print-icon
print-icon

Housing Demand "Vaporized" After Rates Hit 7%

quoth the raven's Photo
by quoth the raven
Wednesday, Nov 30, 2022 - 13:28

Submitted by QTR's Fringe Finance

Since Fringe Finance has started, I’ve scoured the Earth far and wide to try and bring a perspective on real estate to the blog that is going to be both no bullshit and an unfiltered on-the-ground opinion that I know and trust (and could add value to my readers).

And to be honest, I didn’t have to scour much, as a good friend of mine is a brilliant up and comer in the world of real estate in Philadelphia. I’ve worked with her several times and have known her for years - she’s insightful, pragmatic, conscientious and has a serious pulse on the industry. I know for a fact that she eats, sleeps and breathes the industry.

As such, my kind friend, award-winning realtor Kira Mason, has agreed to drop in once in a while to offer up her take on the pulse of the industry for benefit of my readers. Kira runs the Substack Gritty City Real Estate, which you can read & follow free here and she is @kmasonrealtor on Twitter.

Today’s post - free to read - is being syndicated with Kira’s permission. She will continue to contribute exclusive content for Fringe Finance readers as well.

Post-Holiday Inventory Increase Fixed to Add Insult to Injury for the Housing Market

I’m beginning to think that the timing of the interest rate hike this fall has prevented us from experiencing the full effects of deteriorating buyer demand.

Every year, housing inventory gears down for real estate’s dormant period through the holiday season. After the new year begins, inventory then begins its slow hike towards peak in the spring and summer. It was approaching the time when inventory typically begins its final annual descent that rates hit 7% and demand vaporized.

With low inventory the belt keeping the emaciated real estate market’s pants up, I’m nervous about what could happen once more homes hit the market in Q1 and Q2 of 2023.

The inventory decline this year came in two distinct phases. Between January and July, mortgage interest rates rose from 3.11% to 5.81%: a 270 basis point increase representing a roughly 32% increase in one’s monthly mortgage payment.

Market behavior started shifting significantly once rates passed 5.5% in June. By July, inventory began its seasonal downturn…four months early. When rates finally reached and surpassed 7% in October (by which time monthly payments were up a nauseating 47%), inventory began to decline more steeply. Though steeper, inventory declined at more more moderate pace than it usually does at this time of year. This was an effect of reduced demand; despite fewer new listings being added to the market, the dearth of sales caused a relative buildup of older listings.

The perennial reason for the seasonal decline is that few people are interested in house hunting, going through stressful real estate transactions, and moving during the holiday season.

Sellers know that this will affect demand, not to mention the fact that they’ll face the same inconveniences on the buy side, so most choose to hold off on listing their homes until after New Year’s Eve. This holiday season, we can add an additional “inconvenience” to the list: mortgage interest rates at their highest level in 20 years, and affordability at an all time low. With 92% of homeowners enjoying mortgage interest rates under 5%, and 62% with rates under 3.75%, nobody is putting their home on the market unless they absolutely must.

While resale inventory isn’t likely to...(READ THIS FULL ARTICLE, 100% FREE, HERE). 

Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.
0
Loading...