Historically, it is believed that real estate is one of the most reliable assets, which, plus or minus, always grows in price. In the US, for ordinary people, this is an investment, and for banks and builders, a means of earning money. As a result, everyone is happy and the economy is growing. But the data on the market speak of a very likely fall in the value of the real estate.
Real estate prices in the United States are rising at an unprecedented pace in history, next to which even the mortgage bubble of 2007 fades.
At the same time, the number of new homes for sale is declining, which means that fewer people can buy them, making them the most inaccessible in history. This is primarily due to tightening financial conditions in the US. Buyer sentiment has fallen to its lowest level in history:
Typically, 30-year mortgage rates follow the performance of 10-year U.S. federal loan yields, as the average life of a mortgage before it is fully paid off (refinanced) or declared insolvent by the payer is just under 10 years, according to Rocket Mortgage.
The average spread between mortgage rates and bonds in non-crisis years is about 180 basis points, while in recession periods it reaches 250 basis points. US 10-year bond yields have already reached 3%.
Home buying demand continues to fluctuate as new listings fell 7% year-over-year, and the average 30-year fixed-rate mortgage jumped to 6%, pushing the typical homebuyer’s monthly payment to a record high of $2,514.
The median home selling price is up 17% year-over-year to an all-time high of $389,178.
The monthly mortgage payment on the average asking price of a home has risen to an all-time high of $2,514 at the current mortgage rate of 6%. That’s up 48% from a year earlier when mortgage rates were 3.04% and mortgage fees were $1,692.
Does not add optimism and the increasing period of exposure of finished objects, which has already reached the level of 2007.
In light of the above, it is not surprising that Bloomberg wrote: “The fastest rise in mortgage rates in decades has cooled demand in many hotspots so sharply that it has taken the industry by surprise.”
It’s part of a rapid shift in the US housing market as the Federal Reserve raises interest rates sharply to tame inflation, rising mortgage costs to their highest level since 2008. Brokerages Compass and Redfin said they would be cutting jobs as economic data showed housing construction fell to its lowest level in more than a year, while homebuilder sentiment is at a two-year low and homebuyer sentiment is the lowest on record.
The market has certainly noticed the collapse in the housing market, and homebuilder stock prices have plummeted, with the Supercomposite Homebuilding Index down 41% this year, nearly double the S&P 500’s 23% drop.