The real estate market in the US, in general, has been having a terrible year, with home prices still on the rise, and a lot of homebuyers basically can’t afford to buy homes, forcing them to favor renting. These and more problems in the US Economy has hurt the real estate market the most, and the first quarter of 2019 makes no difference.
Lakshman Achuthan, in his article at Bloomberg, explained that the housing market is raising a serious red flag with real home price growth looks to have already entered a cyclical downturn. Read the article below to learn more.
Housing Market Is Raising Serious Red Flags
Image Source: Tim Boyle/Bloomberg
Real home price growth looks to have already entered a cyclical downturn that is likely to intensify as affordability worsens.
Despite a robust U.S. economy, at least as measured by gross domestic product, real home price growth is locked in a cyclical downturn. If that’s not bad enough, it will likely get worse based on the same approach and factors that correctly flagged the housing bust — in real time — in early 2006.
Home prices are highly cyclical and, as everyone discovered from the last recession, their movements can have material consequences for the broader economy. Yet, according to the minutes of the Federal Reserve’s Aug. 1 monetary policy meeting, policy makers are only starting to recognize the “possibility” of a significant weakening in the housing sector as a “downside risk.” Our research suggests that real home price growth has already entered a cyclical downturn that is likely to intensify. Data this week is forecast to show a drop in housing starts and existing home sales.
Part of the reason for the worsening outlook in home prices is the plunge in housing affordability, which is generally a function of the ability of a family with median earnings to buy a home at the median price. This metric — the National Association of Realtor’s Housing Affordability Index — recently dropped to a 10-year low, partly as a consequence of rising mortgage rates. But it’s not just about higher borrowing costs. Affordability has also been undercut by the steady rise in the ratio of median existing home prices to the median earnings of full-time wage and salary workers. This ratio recently reached a 10-year high, with the median cost of purchasing a home equaling almost six years of a worker’s earnings before easing slightly, according to our research.
There’s demand for homes, but prices are increasingly out of reach, resulting in a decline in the number of homes sold. This helps explain why, according to the University of Michigan’’s monthly consumer sentiment survey, home buying attitudes recently fell to their worst reading since the end of 2008. A downturn in the growth of home prices is unwelcome news for home builders, as growth in total homes sold has actually turned lower and is back in negative territory. To add salt to the wound, residential building cost growth has ramped up to one of its highest readings on record, according to our calculations. See full post here…
What is even more alarming with the current real estate prices being locked in a cyclical downtown is that this is all happening despite a robust US Economy. Also, another reason for this worsening outlook in home prices is the serious plunge in housing affordability, meaning more and more middle-class earners can’t afford to purchase a home on its current price.
For some experts, however, they are thinking of history repeating itself. DSNews asked this very important question everyone must know the answer. Read more below for more information.
Is History Repeating Itself?
Image Courtesy of DSNews
Warning signs are flashing in the housing market, says Lakshman Achuthan, COO and Co-Founder of the Economic Cycle Research Institute in New York. Achuthan recently published an article with Bloomberg in which he discussed the decline in growth in real home price since the summer of 2018 began.
This drop in home prices has been closely monitored across the industry, as seen in a recent report on the Redfin Housing Demand Index showing demand flat for a third consecutive month. But Achuthan goes further, claiming research done at his institute indicates real home price growth hasn’t just declined in recent months, but rather has “entered a cyclical downturn that is likely to intensify.”
This trend in decline home price growth, he suggests, very well could lead to an actual drop in housing values, reversing significant gains made since housing prices plummeted in the wake of the subprime mortgage crisis.
“With rates rising and the broader economy in a stealth slowdown that few recognize,” Achuthan warns, “stock prices are vulnerable to corrections… In this context, the home price downturn raises the risk of generalized asset price deflation that could result in a negative wealth effect for the first time since the financial crisis.”
As underlying factors fueling this downturn, Achuthan points to forecasts in data which reveal a drop in housing starts and existing home sales, both trends have been discussed by our sister publication, MReport, here and here. Click here to read the rest of this post…
Experts already made their forecasts about the real estate market and they’re worried about its performance in the first quarter of 2019. Based on the facts and data above, they actually have valid concerns. The first quarter of 2019 is over and the trend does not look good either.
Jessica Guerin of Housing Wire published an article about average home lost has already amounted to $2,440 since this summer alone. More information about this news below.
Average Home Lost $2,440 in Value Since This Summer
In December, the average home declined 0.8% in value since August 2018, equating to a loss of $2,440, according to the latest report from Black Knight.
December marked the 10th straight month of slowing home price appreciation, and in that month alone the average home lost $850 in value.
Image Source: Black Knight
Black Knight estimates that home prices appreciated 4.6% in December, down from a high of 6.8% in February 2018. It predicts that January numbers will follow a similar trajectory.
Still, Black Knight points out that the rate of appreciation is still above the historical average.
“It’s important to keep in mind that annual growth is still outpacing the 25-year average of 3.9% – although the gap is closing quickly,” the report said, adding that the impact lower mortgage rates might have on home prices still remains to be seen. Original post here…
With the number of losses the housing market has experienced since summer, the real estate market in general looks to suffer even more in the next couple of months, even years. It would also take some time for the market to fully recover in terms of housing price, affordability, etc.
With bad news lingering in the real estate and housing market, there is a saying that perfectly fits for the current situation. Be greedy when the others are fearful. With that, it is actually a good opportunity to sell your house fast since there’s a little competition. If you need some help in selling your house, Dependable Homebuyers can help you with that. For more information, visit us at https://www.dependablehomebuyers.com.
