June 13, 2024

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The housing bubble prepares to burst: Pending sales drop in June, inventory rises, prices rise amid rising mortgage rates

The housing bubble prepares to burst: Pending sales drop in June, inventory rises, prices rise amid rising mortgage rates

Suddenly the pent-up display appears – those vacant homes that no one would have considered vacant.

by Wolf Richter for Wolf Street.

Over the past two years, the story has been that there is no inventory to sell, that there is a housing shortage, which is why prices have been going up. Then there were other people like me who pointed out over and over again that people didn’t put their old homes on the market after they bought a new one, that these people now own two or three homes and that they’re going to ride the hottest real estate market ever with prices up 20% or 30% or more annually, and then they sell those vacant homes that no one has ever considered vacant.

And because they were already living in a house, they could sell their empty homes without having to buy another one. This is the “shadow stock” that is now coming into the market, just when mortgage rates have gone up, and sales are going down. And to get things moving, the price cuts are skyrocketing.

Suppressed supply, declining sales: It’s just the beginning, but it’s happening.

Active menus jumped In June it was up 20% compared to May, and up 19% from last year, which is the second consecutive annual increase after a jump of 8% in May, both of which were the first annual increases since June 2019. There were about 98,000 people more Homes for sale in June compared to last year, according to data from the National Association of Realtors today (data in realtor.com):

Active listings jumped for two reasons:

Sales of ONE, pending in June, fell 16% year-on-yearAfter a 12% drop in May, and a 9% drop in April, potential buyers lost interest in rising home prices and mortgage rates. These are listings at various stages of the sale process, but before the deal is closed. June was the tenth consecutive month of year-over-year declines. Back in June, NAR reported that “Closed sales fell in May for the tenth month in a row. This does not bode well for closed sales in June:

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Two, new listings went up in June to 562,000 homes, the second highest level in June in recent years, after only June 2019. And interestingly, the new menus rose in june, when in normal years it peaked in May and decreased in June. I rotated previous Junes (data via realtor.com).

Price cuts soared by 50% in June from May and about weakness On a yearly basis, as sellers try to get buyers to show up and take a look as foot traffic has plummeted and bid wars have regressed into fond memories. This is a sudden reset. But more sellers are dealing with a new reality: prices have to go where the buyers are, and the buyers are somewhere, but much lower (data via realtor.com):

Holy Mortgage Rates – so called because that’s what people say when they first see the mortgage payment for a home they want to buy – hovering around 6% for a 30-year fixed mortgage, double what they were in 2020 (data via realtor.com) .

These kind of mortgage rates, having doubled not so long ago, and home prices that have gone up 40% or more over the same two-year period are a bad combination. Something has to offer, and it won’t be the buyers – because they can’t, they are trapped – but the sellers. Or there is no agreement.

and buyers who could They buy, famous cash buyers, they don’t want Buy at these prices too, now that the madness is starting to come out of the market. Nobody wanted to overpay at the height of the frenzy for what was a completely insane market.

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Big difference in listings between the 50 largest metro areas.

Among the 50 largest metro areas, the number of active listings in June rose the most in Austin (+144% year over year), Phoenix (+113%), and Raleigh (112%). In 31 other central regions, active listings rose in double digits. Active listings decreased in only a few central areas, led by Chicago (-13%), Virginia Beach (-14%) and Miami (-16%).

The table is sorted by annual percentage change of active lists (data via realtor.com):

The largest metro areas, active ads, June 2022 Percentage change year on year
Austin-Round Rock, Texas 144%
Phoenix Mesa Scottsdale, Arizona 113%
Raleigh, North Carolina 112%
Salt Lake City, Utah 98%
Nashville Davidson – Murfreesboro – Franklin, Tennessee 86%
Riverside-San Bernardino-Ontario, California 72%
Seattle Tacoma Bellevue, Washington 66%
Sacramento – Roseville – Arden – Arcade, California 65%
Dallas Fort Worth Arlington, Texas 62%
Denver Aurora Lakewood, Colorado 58%
Tampa St. St Petersburg Clearwater, Florida 56%
Tucson, Arizona 55%
San Antonio – New Braunfels, Texas 54%
San Francisco-Oakland-Hayward, California 46%
Las Vegas Henderson Paradise, Nevada 45%
Jacksonville, Florida 38%
Oklahoma City, okay 37%
Charlotte Concord Gastonia, North Carolina 37%
San Jose, Sunnyvale, Santa Clara, California 34%
Memphis, Fig.- MS-AR 33%
Orlando Kissimmee Sanford, Florida 31%
Portland Vancouver Hillsboro, Oregon, Washington 31%
Kansas City, Missouri 28%
Birmingham Hoover, AL 26%
San Diego Carlsbad, California 25%
Atlanta Sandy Springs – Roswell, Georgia 23%
Indianapolis-Carmel-Anderson, IN 22%
Louisville/Jefferson County, Kentucky 22%
Los Angeles Long Beach – Anaheim, California 20%
Detroit Warren Dearborn, Michigan 18%
New Orleans-Metairie, Los Angeles 16%
Buffalo Chictoaga Niagara Falls, New York 13%
Columbus, Ohio 12%
Houston-The Woodlands-Sugar Land, Texas 10%
Providence Warwick, RI-MA 6%
St. Louis, Missouri-IL 5%
Cincinnati, oh-ki-in 5%
Pittsburgh, Pennsylvania 4%
Washington-Arlington-Alexandria, DC-VA-MD-WV 2%
Baltimore Columbia Towson, MD 1%
Boston-Cambridge-Newton, MA-NH 0%
New York – Newark – Jersey City, New York – New Jersey – Pennsylvania 0%
Minneapolis St. Paul Bloomington, Minnesota, Wisconsin 0%
Cleveland Illyria, Ohio -2%
Philadelphia Camden Wilmington, PA-NJ-DE-MD -2%
Rochester, New York -4%
Milwaukee-Waukisha-West Alice, Wisconsin -4%
Richmond, Virginia -6%
Chicago Naperville Elgin, IL-IN-WI -13%
Virginia Beach – Norfolk – Newport News, Virginia, North Carolina -14%
Miami, Fort Lauderdale, West Palm Beach, Florida -16%
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