![]() The iShares Home Construction ETF ( BATS: ITB) is down a bit more than 30% for the year, but if the situation on the ground is as bad as it appears, then it might be headed a lot lower. The developing crash in housing prices has profound implications for anyone looking to buy a house, as well as for investors in housing stocks. ![]() The market needs to get back into a balance between supply and demand (emphasis mine). ![]() The housing market was very overheated for a couple of years after the pandemic, as demand increased and rates were low. And the Fed is telling you what's about to happen if you read between the lines (and maybe even that they want/need it to happen). This smashes the all-time record set in 2006.Įconomic models will tell you that compared with sluggish wages and skyrocketing interest rates, home prices are as much as 75% overvalued in formerly hot housing markets. Decreased demand comes just as a tsunami of new supply is about to hit the market, with over 1.7 million privately owned homes currently under construction.Mortgage applications for purchases are considered to be the best leading indicator of future sales that will close in the months ahead- they're down 42% year-over-year and continue to fall each week.30-year fixed mortgages are at 7.3% and rising after the Fed meeting.Prices are falling as much as 4% per month in some formerly red-hot markets.Incredibly, recent reporting shows that home prices are now falling faster than they did during the run-up to the 2008 financial crisis. In a matter of months, the pandemic housing boom has turned into a rapidly spreading bust.
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