After the price explosion comes the hangover.
By Wolf Richter for WOLF STREET.
It boils down to this: In terms of single-family homes, sales that closed in June fell further, to approach the lows set in the prior two years, the lowest since 1995, seasonally adjusted; and supply spiked to the highest level since 2016, according to data from the National Association of Realtors today.
In terms of condos, sales remained at the low point in the data, along with May, and Lockdown May 2020, seasonally adjusted; supply ticked down a hair from the spike in May, but remained at the highest level since the Housing Bust.
Sales of single-family homes fell further in June, to a seasonally adjusted annual rate of 3.57 million homes, hobbling along the lowest levels since 1995. They were roughly flat with June 2024 – with the year 2024 having been the worst year since 1995. Sales were down by 25% from June 2019, by 28% from June 2022, and by 32% from June 2021 (historical data from YCharts):
In terms of actual sales of single-family homes, not seasonally adjusted and not annual rate, 356,000 homes were sold in June, just below June 1995.
Supply of single-family homes has been spiking all year and in June reached 4.7 months, the highest supply since mid-2016, also 4.7 months. All of them were the highest since 2015 (historical data from YCharts).
Condo sales in June remained at the low point carved out in May, of a seasonally adjusted annual rate of 360,000 condos, same as May 2025 and Lockdown May 2020, and all of them the lowest in the data going back to 2011. Sales were down by 37% from June 2019. This is the effect of prices having exploded in recent years far beyond what the market can bear, and demand destruction on an epic scale has set in (historical data from YCharts):
Supply of condos, at 6.6 months in June, is at the highest level since the Housing Bust in 2012 (historical data from YCharts):
End of the “housing shortage.” Supply spiking like this destroys the real-estate industry hype, deployed to drive up prices, about there being a “housing shortage.”
But what is real is that prices have exploded beyond what the market can bear, and so demand has plunged because prices are way too high. When sales began plunging in 2022, the theory by the real estate promoters was that sales were plunging because there was nothing to sell. But sales continued to plunge even as inventories soared, and now it’s a buyers’ market with plenty of supply, but there are few buyers.
Prices for condos and single-family homes.
The median price is heavily skewed by changes in the mix of homes that sold (my explanation and chart of how changes in the mix skew the median price). In the spring, nationally, a larger number of higher-end homes come on the market and sell, which changes the mix of what sold and shifts the national median price higher. It does the reverse in the fall and winter. June is generally the seasonal high point of the median price, which then declines through January or February the exception was 2020).
In addition, when demand collapses, as it has now, it might collapse more at the lower half of the sales price spectrum than at the higher end, to where sales at the low end fall more than sales at the higher end, which also shifts up the median price.
The median price of single-family homes rose to $441,500 in June, up by 2.0% year-over-year.
This measure of the national median price had exploded by 50% in the three years between June 2019 and June 2022, on top of the large price gains in the prior 10 years, driven by the Fed’s interest-rate repression and FOMO.
But lots of markets have turned. In 10 bigger cities, prices of single-family homes have declined by 9% to 23% from their peaks. And these are not median prices that are skewed by shifts in what sells. These are prices of mid-tier single family homes. The discussion and charts of the 10 are here.
Austin (-23% from peak) and Oakland (-22% from peak) are the top examples of the 10. Home buyers are not buying the national median home, they’re buying a home in a local market:
The median price of condos rose to $374,500 in June, up by 0.8% year-over-year.
This measure of the national median price of condos spiked by nearly 50% in five years, but in many cities, condo prices spiked by 60%, 70%, even 80% over those five years. Now those prices are way too high and don’t make economic sense anymore, demand has collapsed, and prices of mid-tier condos have begun to plunge in many of those cities.
By city and not using the median price: Here are the 19 cities were condo prices have dropped between 12% and 24%. The top two examples are Oakland (-24%) and Austin (-24%). Six of the cities have had price drops of 16% and more, including San Francisco.
Oakland condo prices are back to where they’d been in 2016:
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I just saw the new excuse is high mortgage rates, I am surprised realtors are not pushing sellers to lower their prices, since they make $0 on no sale. I am not sure how the mortgage brokers and the realtors are making it with this little inventory turning over.
Listing agents fear getting fired if they push their clients too hard to lower asking prices. It’s a very careful dance. They want to tell prospective clients, list with me, I can get you the maximum for your property, but they also want to actually sell the property, which they can’t if the price is too high. They make zero commissions if their client drops them or doesn’t hire them in the first place, or if there is no sale because the price is too high. This is a very tough market for Realtors. Many have exited. It’s only fun in a booming market.
And to see a realtors face when you have the audacity to say..
“How about we both take a cut and get this sold? I’ll lower the price 10%, you lower your commission appropriately, say .5 or 1%. ”
The BS replies I’ve received have been priceless.
