Real Estate Takes Another Hit
There is little doubt now that real estate is showing some major signs of weakening. This is not completely surprising since the market peaked, in the United States, last June. Since that time, it was a sideways-to-lower moving market.
For those who are unaware, the real estate market doesn't operate like other markets. Typically, a peak is not a reversal but, rather, a rounding pattern. What this means is the top is hit and then it slowly changes path.
The reason this is comes from the fact real estate is always local. Those in the business always talk about it yet those who look at things from the outside rarely remember that. For this reason, some markets are tanking while others are holding strong.
Nevertheless, the bad news often spreads. It now looks like real estate is in for some tough days ahead.
Leading Indicators
On my channel, we often talk about leading versus trailing indicators. This is something that many confuse, often looking at the wrong metrics.
For example, the latest CPI read is a trailing indicator. If you want to forecast, look at something like inventories.
When it comes to real estate, the best glimpse into the future comes from the mortgage industry. That is the starting point for most transactions. While there are always cash buyers, the reality is the market is always moving based upon those who are getting loans.
If the mortgage brokers are seeing business dry, up, that is a huge indicators of turmoil ahead. Earlier in the year, we saw the start of layoffs in that industry. Each real estate pullback, this is what happens. When there is little business for mortgage brokers, they start letting people go.
Since June, the week-over-week mortgage applications were dropping. This was a sign the top was in. Now we see levels that are truly horrific.
Sales Dropping
It should come as no surprise that real estate, in many markets, is dropping. We are getting reports of builders who are discounting prices the second they put a home on the market. That is not a good move for those who have contracts. The first wave of cancellations is already hitting. This is only going to get worse as more starts to hit the market.
Last week, National Association of REALTORS came out with their monthly report. It was not pretty as you can imagine.
Existing-home sales dropped for the fifth straight month in June, according to the National Association of REALTORS®. Three out of four major U.S. regions experienced month-over-month sales declines and one region held steady. Year-over-year sales sank in all four regions.
Notice how this was the 5th straight month. Here we are seeing a trend. The talking heads on television are always discussing when the housing collapse will start.
Guess what Bobo, it already started.
Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums and co-ops, dipped 5.4% from May to a seasonally adjusted annual rate of 5.12 million in June. Year-over-year, sales fell 14.2% (5.97 million in June 2021).
Of course, this is all being blamed on rising interest rates. Certainly that didn't help matters and I am very critical of the Fed. However, let's be honest, the market peaked last June. This is actually operating like a normal real estate top.
One more piece from NAR:
Total housing inventory2 registered at the end of June was 1,260,000 units, an increase of 9.6% from May and a 2.4% rise from the previous year (1.23 million). Unsold inventory sits at a 3.0-month supply at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021.
There is that word again: inventory.
Do you know what that means? Simply put, things are not selling like they were. When sales slow, inventories tend to rise until things adjust to the new levels of activity. With moves so quick, nobody had time to do that.
This is a situation to keep our eye on. Real estate makes up a significant percentage of economic activity. If that starts to head south in an accelerating manner, recession will bowl us over.
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...and here I just thought TASK was all crypto, with a side of equities 😅
Yes, big BAD things ahead! (imho). I'm just still trying to balance my crypto, cash, and precious metals... Silver is looking like a crazy bargain, I even see COMEX BARS for sale on retail sites, with relatively low premiums. Are the traders standing for delivery? Is this a good sign for stackers, or what?
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Yup its true that bad news or rumors spread rapidly and common people trust on that without having any research or consultation. Thanks for sharing positive vibes.
A buyers market. This is a good time to buy, rates may be going up, but those rates may also come down in the future and people may be able to re-finance at lower interest rates.
For myself, I do not think there is a bad time to buy a house. Housing in the long run will go up in value in most cases.
A home is an investment in life, not an investment to be sold or bought willy-nilly style for profit.
I see that around here now also, houses sitting for over a month or better while last summer they were being sold within a matter of days. People who bought at inflated prices are going to be in for a shock. During 2007-8 crash, right before that they had my place at almost 130 thousand, once the crash took hold it fell every year for years until if it had fell another seven thousand it's value would have went below what I paid for it, back than 17 to 18 years prior.
There was one house I'd always had a thing for on the other side of town, it went up for sale and they wouldn't even take my offer despite it was twenty five thousand over the state equalized value for it. The lady said the guy wanted it listed for four hundred thousand and if he couldn't get it he wasn't selling, she said she already had offers over that. I offered 275 on a 254 valued home and basically, the surrounding neighborhood. It wasn't even a four hundred thousand dollar neighborhood. Lucky it was a two family with the way rents are they'll save themselves some agony but I highly doubt they'll get two thousand a month in rent for that upstairs apartment. I bid on it during the last housing crash but someone out bid me. Nice large house with an exceptionally large yard, had a walk out basement with plumbing for a basement bathroom. I was just envisioning a nice size pool, a bathroom where people aren't tracking all wet into the house and plenty of room for a garden and play area for grand kids.
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STOPI think the housing market top was kind of called when Zillow started instant buying houses. With the inventory high and people having less discretionary money left over after essential costs. This means that people just don't have the money to spend on houses right now.
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I never heard of Zillo Insta-buying houses...What exactly was that?
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At the peak of the housing prices during the lockdowns, Zillow decided to list a price that they would buy your house for. It didn't work out as plan because they couldn't flip the homes to earn enough profits and it failed.
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Oh. That’s unfortunate.
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This makes sense that real estate is local, certainly different markets have different supply and demand issues, and as people move around fleeing one area and escaping to another those local markets will reflect increased supply or increased demand with one market seeing falling prices and another rising prices. I guess it's another example of people in the media over generalizing.
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The business many people were investing on now,is real estate.both the government and her citizens were onto it.
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The business many people were investing on now,is real estate.both the government and her citizens were onto it.
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Real estate about to turn into fake estate if things keep going like this lol.
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Thankfully we’ve held out this long now we are on the lookout for something that we want. I don’t think we will be able to get one at the very low or bottom since we are going for newest houses but it’s good to hopefully get it on the downswing so that we pay less than we would have if we grabbed it 2-3 months ago!
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