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Cracks Emerging In Housing Market Foundations
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Between home price inflation and rising interest rates, the US housing market is not having a good summer. 63,000 home sales were canceled in July alone.
Nationwide, roughly 63,000 home-purchase agreements fell through in July, equal to 16.1% of homes that went under contract that month. That’s the highest percentage on record with the exception of March and April 2020, when the onset of the coronavirus pandemic brought the housing market to a near standstill. It’s up from a revised rate of 15% one month earlier and 12.5% one year earlier.
While real estate agents are not anticipating an immediate collapse in housing prices, the rise in contract cancellations is the latest data point suggesting the housing market is cooling off.
“Home-purchase cancellations may begin to taper off as sellers get used to a slower-paced market,” said Redfin Deputy Chief Economist Taylor Marr. “Sellers have already begun to lower their prices after putting their homes on the market. They’ll likely start pricing their properties lower from the get-go and become increasingly open to negotiations.”
Rising rates on home mortgages are helping to magnify the cancellation trend, as more and more prospective buyers are unable to afford the increased mortgage payments that ensues.
Inflation plus the Fed's war against it is slowly strangling the housing market.