I ended up selling on my own both times and just smiled running into the agents months later.
Fsbo is making a comeback. As a buyer and seller I never met a realtor who brought any knowledge to the table. It’s comical how people are so lazy that they can’t put a listing on Zillow and hire a real estate attorney to handle the financials.
I absolutely don’t see any value in using realtor services especially when all the information is readily available.
I am OK with paying couple of grand to realtor for their services but we are talking big money if the home price is couple of millions.
@Danno every time I have sold a property (both personal residential and apartments) I have paid an extra 1% above market to the “selling” broker. When the property hits the market almost EVERY broker with a buyer will push them to buy it (whether it is a good fit or not) since the selling broker will make $10-$50K more than they would if their buyer buys another similar priced property. I have got the same look Danno has has from “listing” brokers but I have never had a realtor walk away since 1% less is better than nothing and they know that when I want to sell I am going to sell (I’m not a test the market guy who will waste their time).
DC is getting rid of Realtors period. There have been so many complaints with the Realtor’s commission for unethical behavior that they’ve decide to require a brokers license to list property. A major class action suit was filed against Realtors by consumers which involved commissions for buyer’s agents who were ripping off buyers. The suit went against the Real Estate buyer’s Agents. Realtors are history in DC. Good riddance.
Chinese will buy. 😓 On Chinese social media WeChat, Chinese realtors who are in Orange County, LA County & San Diego County now are pushing these inventories to Chinese who have made housing market unaffordable in Australia, New Zealand & who think housing price is cheap in 🇺🇸🤯 two European countries are on their favorites now – Greece & Hungary. Now let’s see what housing price will look like in these two countries in 12 months. What really disturbing is that all they talk about Re these homes are (1) how much $$ they can make through rents or capital gain & (2) how cities like Irvine not cheap (after they destroyed the pricing in those cities & turned everything into wealthy people game 🙄) . Greed @ steroids
What you describe peaked in 2017 and 2018. I even wrote about it at the time. This article is from June 2018. It has some screen shots of ads run in China about US homes. This is how the article starts:
https://wolfstreet.com/2018/06/07/how-chinese-investors-inflate-housing-markets-in-the-us-canada-and-australia-as-governments-try-to-stem-the-tide/
“Top residential real estate brokerages in the US have been promoting US homes to investors in China for years. Brokerage firms in Canada, Australia, New Zealand, and other countries have done the same. Commissions are at stake! They have set up units in China and are partnering with Chinese real estate portals, such as Juwai.com.
“Warren Buffett’s Berkshire Hathaway HomeServices, a subsidiary of HomeServices – the second largest residential brokerage in the US – entered the fray belatedly a year ago with a marketing agreement with Juwai.com “to syndicate all of its franchisees’ residential listings.”
But that mania peaked in 2017 and 2018, and then came the big flop. Since that peak, purchases by buyers from China have plunged by over 70%:
Depends on the market.
NY metro market is still extremely hot.
How do prices explode beyond what the market can bear, if the prices are set based on recent previous market transactions?
Somebody was willing to pay those prices, with the incentive of low interest rates, etc, at one point, and people are still paying those prices now, although not in the same numbers as in 2021-22.
Eloquently explained in the article: “…driven by the Fed’s interest-rate repression and FOMO.”
Now those buyers have their homes, the remaining market can no longer bear those prices, which is why sales have collapsed.
exactly, the number of people willing to pay super high prices is very small but they are still out there
But not nearly enough of them.
Cmon don’t be disingenuous. If prices run up 200% and then fall 50% in a span of 5 years, that’s still insane growth.
Prices literally can’t keep on climbing forever.
Whoopti
“If prices run up 200% and then fall 50% in a span of 5 years, that’s still insane growth.”
True. A still insane growth of 50% total or about 8% growth a year:
$100 + 200% = $300;
$300 – 50% = $150.
from $100 to $150 in five years = 50% growth, which would be about 8% per year, still insane.
BTW, I didn’t say anything about price growth in my comment that you replied to with “Cmon don’t be disingenuous.” Maybe your comment got into the wrong place?
And the prices are going down slowly but surely almost everywhere.
If some location is left out of prices not going down, they’d catch up or down!
I’ve asked people who have paid peak 2022 pricing in the past 6 months, “Why? Why did you pay double for this house what it was worth in 2019?” Most of them have just done something like shrug and say “Ehh, that’s what they cost now.”
The thing is, they wouldn’t cost that if buyers would stop overpaying. Most have, as the article points out, but enough are still doing it that it gives the remaining sellers hope that their gravy train will come in too.
I bet @TSonder is a popular guy at parties asking people “why did you overpay for your home”….
From 2020 to 2024 paying People to stay home and receiving more money than could ever imagine jacked the economy/real estate up to unrealistic highs.
