Q2 2022 U.S. Home Affordability Heat Map
California home sales in June were down by 25% year-over-year. The NAR’s Pending Home Sales index was off by 20%. The MBA’s Purchase Loan Application index hit its lowest number this century. List price reductions increased from record lows to a higher- than-normal rate of 35%. Anecdotally, real estate agents reported fewer instances of multiple bidders for a property, lower attendance at open houses, longer days on market, and more inventory listed for sale. Clearly, market momentum has shifted, and affordability is the likely culprit. A homebuyer looking at the same property he or she might have purchased a year ago would pay 40-50% more in their monthly mortgage payments due to higher mortgage rates and the increased price of the homes. That made the properties too expensive for many buyers and made it impossible for others to qualify for the loans they needed to make a purchase. Unsurprisingly, sales and pending sales have dropped, contract cancellations have increased, and home prices—while still increasing by double digits—have showed signs of slowing down. Builders, having learned their lesson the hard way by overbuilding in the run-up to the Great Recession, also reversed course. As a result, housing starts have declined for two consecutive months.
Q2 2022 Affordability Index* (Under 100 is Less Affordable Than Historic Average) 47 200
Q2 2022 Median Sales Price $75,000 $500,000
$1,000,000 $1,725,000
© 2022 Mapbox © OpenStreetMap
to sell, about whether we’ve been in another housing bubble over the past few years and whether another housing crash circa 2008 is all but inevitable. The sudden drop in home sales, increased cost of financing, and softening of prices all at least suggest that some sort of correction might be on its way. Although anything is possible, the likelihood of another massive crash in the housing market is very slim. So, investors waiting for a tidal wave of distressed inventory may want to alter their plans. Market conditions today couldn’t be more different from what conditions were immediately before the Great Recession. Let’s take a look at just a few examples. SUPPLY AND DEMAND. In a normal, healthy market there would be about a six-month supply of homes for sale. Today, even with the recent increases
in inventory, there’s about a 2.5- month supply, still less than half what we’d normally see. Contrast that to 2008, when there was a 13-month supply, more than twice what the market could consume: too much supply for market demand versus not enough supply to meet demand. EQUITY. Today homeowners have a record amount of equity, over $27 trillion. In fact, our ATTOM data shows that almost 90% of borrowers currently in foreclosure have positive equity. Compare that with the Great Recession, when 33% of all borrow- ers, including a majority of borrowers who were delinquent or in default on their loans, were underwater on their mortgage. Equity gives homeowners options and a chance for a soft landing if they happen to fall on hard times financially.
IS A HOUSING CRASH COMING?
Many industry commentators have been wondering, often rather loudly if they have products and services
72 | think realty magazine :: september - october 2022
Made with FlippingBook Online newsletter