A top real estate economist offers one word to describe the housing market: You can’t buy
If there was one word to best describe the real estate world at the time, what would it be—impossible, perhaps? That seems to be the case for Redfin chief economist Chen Zhao, who said earlier this week: “Unaffordability is the issue in the housing market right now.”
In an interview with CNBC Zhao discussed the newly released data, which found home prices rose 6.5% in March compared to a year earlier, and Redfin’s data, which found they rose 7.3% in April. from last year.
He said: “There doesn’t seem to be much relief in terms of home price growth. “For the average consumer, what that really means is that, as long as stocks are tight, which they have been and the last few years, home prices really look like they’re going to continue to appreciate at a faster rate.”
We are about two to seven million homes short, according to one estimate. And mortgage rates that have been rising since their pandemic dried up the available supply because no one wants to sell their home and offer a low mortgage rate for a much higher one in the neighborhood. currently (where the Federal Reserve has raised interest rates several times in order to deflate prices).
That’s part of why existing home sales hit a nearly 30-year low last year, and are still falling (down about 2% month-over-month and year in April). Not to mention, pending home sales fell 7.7% in April from March, according to data released today, and all areas across the country saw monthly and year-over-year declines in signings. contract. It is important to note, inventory levels are better than last year, but still lower than normal seasons.
“The impact of rising interest rates throughout April has dampened home prices, despite a glut of inventory on the market,” National Association of Realtors chief economist Lawrence Yun said in a news release. Thursday. The hope is that the Federal Reserve will cut interest rates once this year and that should result in better conditions, or more supply, and improved prices, he said.
In terms of supply (and local values) there are differences, as Redfin’s Zhao pointed out. The Sunbelt is the place everyone seems to be talking about. In the world of real estate, right now, who you are can influence your vision in any space. As an investor, he “sees a big weakness” in the Sunbelt, Zhao said, because there is so much supply that it stops home price appreciation and, in some cases, lowers the value. In fact, for anyone who wants to buy a house to live in, that’s a good thing.
Either way, “the consensus now is that the Fed will be able to taper in September,” Zhao said. “I think there is a possibility that the inflation data that comes out in mid-June or mid-July may be better than expected, in which case July is back on the table… July has the potential to to be the best person. a little bit away from the November election.” (There has been debate among economists about the Fed’s decision-making and independence in an election year).
But if you’re a local buyer, the difference between July and September might not matter much, he said. However, “we should expect a slight reduction in the rate during the second half of the year.”
Indirectly, interest rate cuts from the Fed could lower mortgage rates, which as of the latest daily reading sit at 7.29% – down from more than a year twenty reached in October last year, above 8%, but much. higher than the sub-3% rate seen throughout the epidemic.
But here’s the thing: More supply (expected to come to the market when mortgage rates ease) won’t solve everything. “Home prices are very high, but the rate of interest should come down with more supply,” said NAR’s Yun. “However, the prospect of a measurable decline in home prices appears weak.”
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