Raging national housing market shows signs of cooling off
The robust national housing market that has kept climbing over the past year is apparently starting to cool off to a more reasonable level, according to a market research firm. The most recent data shows that more than 20 percent of sellers ended up dropping their list price for their home in seven out of the 10 most popular destinations for movers.
Over the past month, this scenario was realized in Phoenix, San Antonio, Atlanta, Tampa, North Port (FL), Sacramento, and Cape Coral (FL). According to a national industry observer, the main reason is that mortgage interest rates are rising, thanks in part to the Federal Reserve increasing its benchmark interest rate by a half-point and planning for more increases throughout the balance of 2022.
When mortgage rates were at or below three percent, both local and out-of-town homebuyers were more than willing and able to tolerate high prices, but at five percent, many are now priced out. A home’s price is driven by the balance of supply and demand, and when demand drops off and supply increases like it is now, rapid price increases evaporate quickly.
The regions mentioned above are experiencing an abrupt drop-off in demand after two years’ worth of sharp increases in price fueled by a surge in people moving to new areas of the country. This is forcing the sellers to then drop their prices with increasing frequency.
Boise, Idaho, is where the largest share of home sellers dropped their price recently. In April alone, 41 percent of sellers there decreased their asking price, a 10 percent increase over the number that did so last year at this time. In the past two years, Boise’s home prices increased by 62 percent.
The sharp increase in mortgage rates has knocked some of the wind out of a housing market that had been super-charged by surging migration. These sellers are now driving the national rate of price drops to its highest level since October 2019.
According to Fox Business, mortgage applications declined by 1.2 percent in just one week in May. The higher prices are keeping people from getting out of debt. They are also keeping people from refinancing existing homes and buying homes. The sad news is that within the past year, people refinancing a mortgage is 75 percent lower than before.
Biden’s inflation streak has caused construction costs to escalate, interest rates to rise, and shelves to be empty. Recent data from the United States Census Bureau shows that new home sales fell by a whopping 16.6 percent in just one month.