![]() ![]() ![]() What’s going on in the housing market is that the housing market is now freezing up, with potential buyers not even willing to apply for a mortgage, and not even shopping for a home. They’re pulling back because they also see what’s going on in the housing market. But since then, volume, based on purchase mortgage applications, has gotten a lot worse.Ĭash buyers and investors are pulling back even faster, and their share of total home sales has dropped further, now down to a share of 15%, from a share in the range of 20% earlier this year. And these closed sales in September plunged by 24% from a year ago and by 30% from October two years ago.Ĭlosed sales in September were barely above the two lockdown months in the spring of 2020. This collapse in mortgage applications in October is an indication of where closed home sales will be, and when we’ll get this data in November and December, it’s going to be gruesome.Ībout ten days ago, the National Association of Realtors released the data for home sales that closed in September. ![]() And beyond that, they’re the lowest since 1995.Īnd as I said, investors are pulling out even faster. They are now well below the lows during the lockdowns in the spring of 2020. And now they’re down 42% from a year ago.īut compared to early 2021, so that was roughly the peak of the housing frenzy, mortgage applications have collapsed by 52%. They started plunging in February this year, as mortgage rates were rising, and they continued to plunge. ![]() The most immediate view on what home sales might turn out to be, the most real-time view of current home sales, is the number of applications by home buyers for mortgages to purchase a home.Īnd those mortgage applications have collapsed by 42% in the latest week, compared to a year ago. The plunge in sales has just been stunning, and it’s getting worse. They’re pulling back because they cannot afford the mortgage payments at 7% and even cash buyers, including institutional buyers that buy rental properties, they are pulling back and they’re pulling back faster than regular home buyers, because they see how home prices are now skidding, and professional investors don’t want to buy at the top and ride the whole thing down. And home buyers are reacting exactly the way they’re supposed to: They’re pulling back from agreeing to pay those ridiculous prices.Īnd we see that in the numbers everywhere, and they’re pulling back more every month. These price spikes are now getting hit by the 7% mortgage rates. There have been similar price spikes in other markets. These markets include the metros of Miami, Tampa, Los Angeles, San Diego, Seattle, San Francisco, and others. Over the past 20 years through early this year, home prices in expensive markets have tripled or quadrupled, according to the Case Shiller index. With 7% mortgage rates after a 60% price spike in two years, sales have plunged, and those sales that are taking place are taking place at lower prices. And we know how this is going to end and it already ended: In the Miami metro and the Tampa metro, for example, home prices spiked by 60% in two years, according to the Case-Shiller index. Over the past two years, we’ve seen spikes of home prices of 30% to 60%. So now we’ve got sky-high home prices, and I mean ridiculous home prices, and mortgage rates that were normal when home prices were just a fraction of today’s prices. Now we have surging interest rates and the opposite of money printing: quantitative tightening. Home prices have shot up to ridiculous highs in the era of interest rate repression and money printing by the Federal Reserve. But there’s a difference between 2002 and now: The magnitude of the home prices. The average 30-year fixed mortgage rate has more than doubled since last year, from less than 3%, to now over 7%, the highest in 20 years, the highest since 2002. And in some markets, they’re going down faster than they’d spiked on the way up. After mind-boggling ridiculous spikes, home prices in most markets are dropping, and in some markets, they’re plunging at the fastest pace on record. Raging inflation knocked out the “Fed put,” and banks are no longer on the hook for mortgages taxpayers and investors are. ![]()
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