Housing Prices Hit "Breaking Point" Leading to Collapse in Demand

“The affordability crisis may have reached a breaking point in Portland, San Jose, and Seattle,” said Redfin CEO

Buyer Fatigue

Redfin notes June Home Prices Rose 5.7% Year Over Year; Smallest Increase Since December 2016. The key point is buyer fatigue.

“The affordability crisis may have reached a breaking point in Portland, San Jose and Seattle,” said Redfin CEO Glenn Kelman. “After 75 straight months of price increases in these markets that far outpaced wage growth, homebuyers are now becoming selective about which homes to buy, and at what price. The homes that did sell in June still sold quickly, but buyers were significantly more likely to reject homes that were less desirable or aggressively priced by the seller: the percentage of listings in these markets that sold within two weeks declined in June from 61 percent to 52 percent, and the fraction of listings that dropped their price increased from 31 percent to 33 percent.”

“We’ve seen similar signs of buyer fatigue in the past, especially at this point in the season,” Kelman continued. “But in this case the lull has lasted a bit longer and affected more markets than in the recent past. It’ll be interesting to see whether buyers adjust to the latest price increase and come back in force this fall, or if instead we see these markets shift more in favor of buyers.”

Related Articles

  1. Apartment Construction in 2018 Expected to Decline 11% After Strong 6-Year Run
  2. Existing Home Sales Decline Third Month Despite Rising Inventory
  3. Real Hourly Earnings Decline YoY for Production Workers, Flat for All Employees
  4. Housing Starts Unexpectedly Plunge 12.3% in June, Permits Down 2.2%

Once again, signs are adding up that housing has peaked this cycle.

Mike "Mish" Shedlock

Comments (10)
No. 1-10
2banana
2banana

Rising interest rates + DJT new tax laws + QE unwind = the tipping point

Want housing prices to go back to "normal?" Get government out of the business of guaranteeing mortgages. Enforce GAAP. Throw bankers in jail for fraud.

thimk
thimk

well i guess we will soon see how many living units are unoccupied. Appreciation rate will be less than carrying cost. Will this asset class deflate before the stock market?

Six000mileyear
Six000mileyear

The housing and stock markets will have a race to the bottom like last time. Stocks should bottom first since their transactions take a fraction of a second. Housing can take months.

DFWRealEstate
DFWRealEstate

Dallas definitely hitting the wall of affordability. After barely rising at all in May, sales in June turned slightly negative. It will be interesting to see where July numbers land, but I would expect more stagnation with a lack of affordable homes. Additional jobs are great, but home price inflation has far exceeded local wage gains...

Casual_Observer
Casual_Observer

A bigger boom will lead to a bigger bust and take down the broader economy with it. Rates are rising and the crack hit that has been interest rates will go away.