Homebuyers finally take a break with more inventory

More housing options are a good thing for home buyers

Although the inventory of housing is increasing, it is a good thing, not a repeat of the collapse because of the financial crisis. As you can see below, the sales deposit has created a vertical peak from 2005 to 2007 in active entries, which moved the inventory from 2.5 million to 4 million. The sales deposit in 2022 (due to sudden rate increases) did not have the same result and it has taken three years of the lowest home sales ever – to adapt to the workforce – to get active lists back to 1.5 million.

Why is this important?

I believe that the mortgage interest rate will remain higher for a longer period until the labor market breaks, so the only real solution for the affordability of homes is an increase in housing stock that would help stabilize house prices. I am enthusiastic about the recent data that prove that Existing home sales have reached a soil. With every passing year of cooling house prices, housing becomes a bit more affordable because wages are also rising and more households are formed.

This cannot happen if house prices increase by 10% -20% per year. It doesn’t even work if house prices rise higher than 5.5% per year. However, low single-figure home price growth can make homes more affordable over time, which then makes the background for the growth of home sales easier when the mortgage interest rate goes to 6%.

The growth of housing sales can usually be attributed over the years to a pattern that follows periods of high mortgage interest rate. After such a phase, a recession often occurs, which leads to lower interest rates and then an increase in housing sales for the coming years. When we consider our current situation in the historical context, we can see that even with increased prices, mortgage interest rate, real estate tax and insurance costs, this trend applies because the sale of houses no longer crashes; They create an extreme low basis for working.

Follow the housing market tracker for live weekly data

The existing sales and stock report for home is excellent, but it is also lagging behind in real-time data. Our housing market tracker -data is for the existing sales data of the home and we have that data ready for you every weekend. We follow weekly processing and total in anticipation of sale to see a real time where the demand is going. The question is even laid down all year round with raised rates.

Here, with our total hanging sales data for home, we can see a small growth on an annual basis, even with increased rates.

Conclusion

I am optimistic about the future of the housing market because it heals itself and becomes normal again. This does not mean that house prices crash like in 2008, as demonstrated today’s existing home sales. The long-term and historical data about house prices that goes back to 1942 show that we usually experience a period of rapid price growth, followed by a cooling period. The 2008 housing market was a deviation in this pattern that has been around for more than 80 years. For the housing market to function effectively, we must see an increase in the inventory and more choices for home buyers; Otherwise we will be stuck at these low sales levels for a more longer period.