After banking crisis, the housing market faces even more uncertainty
After banking crisis, the housing market faces even more uncertainty
New data from the National Association of Realtors showed a 14.5% increase in home sales in February, a huge increase relative to expectations.
Existing home sales have gone down consistently every month for an entire year now. Inventory has also been at historic lows. While today’s data may be good news for the industry, it comes against a fresh backdrop of bank collapse and general recession anxiety.
Robert Padilla and his wife Patricia have been looking for a house to buy in Santa Fe, New Mexico, for about a year.
“It’s just the two of us, but we have family that we’d like they come down to visit us,” Padilla said. “So we wanted a three bedroom, two bath.”
But there hasn’t been much to look at in their price range — which is about $350,000. Padilla works as a security guard for public schools. The houses they’ve seen have been disappointing.
“The roofs are leaking,” he said. “They’ve had animals living in there. chickens. I mean we just can’t do that.”
If mortgage rates were lower, Padilla says they’d be able to look at nicer houses. Rates have come down from their high of more than 7% last November. But with rates around 6.5%, buying is out of reach for many home shoppers.
It’s all a bit of a negative feedback loop between buyers and sellers, says Selma Hepp, chief economist at CoreLogic.
“Both sides think it’s a bad time to buy and it’s a bad time to sell,” Hepp said. “And so both are sitting on the sidelines.”
According to her, this trend has been worsening. “Both attribute it to higher mortgage rates,” Hepp said.
And now there’s the uncertainty of a banking crisis to factor in. “A lot of the expectation is that mortgage rates may again go up, and that we will see a tightening of lending conditions,” she said.
Hepp also points to consumer sentiment being low as an obstacle. Logan Mohtashami, a lead analyst for HousingWire, agrees.
“A friend of mine that works in the lending industry, told me that a homebuyer just took all the money out of out of their bank, because they were afraid that the bank was gonna go under,” Mohtashami said. “They said, ‘We don’t want to even buy a house, we just don’t want to lose our money.'”
But Mohtashami and other analysts do see a flicker of hope for the housing market going forward.
“Rates may decrease even further in the coming weeks depending on reactions to the financial market,” said Nadia Evangelou, a senior economist for the National Association of Realtors, the group that releases the monthly home sales reports.
Evangelou said she is cautiously optimistic because contract signings rose significantly for the second straight month and that’s a good indicator for home sales. But like many analysts and would-be home buyers and sellers — she’s holding her breath for the federal reserve’s next move.
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