Worst construction-cost inflation ever is rising less crazy-fast as demand plunges. If builders want to bring in buyers and sell houses, they’ve got to cut prices – and by a lot: And now with much higher mortgage rates, at those crazy prices, sales volume has collapsed, cancellations have spiked, traffic of prospective buyers has plunged. Note the crazy price distortions since then.
The three-month moving average, which irons out some of the month-to-month ups-and-downs of the median price, fell for the second month in a row, the first such declines since the lockdown months. In a moment, we’ll look at the three-month moving average, which gives a clearer picture: This was down by $20,000 from the peak in April, whittling down the year-over-year gain to 8.2%, the smallest gain since November 2020. The median price of new single-family houses that were sold in July rose to $439,000, not quite undoing the plunge in June. Prices must come down at these mortgage rates, and they’re starting to. This was the highest since the worst months of Housing Bust 1 in late 2008 and early 2009:īy region, unsold inventory jumped in three of the four regions, in terms of the percent increase year-over-year: Supply of unsold new houses spiked to nearly 11 months of sales, on this surge in inventory and the collapse in sales.
Inventory for sale in all stages of construction jumped to 464,000 houses, up by 28%, from July last year, and the highest since March 2008: Suddenly no “housing shortage”: Inventories and supply spike to high heaven. Homebuilders know this because they have been lamenting for months the plunge in traffic of prospective buyers, according to the survey of homebuilders, conducted by the National Association of Home Builders:
Sales obviously would be a lot higher if prices were a lot lower, and more people could actually buy at these mortgage rates – today, the average 30-year fixed rate is at 5.7% again, according to Mortgage News Daily – but it takes a sustained plunge in volume to hammer the message into increasingly motivated sellers what they need to do if they want to sell: They have to go where the buyers are, and the buyers are a lot lower.
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