Those days are long gone, Time to come back down to reality.
Howdy 209er. Don t forget , ZIRP, No money down , No income verification , just sign your name and you can walk out of a closing with a check in your pocket. Only in AmeriKa baby…..
Ironically, the only mortgage product that does that is a VA loan.
albeit at a steep premium to FHA 3% vs. 1.7% in lieu of PMI
NINJA loans are long gone.
ARMs are making a comeback;
this time in a bullet proof vest.
Now is the time the Real Estate hype machine starts telling sellers that it is a buyer’s market and to price accordingly. They don’t make money unless things sell and they’ve squeezed all they can out of the bull market.
The next propaganda will be to price competitively to attract buyers.
Nah, they’re still at the rate buy-down and seller concessions phase.
Give it another year a or so…
Follow the Wolf.
The data point of median price is flawed, as mentioned in the article. In my mind, a better data point is price/foot on closed sales for homes in various strata (e.g., 2000 ft and lower, 2000-4000 ft, and >4000 ft) and in a specific locality, with the extremes on both ends disregarded. But this takes a lot of time to put together.
Which is what the data I used for my local home prices does: it’s “mid-tier” (the middle third, so that reduced the impact of shifts in the mix), “city” or “MSA” (so local markets), and it’s not median price, but based on millions of data points, from public records to Realtor associations, and includes sales pairs data.
And between 1995 and today the US population increased by ~21%. Or does “seasonally adjusted annual rate” factors that in already?
Seasonal adjustments don’t include population increases.
Howdy Folks. Rut Row, is the hissing getting louder?????
Oh Boy, isn t this great???? Bubba maybe coming out of RE Retirement earlier than I thought.
Bubba. Quit being an a* s and know it all. It is ugly.
Prospective buyers smell blood in the water. They can bide their time now. Can’t see how these trends turn around without a significant price correction.
This is me. I’m sitting on the money to buy a place pretty much outright. However, I refuse to pay double what things were only 4 to 5 years ago. The one thing keeping this going is the inflated stock and cryptomarket. The economy would be slowly heading into a recession if retail investors weren’t driving an asset bubble in crypto and stocks. I’ll keep riding the lows and selling the highs as long as people want to play chicken, but this seems insane at this point.
Everyone is absolutely convinced that the government will do everything it can to prop up the stock market, no matter how bad for the dollar.
Until something happens to challenge that deeply-held belief, the meltup in all assets will continue.
You mean like leading up to every other crash in history when investors were convinced that they couldn’t lose any money in stocks? Like when the Federal reserve was desperately cutting interest rates during the com crash and 2008 but stocks continued to crater? beliefs don’t mean spit against reality.
75 percent of outstanding mortgages are under 5 percent, 30 percent of existing inventory has no mortgage, those folks make up the majority, they aren’t looking to sell…not every asset class should be a speculative bubble..zombie buyers, fomo and fools theory need not apply…
“30 percent of existing inventory has no mortgage, those folks make up the majority, they aren’t looking to sell”
If they don’t want to sell then why take so much pains to list!!!
The interest- rate induced lockdown of the Bubble Machines has only been applied to one industry this far.
Stocks, Cryptos, metals are at or near ATH or at least multi year highs. Total CryptoCrap has just bumped up against $4T. Total stock capitalization worldwide is probably $125-$130T. Only food and energy are staying tamed… for now.
Can the US debt keep up?
Home affordability is something which is directly impacted by treasury yields/mortgage rates. Stocks, other assets are impacted but not directly.
I see home prices going down over time, if the rates remain high.
I don’t see rates going down anytime soon, keeping in mind the debt level and deficit not going down.
Stocks and crypto don’t have carrying costs, so people can afford to FOMO.
They have carrying costs if they were bought on margin.
Even if they weren’t bought on margin, they do have opportunity costs. Right now, anyone can get 4% or a bit more on USD cash or t-bills. If the holder also has debt, then the payout has to be more than the interest cost of the debt that could be paid off, AND the tax rate on that income needed to pay the interest.
Sure, but 4% is nothing if you get 20% per year in stocks. Investors believe that will continue indefinitely, which is why the broader market has P/E ratios that are basically records.
Why are new home builder stocks rebounding? I thought it would be the opposite.
I can only speak for my little slice of flyover.
I would have to go back to pre GFC, since I have had a year were the job requests on new construction has been over 80% of our work.
Typical year 60-40. GFC 20-80.
You can still sell houses quite easily if you price them right and can offer financing incentives – which the builders can do.
It was an earnings beat on lowered expectations by DRHorton.
3.36 vs. 2.94 expected; less than 4.10 the previous qtr
Home builders are all low float stock and volatile;
also trade at very low forward multiples <10 pe
Existing home sellers are high as heck and refuse to cut their prices. New-home buyers only have to cut their margins some (and there was plenty of space to do so) and get to undercut existing home sellers.
