Because prices are still way too high. So the Buyers’ Strike continues.
By Wolf Richter for WOLF STREET.
The new motto: Lower mortgage rates and too-high prices cause demand to wilt as potential buyers wait for still lower mortgage rates, lower prices, and higher wages – something that Fannie Mae also noted. This is the buyer’s strike in effect.
So, despite mortgage rates dropping to 6.09%, from 7.9% 10 months ago, sales of existing single-family houses, condos, and co-ops dropped further to a seasonally adjusted annual rate of 3.86 million in August, according the National Association of Realtors today.
Sales were down by 2.5% from the wilted levels a year ago, down by 36% from August 2021 and down by nearly 30% from the same period in 2018 and 2019 – these are the worst sales since the depth of the Housing Bust – while supply surged to highest for any August since 2017 (historic data via YCharts):
“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” the NAR said in the report.
Alas, “the recent development of lower mortgage rates” isn’t all that recent. Mortgage rates started plunging in November 2023 from the 7.8% range and have now reached 6.09%, according to Freddie Mac today. Mortgage rates have plunged for 10 months and hit a two-year low.
But people are waiting for still lower mortgage rates, and lower prices, and higher wages – because prices are still way too high, after exploding in recent years, that’s the problem in the housing market – see our Most Splendid Housing Bubbles in America:
Inventory and supply rose to multi-year highs, as demand has wilted. Unsold inventory rose to 1.35 million homes, up by 22.7% from a year ago, and the highest since October 2020, according to NAR data.
Supply rose to 4.2 months at the current rate of sales, up 27% from a year ago, and the highest for any August since 2018.
The spike in supply in recent months is the result of the wilted sales and the rise in inventories of vacant homes that homeowners had moved out of some time ago but kept off the market to profit from the price spike all the way to the top; and now they’re putting them on the market without having to buy another home because they already bought one some time ago. (historic data via YCharts):
The stacked chart looks beyond the seasonality of supply. August 2024 (red line) was just a hair below August 2018 (brown line), which had the highest supply of any August in those years going back to 2017. 2018 was the final stage of a rate-hike cycle. Mortgage rates had risen past 4% and were on their way to max out at just over 5% by November 2018.
The median price of single-family houses fell to $422,100 in August, the second month of seasonal declines from the seasonal peak in June. In August, the median price was about the same as in June 2022.
The year-over-year gains have been whittled down each month for four months: In August to +2.9%, from +3.9% in July, +4.1% in June, +5.2% in May, and +5.4% in April.
The median price of condos and co-ops dipped to $366,500 in August, and was up 3.5% year-over-year. The year-over-year increases through July had been getting smaller from the 8%-plus range late last year. Unlike single-family house prices, condo prices didn’t book any year-over-year declines in mid-2023.
Median number of days a property sits on the market for sale before it sells or before it gets pulled off the market rose to 53 days in August, the highest for any August since 2019, according to data from Realtor.com.
Days on the market is kept down by sellers pulling their home off the market when it doesn’t sell after a few weeks, to then relist it later for sale at a lower price, or to try to rent it out, or turn it into a vacation rental, only to then relist it for sale. The metric tracks the mix of how quickly homes sell, and how aggressively sellers pull their unsold homes off the market.
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The biggest factor I see, is from personal experience.
Sold house for $430k end of June 2022.
Dude that bought it, poured tons of dough into upgrades, then listed it for sale this spring for $580k, with literally no offers. He took it off mkt and scrubbed sale effort.
Last week, a home almost across street from mine, which had been abandoned for about a decade, sold for $720k — with tons of upgrades, after being bought for $400k in 2023.
My observation is that the overpriced homes from 2022ish, became money pits, where upgrades took them to a new higher level of unaffordability — supercharging prices and limiting the amount of buyers looking to trade up.
These top end luxury homes that have been updated, lock sellers into higher prices, keeping most buyers away, because they can’t afford the new price point.
The buyers who are able to upgrade are looking for pristine, move in excellence, where absolutely nothing needs done — and paying a premium price to get a perfect location with nothing to do for years.
The vast majority of homes on the market are overvalued and in need of upgrades — which leaves a highly bifurcated mkt that’s either super unaffordable high end, or sellers that are excessively greedy, squeezing lemons.
When all these poor people and new migrants learn how to vote, the just might decide that the rich hill dwellers should be kick out and put under the bridge. Vote for me and on day one all fat cats will now be skinny cats.
Now wouldn’t that be fun…
🍿
Here for the “world is ending” comments.
