Summary
Home sales in the U.S. have reached a record low, with pending sales dropping to the lowest levels ever recorded by Redfin and the National Association of Realtors. This decline is not limited to specific metropolitan areas; it is observed across all 50 of the largest markets in the country. Analysts suggest that this may signal a new normal for the housing market, with many waiting for mortgage rate relief that may not arrive soon. The current data indicates a potential cold winter for the housing market, as demand continues to wane.
Recent predictions by housing analysts highlight four key trends: a decrease in transaction volume, a decline in new listings, an increase in inventory, and a potential drop in home prices. The data shows that pending sales have fallen by 14% in just one month, indicating a significant slowdown in buyer activity. The overall annualized home sales are currently around four million, well below the normal rate of approximately 5.25 million. This downturn is attributed to rising mortgage rates, which have made home purchases less affordable, alongside a psychological shift among buyers who are hesitant to enter the market.
Inventory levels are rising, but not due to an influx of new listings; rather, it reflects a lack of buyer absorption of existing homes. New listings have also decreased slightly, suggesting that sellers are reluctant to enter the market amid declining demand. While some markets are experiencing nominal price declines, the overall sentiment points toward a correction rather than a crash, as sellers are not flooding the market with new listings.
Looking ahead, mortgage rates are projected to remain high, with forecasts suggesting rates around 7.5% for the next year. This situation could continue to suppress buyer activity unless significant changes occur, such as a resolution to geopolitical tensions or a recession that might lower bond yields and mortgage rates. For investors and buyers, the current market presents opportunities, particularly as motivated sellers may be more willing to negotiate favorable terms.
Show Notes
Pending home sales just hit their lowest level on record since the NAR started tracking them in 2001—and they fell in all 50 of the country's biggest metros. Winter hasn’t even begun yet, and we’re already seeing the massive effects of high mortgage rates, low affordability, and overall economic pessimism. And with inventory rising, it raises the question: how do we avoid housing-crash territory?
I made four key predictions a few months ago: transaction volume would fall, new listings would drop, inventory would rise, and home prices would flip negative (nominally). The dominoes are lined up, and the first three have already fallen—so what happens to home prices? Those betting on a housing crash are missing one key variable, and it’s the one thing that could keep us out of crash-style price cuts.
So I’m going through each data point to give you a clear look at why pending sales just hit the lowest level since record-keeping began, why inventory is rising while seller numbers aren't, and why home prices will begin to fall, but not to the levels you think.
In This Episode We Cover
What’s causing the dramatic lack of demand in the housing market (and why it may not get better)
Will our rising inventory eventually lead to a price crash?
Why sellers aren’t going to be forced to sell their homes at rock-bottom prices
The two factors that could cause mortgage rates to fall (or rise even more)
Why I’m still analyzing deals even as price drops don’t look like they’re stopping
And So Much More!
Links from the Show
Join the Future of Real Estate Investing with Fundrise
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Dave's BiggerPockets Profile
On the Market 372 - New Recession Indicator Shows Americans Worse Off Than We Thought
NAR: Pending Home Sales Decreased 7.3% in September
Grab the Book, Recession-Proof Real Estate Investing
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