All housing is bankrupt. Real estate is cyclical, typically with mortgage rates rising rapidly, sales declining, and home prices falling. And eventually, as home prices fall, sales return. But nothing like that happened.
The pandemic-driven housing boom saw historically low mortgage rates and remote work stimulate demand, driving home prices up significantly. Then, inflation rose until it could no longer be ignored, and the Federal Reserve raised interest rates. As a result, mortgage rates rose (they appear to have peaked at more than 20-year highs) and sales plummeted to their lowest level in nearly 30 years. But because no one is selling their homes, home prices have not fallen meaningfully or broadly. Basically, there are more buyers than sellers, and there are more homes available, so prices will never go down.
“The reality is that about 70% of sellers are also buyers, so sellers are also becoming more sensitive to this environment,” said Skyler Olsen, chief economist at Zillow. CNBC Around the end of last weekend.
Rising mortgage rates are generally thought to be difficult for homebuyers because they result in higher monthly payments. However, high mortgage interest rates, as Mr. Olsen said, have a huge impact on sellers and potential sellers. Most of them are also buyers. And no one is going to give up 3% on a mortgage rate that’s more than double, so they won’t sell it unless they absolutely have to. This is called the lock-in effect, and it’s why existing home sales plummeted last year and most recently in March.
In March, “the market that was increasing the fastest was actually the most expensive, and that was the California coastal market,” Olsen said. “Why was that? Well, these are also the places where we’ve seen the most aggressive exits, and yes, continued exits by existing owners who don’t put their homes up for sale.”
Olsen was referring to a recent analysis that found monthly home price increases were most dramatic in “large coastal California cities” (and Seattle). It found that home prices rose more than 3% in San Jose, and about 2% or more in San Francisco, San Diego and Los Angeles. He said in his analysis that it is “no coincidence” that these metropolitan areas are also the areas where “the highest proportion of homeowners are likely to be locked in on mortgage rates,” adding that new He cited another analysis that found the only housing markets with supply were in the following regions: There are many baby boomers out there who don’t care about rising mortgage rates.
“Nationwide, we continue to experience a housing shortage,” Olsen said. At the same time, “enough buyers are still motivated to move forward…the typical home pending in March… [sold] In just 13 days. At this price, at this mortgage rate. ”
So while there aren’t enough homes (by some estimates, there’s a shortage of somewhere between 2 million and 7 million homes) or sellers, there are enough buyers. That’s why housing prices don’t fall. But, of course, not all markets are the same. Texas and Florida are “areas where people aren’t so locked up, and a large portion of the population is free and mortgage-free. They’re older boomers, and they’ve moved there with the growth in stock prices over the past 15 years.” I moved here,” Olsen said.
She continued: “These are areas where we’re not so locked in. We’re seeing inventory return here, we’re seeing home price declines. Austin has seen home price declines for the year, and other parts of Texas Housing prices have fallen significantly in major cities.
The average 30-year fixed mortgage rate is 7.44%, and as long as mortgage rates remain high, there won’t be enough homes or sellers to compete with buyers. And let’s not forget that there is already a housing crisis, and the situation is only getting worse as people hold on to their homes and prices continue to rise.