That dynamic means that home builders can essentially build whatever volume they want, without fear of saturating the market, because the group that loses are existing home sellers. Combine that with still-respectable margins, and you have a good stock buy.
Losses also accrue to buyers of the new homes as the builder decreases prices and margins to sell homes.
The only real winners as prices fall might be renters.
Wolf, you used “housing shortage” in scare quotes. It is taken as an article of faith in most quarters that there is a massive housing shortage in America. It’s never made much sense to me. Here you imply it is a fiction of the industry. In broader context it’s usually framed as an equity issue. I think I can agree that in some areas, housing is expensive, even insanely so (San Francisco) has come to mind, and even if it’s easing now, it’s still crazy expensive for middle class folks compared to their salaries). But I’m not convinced the answer is to just build a zillion more homes (and in SF, it’s probably not even doable). Do you have a take on this?
Yes, if you will, there is a shortage of realistically priced homes after the Fed and the RE industry have conspired for many years to drive prices out the wazoo. But there are plenty of homes. It’s just people cannot afford them. If you have enough money, you can buy multiple homes anywhere, and people do. If you don’t have enough money, you cannot buy anything anywhere. That’s the definition of a pricing problem, not a shortage.
Wolf: Would a bust be good for the country. I know there will be winners and losers, but overall wouldn’t it be net, net good for the industry and the economy? Thx.
A sudden huge bottom-falls-out bust would probably not be good for the economy in the short term. But if it’s a slow decline stretching out over the years, and is combined with income growth so that they can meet somewhere in the future, there would be big benefits.
High home prices (relative to incomes) are a big leech on the economy. So over the long run (we’re all dead), lower home prices would be:
1. good for consumer spending because consumers would have more money left to spend on goods and services. And that’s 2/3 of the economy, so it would be good for businesses that can sell more, and for the economy. Interest and principal payments and purchases of existing homes don’t go into GDP, but consumer spending does go into GDP.
2. good for employment because consumer spending drives business revenues and the economy, and a growing economy creates jobs
3. good for businesses (employers) in now-high-cost markets because compensation costs are much higher in places with high home prices, and lower housing costs would allow for lower compensation costs, and companies would have more money left over to invest in expansion projects
4. good for homeowners because the monthly carrying costs would be lower, esp. property taxes and homeowners’ insurance => which translates into having more cash left over to spend on other things in the economy, and so it would be good for the economy.
People can probably come up with other benefits to the economy.
The main drawback of long-term lower home prices:
1. Lower property tax revenues, which is why state and local governments pump up real estate prices at every chance they get. All they think about is extracting property tax revenues from homeowners.
2. Lower incomes for the mortgage lending industry that get paid fees based on the loan values; and for RE brokers because they get paid on the transaction prices.
So pros and cons, but the pros far outweigh the cons.
Let me tell you what is not good for the economy. The stock market being held up by AI providers and advertisers. Until you posted it a few days ago, I had no idea that Google and Facebook were taking most of the advertising revenue of the world. Now I know why every newspaper seems to be behind a paywall now.
If the stock market keeps at ATH and consumer spending stay buoyant I expect home prices to dip/level off before a move higher
A decline in tax revenue assumes that local governments actively accept the loss by giving out lower assessments, and passively accept it by not adjusting the tax rate.
Some locations that are allergic to taxation will fall prey to a property value decline. But others will just adapt. Property value declines don’t necessarily decrease income so there’s little inherent reason that total taxation must decrease.
I wonder if the big banks and mortgage companies are looking at how many mortgages in their portfolio are at those peaks in 2022-2023 and are making contingency plans for the eight year point (average life of mortgage). Some of these people (sellers and/or mortgage holders) are going to take a pretty good haircut when it comes time to sell/move.
I keep thinking of the line in “Margin Call” when the Jeremy Irons character John Tuld says:
” I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more. And standing here tonight, I’m afraid that I don’t hear – a – thing. Just… silence.”
Banks are not too worried. They washed their hands off most of the mortgages.
The government now guarantees a big majority of the mortgages and packaged them into MBS and sold these to investors. Not even the investors carry credit risk; only the taxpayer does.
Many of the remaining mortgages were packaged into private-label MBS and sold to investors, but these investors do carry the credit risk. Still banks are off the hook.
There are only $2.3 trillion in residential mortgages on bank balance sheets, and that includes 2-4-unit multifamily loans. That’s only 18% of the total household mortgage debt. But the percentage is even smaller since the $2.3 trillion includes 2-4-unit multifamily buildings that are not part of the household mortgage debt.
This is one of the big changes coming out of the financial crisis: the banks will walk away from the next housing crash with a bruise, but the taxpayer will get mauled. But no one cares about the taxpayer.