Current State of the Housing Market

Today, in the Calculated Risk Real Estate Newsletter: Current State of the Housing Market

A brief excerpt:

This is a market overview for mid-August.
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The early local market reports for July show inventory up over 46% YoY for these markets! These same markets were up 20% YoY in May, so the NAR report for July will show further increases in inventory.

It is important to realize inventory is both increasing and still very low. Here is a graph from Realtor.com’s July Housing Trends Report. This shows their estimate of active inventory over the last six years. Currently inventory is rising, but still far below normal.

Since inventory was declining rapidly for most of 2020, and it is very likely that inventory will be up in August or September compared to 2020.
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We are seeing a sharp slowdown in the housing market, with more price reductions, more inventory, and fewer sales. It will take some time to see the impact on house price growth, but that is coming too. However, inventory growth has slowed recently, and inventory is key for predicting house prices.

Next week, existing home sales will likely show a sharp year-over-year decline in sales for July - with sales below 5 million SAAR for the first time since the first few months of the pandemic. Housing starts will probably show further declines (and still a record number of homes under construction).

It is important to remember that housing is a key transmission mechanism for Federal Open Market Committee (FOMC) policy. As long as inflation remains elevated, the Fed will keep raising rates - and that will impact the housing market (although mortgage rates have already jumped in anticipation of the FOMC actions).

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