Wash.: 42.41 days,
4. Bremerton, Wash., 43.60 days,
5. Ogden, Utah: 43.85 days,
6. Colorado Springs, Colo.: 45.56 days,
7. San Diego: 45.67 days,
8. Vallejo, Calif.: 45.93 days,
9. Fort Wayne, Ind.: 46.46 days,
10. Columbus, Ohio: 46.84 days.