US real estate Armageddon: Home sales plunge to covid lockdown level
By now it is clear that the real estate crisis is hitting the USA with a hardness that perhaps not even the authors of the monetary tightening had hoped for.
Existing home sales in the United States, which include completed transactions of single-family homes, townhouses, condominiums and cooperatives, fell 1.5% to a seasonally adjusted annual rate of 4.02 million in December 2022, slightly at above market forecasts of 3.96 million. It was the 11th consecutive month of decline in home sales, the longest period since 1999, and the lowest level since November 2010, i.e. the great financial crisis, as buyers continue to grapple with tight inventories and high mortgage rates. Total housing inventories were 970,000, down 13.4% from November but up 10.2% from a year ago. The median price of existing homes across all housing types was $366,900, an increase of 2.3% from December 2021, as prices increased across all regions. Here is a graphic view of the situation
In truth, a rebound is expected because the decline in demand has led to a reduction in mortgage rates, this risks being only the famous "Rebound of the dead cat", i.e. a minimal readjustment that does not change the objective situation.
Meanwhile, the median house prices, as noted by wolfstreet, fell by 11.3%, with peaks of up to 30% for markets such as San Francisco. However, the drop has not yet been such as to cancel the price increases of 2022, but we are close now.
To be hit is the market of western states which, up until yesterday, seemed to be the most dynamic.
The drop in sales portends a further drop in prices: the market is now non-functional and will require further price reductions to become functional again. However, this will lead many mortgages concluded in 2021 and 2022 to be "negative assets", i.e. with the value of the property net of negative debt, prompting owners not to pay the loan itself. If this trend continues, as expected, we need to prepare for a backlog of defaults.
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The article US real estate Armageddon: home sales plunge to covid lockdown level comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/armagheddon-immobiliare-usa-le-vendite-di-case-precipitano-al-livello-del-lockdown-covid/ on Sun, 22 Jan 2023 08:11:33 +0000.