Is the housing market starting to slow down? At least a little bit? I’m having a tough time understanding what is actually going on.
The Market is Cooling, right?
To give you an example of why I’m confused, let’s take a quick look at Redfin. During my most recent site visit, I read an article here that posited the market is beginning to cool.
Both pending sales and asking prices began to decline or flatten in the four weeks ending May 30. It’s too soon to tell if these are early seasonal changes or the start of the post-pandemic cooldown we predicted earlier this year.
It also goes on to list all of the indicators that would suggest a cooling market.
- Pending home sales fell 3% from the four-week period ending May 2, compared to a 2% increase over the same period in 2019. Compared to 2020, they are up 38%.
- Asking prices fell $2,500 from the four-week period ending May 23 to a median of $354,975, up 11% from the same period in 2020.
- New listings of homes for sale were down 8% from the same period in 2019, and are down 5% from the 2021 high, which was set during the four-week period ending May 2. During the same period in 2019, new listings fell 2%.
- Active listings (the number of homes listed for sale at any point during the period) fell 37% from the same period in 2020.
- For the week ending May 28, Mortgage purchase applications decreased 3% week over week (seasonally adjusted). For the week ending June 3, 30-year mortgage rates rose slightly to 2.99%.
The Market is Permanently F$%&ed, Right?
Ok, so those are all indicators that the market is starting to cool, but then I watched a video of the Redfin CEO about his Tweetstorm that the market has irrevocably changed for the worse. Per the post I did yesterday, Cultural Husbandry thinks the situation is so bad that America will become violent as a consequence of the housing market(see the rest of his Twitter here).
All this leaves me wondering what the hell is going on? Is the market going to keep cooling with increased but reasonable asset prices, or is it a bubble that is going to pop? Is this a serious threat to America’s economic freedom?
That last take seems a little bit extreme, but it’s what news media is saying. Another thing I don’t totally have a read on is how sensationalist news outlets are being with their reports on the housing market. Similar to the Redfin CEO, The Hill, a news channel I thoroughly enjoy, recently did a similar segment on Wall Street’s grip on the housing market(see the video here).
They basically contend that the “Great Reset” is already well underway and housing is going to be primarily owned by financial institutions. Once that happens, average Americans will never be able to own homes and take part in that form of wealth creation. Again it is an alarmist take. One that I expect a news station to espouse. But, there has to be a scary amount of truth to it, no? I mean just look around. The housing market seems unsustainably hot.
Does Anyone Know What is Actually Going On? Anyone?
Then again, my finance friends say there is nothing to worry about. Maybe that’s because they’re on the buy-side and are #winning. Maybe it’s because all of this housing talk is overblown and we’re going to see a reasonable cooling.
Does anyone know? What do all of you think is going to happen to the housing market? Should I, a lowly Millennial, be fighting tooth and nail to go into 7 figures of debt to own right now, or will it all be alright like it was for the Boomers? Let me know what you think in the comments!