Thoughts on Housing

Let’s talk housing.

30-year mortgage rates are now 5.2% (or thereabouts). This is a double off the low.

Coupled with significantly higher prices, this has caused mortgage payments to shoot up. From Charlie Bilello

In Jan 2021, the 30-yr mortgage rate was 2.65% and average new home price in the US was $401,700.

Today, the 30-yr mortgage rate is 5.23%, and average new home price is $570,300.

Assuming a 20% down payment, that’s a 94% increase in the monthly payment (from $1,294 to $2,514).

Applications for a mortgage fell 7% for the week and are 21% lower than the same week a year ago. This stat is at a 22-year low.

Refinance demand dropped 6% for the week and is down 75% year-over-year. Those looking to pull money out of their house are doing it with a second mortgage, not a refi.

Here are some comments/quotes from builders around the country, via Rick Palacios.

Austin builder: “Some parts of town where finished homes are now taking a month to sell versus hours. Market is definitely correcting. Incentives are back and seeing some builders cutting prices on inventory.”

Baltimore builder: “Customers now mentioning potential reduction in prices and/or increase in incentives.”

Bend builder: “Market drastically changed in last month. Traffic slowed significantly. Sellers of both new and used homes are dropping prices.”

Birmingham builder: “Steep decline in sales over past 2 weeks.”

Boston builder: “Recently started seeing drop off in buyers wanting to get on interest list. A release of 4 new homes this past weekend may be the first one in quite some time that is not fully sold out from buyers on our waiting list.”

Charlotte builder: “Still not meeting [sales] goal and seeing less traffic, with people taking longer to make decisions. Some close-out communities are not getting traffic.”

Columbus builder: “May traffic down 25% from April and don’t expect June to compare well to May.”

Dallas builder: “Lower priced, outlying communities have slowed. Interest lists are nearly half of what they were.”

Denver builder: “Higher rates are definitely bringing a chill to the market.”

Greenville builder: “Lowest traffic in many months.”

Harrisburg builder: “Market is soft, inventory is building. Missed May projected sales by 50%.”

Houston builder: “Home prices hit a ceiling and incentives are starting to show up.”

Jacksonville builder: “Released 4 inventory homes in a HOT community and only sold 1 (first time haven’t sold them in under 48 hours in more than a year).”

LosAngeles builder: “Seeing more cancellations due to payment shock for those in backlog that didn’t lock rates.”

Nashville builder: “Most builders are cutting speculative housing starts by 15%.”

Philadelphia builder: “Forced to reduce some pricing and become more competitive.”

Phoenix builder: “As interest rates rise and pricing continues to escalate, there’s no way we can sustain the type of sales rates we are used to.”

Portland builder: “Incentives are back in the market.”

RiversideSanBernardino builder: “Pricing in this market will correct by 5-10%. If this administration lets the housing market slide because of inflation, we’ll probably take some more hits to pricing.”

SaltLakeCity builder: “Had a rough May.”

SanAntonio builder: “Builders are requiring higher earnest money deposits. Rates are impacting buyers due to debt-to-income ratios.”

Tampa builder: “Website and phone traffic slowed dramatically in the past 45-60 days. Longer-term pause in buyer traffic would cause alarm for our 2023/2024 business plans.”

The housing boom is over. I’m not predicting a repeat of 2007-2008, but lower prices and the negative wealth effect that comes with it seem inevitable, if the market didn’t have enough to worry about.

Leave a Reply