“The red-hot US housing market may finally be cooling off, the economist Ian Shepherdson says. In recent notes, the Pantheon Macroeconomics founder laid out data pointing to a market slowdown. He says the slowdown is in its early stages and will unfold in the months ahead.”
This is a quote from the Business insider this past week. Allow me to continue with his analysis which is consistent with what I have been saying for months.
Falling demand would also affect housing availability. Shepherdson, who was one of several prominent economists and analysts who predicted the subprime-mortgage crisis and housing crash of 2007-2008, pointed out that existing-home sales had started to fall, helping add to the availability of houses on the market.
He predicts that the number of existing-home sales is likely to continue falling in the months ahead, adding much-needed balance to the overheated housing market. He says he expects monthly sales to total 4.5 million by the end of this summer — a major contrast with the roughly 6 million existing homes that were sold in February.
New-home sales are also starting to fall — a trend Shepherdson says will continue. And it's this combination of rising mortgage-interest rates and falling demand that is starting to bring down price growth, Shepherdson said.
"Prices recently have increased much faster than implied by the inventory numbers, perhaps because the shortage of inventory of existing homes has pushed up demand for new properties, but our second chart shows that they are starting to correct. This process has much further to run," he added in an email to clients Wednesday.
He also said he expected rental-price growth to begin to fall, probably next year.
Some other notable real-estate market experts have also recently published research or made comments that line up with Sheperdson's forecast.
Scott Buchta, the head of fixed income strategy at Brean Capital, said on Wednesday that he expected price growth to start to "level off" later this year, falling to about 4% to 8%. Home prices are up 19.2% over the past year, according to the S&P/Case-Shiller US National Home Price Index.
Desmond Lachman, a senior fellow at the American Enterprise Institute who previously served as a deputy director for the International Monetary Fund, recently told Insider that rising interest rates would be a major drag on home prices, even if demand continued to outpace supply in the market. This is because higher mortgage rates directly affect a borrower's buying power by reducing the total home price that buyers can realistically afford.
David Greene, who hosts the "BiggerPockets" podcast and owns a mortgage company, told insider in early March that the housing market's biggest price gains were still yet to come.
"Prices are going to continue to grow," he said. "I think they're going to grow faster than we can get a handle on them. I think this spring is going to be one of the busiest and hardest home-buying seasons that we've seen in my lifetime."
This is consistent with what I have been saying for some time. Prices will go up this spring but begin to slow down as the year continues. Whether we will see growth next year is not known but statistic bear out that we are at the top as does valuations.
This is the time to sell rentals and move if you intend to do so. You will get perhaps the best price this year as well as a strong demand for your property. Don’t hesitate because this is an opportunity to make a huge profit.
Changes are indeed starting to unfold in the real-estate market. Demand is falling, and inventory is rising. But how deep and lasting these trends will be remains to be seen. With the Fed signaling its unwillingness to back off from rate hikes with inflation at generational highs, the outlook for continued price growth isn't as rosy as it was even six months ago.
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