U.S. housing market collapse might have already started

NEW DELHI (CoinChapter.com) — The U.S. housing market is likely collapsing as the pandemic’s red-hot sector has cooled rapidly in recent months.

High inflation and rising borrowing costs have likely contributed to the buyers pulling out of the market. Moreover, typical property values are falling month-over-month in nearly a fifth of major areas in Aug.

Although the cooldown was necessary to restore affordability to the housing sector, the challenge was to prevent the deceleration from becoming a collapse. However, it seems the federal reserve has failed to stop that, with several experts believing that the U.S. housing collapse is already here.

Dan Tapeiro, a veteran macro investor, tweeted that the “U.S.S. housing collapse [is] just starting.“

He shared a chart that showed the price action of thU.S.S. housing market since Jul 2021. The chart shows that home prices have been steadily declining since Mar this year.

Furthermore, real estate investor Graham Stephan also highlighted the storm brewing in the housing market, highlighting home sales are down 20%, with mortgage demand now at a 22-year low.

Meanwhile, the number of new houses on which construction plunged by 9.6% to about 1.4 million in July, well under the projections of more than 1.5 million, per the Census Bureau’s report. Moreover, home builders’ sentiment is at its lowest since 2020, with buyers canceling home sales at the fastest pace in two years.

U.S. Housing Collapse Imminent, Suggests Data

Rapidly rising mortgage rates are largely to blame for home sales numbers falling. Existing homes in Jul sold at a seasonally-adjusted annual rate of 4.81 million units, the lowest level since Nov 2015 (excluding the market’s freeze at the beginning of the pandemic).

Historically low rates in 2020 and 2021 helped raise the annual sales numbers to levels unseen in more than a decade. However, following the recent rate spike in the 30-year mortgage rate, prospective buyers have pulled back.

With rates not likely to lower anytime soon, the conditions have led economists to use ‘recession’ to describe the U.S. housing collapse. In an Aug note, Fitch Ratings warned of a severe downturn in the sector.

The firm predicted only a “moderate pullback” in the U.S. housing market, marked by a mid-single-digit decline in activity next year. However, the firm also warned that housing activity could fall by nearly 30% over a multi-year period in a worst-case scenario.

Meanwhile, the typical home values adjusted by 0.7% in Jul, per the S&P CoreLogic Case–Shiller Home Price Indices. In detail, the index tracks the monthly change in the value of single-family homes in the U.S.

The index rose 18% year-over-year in Jun, down from 19.7% in May. Moreover, the annual appreciation slowed in 10-city and 20-city (non-seasonally adjusted) indices. Despite the markets falling monthly, the dips are not enough to undo the rapid appreciation that occurred since the onset of the pandemic.

In addition, Goldman Sachs predicted that the housing market has “further to fall,” with home price growth likely to slow down in the next couple of quarters.