😆
I just love all the RE hype articles about lines of people out the door ready to purchase. Like you look at the numbers and what they are trying to sell you and they do not line up. It’s scary to me that no matter where you look someone is trying to sell a narrative that helps themselves. Thats why these bleak and often self absorbed commenters give me the feeling I’m at least not being sold a narrative and I actually appreciate that. Always appreciate Wolf and his realism.
So would it be safe to say we don’t have a supply problem but maybe an affordability one?
No, according to your RE agent, NAR and even Pow Pow..it is and always will be a supply problem…solution? build more houses as they say. $1M for a POS house, this is the norm, suck it up, according to them
Phoenix_Ikki,
Lots of supply and lack of demand brings down prices once sellers get desperate enough, or are forced to sell because they’ve run out of money to pay for the carrying costs.
I completely agree with you, I just have a shred of doubt (against my internal consensus) there will be any event on the horizon that will force a lot of hold out sellers to sell in mass…just hard to see and so far any price decrease in certain markets is worse than watching paint dry…
If you increase supply the prices will fall.
The fact someone is willing to pay a price for what they want means they have little choice.
If say a Dominoe’s houses LLC popped up to challenge the current Papa Johns houses LLC and dominoes added 5000 pizza houses into the existing supply of papa John’s houses then consumers would have a choice. Dominos would effectively be lowering the prices.
What you have now are builders who sell for as much as they can get. While they are lowering the prices, they are also greedy and don’t care about disrupting the current state of affairs.
And the NAR has no incentive to lower the prices because their agents get quite a large commission. And I think they have the largest lobbying group in Washington of anyone.
So yep, pending a catastrophe where sellers HAVE to sell or new supply dilutes the old supply then nothing will change.
Wowow Mr Wolf NVDA is going up!!
Homes are for losers buy GPUs!!!
Wolf won’t like this comment because I am “pumping”
He will be out of a job like Spinning Jenny spinsters :]
NVDA $150 EoY
I’m seeing NVDA $230 by next year end.
It’s not a surprise. Is it a gamble? Heck yeah.
High risk. Of course
“Days on the market is kept down by sellers pulling their home off the market when it doesn’t sell after a few weeks, to then relist it later for sale at a lower price, or to try to rent it out, or turn it into a vacation rental, only to then relist it for sale.”
AKA virgin again :) Real tough for an used house but they are pulling it off saying NEW or 19 minutes since listed :)
Very nice summary. Thanks.
Powell says the Fed can’t fix housing. The Fed got us into this mess (or certainly helped make the problem worse), but now they are just throwing their hands up saying not our problem. Sigh.
The big thing they did to drive up home prices was QE, including buying MBS.
Now they’re doing QT, the opposite, and they lifted the cap off the MBS roll-off, and higher home sales volume and higher refi volume will speed up the MBS runoff.
As a result of QT (higher long-term rates), demand for homes has collapsed. Prices will follow.
Overall prices haven’t really moved much in two years, supply is way up, demand has collapsed, so OK, we’ll see how that turns out.
They’ve been in the process of trying to undo that problem, while trying not to tank the economy.
When did they lift the cap on MBS?
May 1, officially announced, started in June:
https://wolfstreet.com/2024/05/01/fed-holds-rates-at-5-50-top-of-range-qt-slowdown-starts-in-june-acknowledged-inflation-is-a-problem-again/
We need a recession, and that shouldn’t be considered “tanking the economy”.
They are a normal part of the business cycle, necessary to eliminate inefficiency and moral hazards. They also promote economic fairness and an even playing field where stakeholders get several entry points for productive investing, as well as opportunity for a dignified retirement.
When the Fed is over cautious and tried too hard to avoid recessions, it indirectly supports over-speculative and poor investments, inefficiency, and asset price bubbles that last for long periods. Generations can suffer.
Further, the central planners may be successful avoiding several smaller recessions, but it simply allows risks to build, setting the stage for much larger and longer-lasting crisis. Common sense, really.
1:04 PM 9/19/2024
Dow 42,025.19 522.09 1.26%
S&P 500 5,713.64 95.38 1.70%
Nasdaq 18,013.98 440.68 2.51%
VIX 16.22 -2.01 -11.03%
Gold 2,614.30 15.70 0.60%
Oil 72.05 1.14 1.61%
As expected, market got their Heroixx injection…next stop, forget to the moon, mars, they are heading straight to Pluto. Next orgy speculation will be FED cutting down to 3% by next year…fantasy perhaps but that won’t stop them from adding never ending fuel to this fire
We’re back baby! 💪
Hey everyone has the ability to login to their brokerage and buy buy buy.
Also 10 year and 30 year rates higher.
““Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,””
Always good to see this kind of data, let’s hope this is just another one of their propaganda talking point and not an accurate prediction…time will tell, although I can see they use the next Spring season uptick as some kind of proof of a housing recovery…
Are we sure that rate cuts will lead to lower mortgage rates?
sure glad we sold 2 homes(one in July and 1st week sept)
both got full priced offer
1st one though had 8% finance buydown
2nd one had 35% down with owner carry – now we’ll make even more
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I’ll start hunting after thanksgiving when everyone takes holidays off
All this talk about concern for affordability….people, if you thought the Fed or .Gov would intentionally draw home prices down, you’re dreaming. And it’s not because the Fed is babying billionaires or whatever b.s. gets thrown around. It’s because millions of recent buyers would have their equity wiped out. I know, lots of you don’t care or even want that. But I remind you, most homebuyers are STR wannabe overbidders or hedge funds or whatever. They’re ordinary people just like you, who wanted a own a roof over the heads and were willing to stretch to varying degrees to do it.
The Fed/.gov isn’t going to intentionally harm them just so some others can buy more affordably. My guess is their plan/hope is so stop the rise in housing and let wage/downpayment growth catch up.
“They’re ordinary people just like you, who wanted a own a roof over the heads and were willing to stretch to varying degrees to do it.”
Yeah cause you know we all had a gun to our head that we just have to buy a house to survive..who can bare the shame of ever being a renter…
As a New Yorker I grew up being a renter and feel no shame about it.
We recently bought because we were priced out of the rental market by a greedy landlord and were tired of being in a financially abusive relationship as renters. In the last 10 years we have had bad landlords, the mega one, and good landlords too.
Our last landlord raised the rent 25% over 3 years and we were already overpaying for the house from day one. That was our biggest complaint. When we gave them notice they listed the house even higher and now lowered the rent below what we were paying. I doubt they will ever get the rent we were paying again. It is still too high for the area and the house.
This is why renting is not always better. It is not only about the rent. It is about being able to manage your finances in a stable way. I have owned and I have rented, I always had more money renting, but not more peace of mind.
Folks just trying to keep a roof overhead will just keep on keeping on regardless of what the Fed does.
Prices are coming down and they’ll be coming down some more. You’re just gonna have to deal with it. The Fed doesn’t have your back, bud. QE has been finished for some time.
“The spike in supply in recent months is the result of the wilted sales and the rise in inventories of vacant homes that homeowners had moved out of some time ago but kept off the market…”
This is inevitable with the rising carrying costs. Eventually something’s gotta give.
The rent, and purchase price, is too damn high.
What if the past 2 days’ spike in the 10 year yield becomes a trend, perhaps because of inflation expectations rising due to rate cuts? This could cause mortgage rates to rise and not fall. Then things would get really exciting…
My general take is those that have “theirs” don’t want anything to really change but often want to sound off about the state of things. In simple terms, similar to civil rights eta where people would talk about inequities but really didn’t want to support real actions required to support change. MLK and Malcolm X were very clear on these points, although one has been white washed and one demonized in the rewrite of history. There are those that indeed do not have “theirs” but once in that category they want to remain there and hope for asset appreciation.
Not sure where it goes from here but even on my case where inequity and injustice are important I wouldn’t want to see a 25 to 50% reduction in my wealth given what it would mean. Many want a day of reckoning but seems most would prefer it down the road! Fundamental change will not come with small changes in political and monetary realms but there is no appetite for anything beyond that. There is no fundamental solution which would decrease asset prices without hurting those most disadvantaged and simply just concentrating wealth even more as the past has demonstrated. A choice between a wolf and a fox is still choosing a predator.
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The prices will not go down, simply because the pricing is not any more human but algorithmic. Simply put there are software packages that allow each realtor to optimize the price, available inventory and other such that the profit is optimal. And since all algorithms relay on more or less the same data set, they recommend the exact same action> Hold, reduce market inventory and keep the price fixed. And that is what they are doing…That is what everyone is doing. And will be doing, since they all use the same data set and the same algorithm.
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But the prices in New York where I’m looking are going down. Substantially.
That months supply graph looks impressive and it’s good to see we are getting back to normalcy. Unfortunately though, in unit terms nationwide inventory is still almost 30% below what it was in August 2019.
Between now and November is the time of year where seasonally inventory begins to drop off. Last year’s drop off was particularly small. If that happens again this year then we might be able to eat at a chunk of that 30% gap. And if that happens in a meaningful way then we might start to see some significant drop in prices come later next year. The tell will be the unit inventory level in February and how far below it will end up being compared to the annual peak (which is typically around now through November).