Connect with us

Housing Crash Imminent: As Mortgage Rates Explode Price Cuts Soar And Buyer Demand Collapses

Housing Crash Imminent: As Mortgage Rates Explode Price Cuts Soar And Buyer Demand Collapses

A little over a month ago, when mortgage rates…

Published

on

Housing Crash Imminent: As Mortgage Rates Explode Price Cuts Soar And Buyer Demand Collapses

A little over a month ago, when mortgage rates were still "only" 5% we shared several devastating anecdotes from real estate agents and industry execs who validated our worst fears: US housing was imploding... fast, with subsequent observations only confirming this dire conclusion about the state of the most popular asset class among the US middle class.

Fast forward to this week when things have gone from worse to catastrophic, because with 30Y mortgage rates soaring at the fastest pace on record to above 6%, or levels last seen just before the housing bubble burst...

.... sending the average mortgage payment on a median mortgage up by almost $800 in just the past 6 months...

making housing the most unaffordable in history...

... sending new home sales plunging at the fastest pace since the peak of the covid crisis after the longest negative streak since 2010...

... and homebuyer sentiment imploding to the lowest level in generations...

Which brings us to the latest housing market summaries from real-estate brokerage RedFin, which are not pretty.

The first shows that after the period of unprecedented gains for home prices and a uniformlly sellers market, has flipped, and according to Redfin, the highest share of sellers on record dropped their list price during the four weeks ending June 12 as mortgage rates shot up to levels not seen since 2008, collapsing the pool of potential home shoppers.

In the Austin, Texas, and Nashville, Tennessee, metro areas, the share of new-construction offerings with price cuts has quadrupled from a year earlier, according to Redfin. They tripled in Phoenix and doubled in the Tampa, Florida, region.

“We are in a different place — the builder can no longer name a price and say, ‘pay it or move along,” said Nicole Freer, a Houston agent who has slashed prices by $2,000 to $20,000 on homes she lists for builders. “They’re telling us: ‘Our managers have allowed us to negotiate again.’”

Still, despite the clear cracks in housing, homebuying has never been more expensive. Due to delays in pricing, the typical buyer with a 30-year fixed-rate mortgage is looking at a monthly payment of $2,514, up from $1,692 a year ago!

But those who remain in the market may notice they face less competition from other buyers.

Homes are more likely to sit on the market for a few weeks, compared to last year when they would go under contract within a week...

... and home prices are being bid up less often than they were earlier in the spring.

“The housing market isn’t crashing, but it is experiencing a hangover as it comes down from an unsustainable high,” said Redfin deputy chief economist Taylor Marr. “Housing demand has already cooled significantly to the point that the industry has begun facing layoffs. This week’s rate hikes will further stretch homebuyers’ budgets to the point that many more may be priced out. While a lot of home sellers are already dropping their prices, more homeowners will likely decide to stay put now that the mortgage rate on a new home is significantly higher than their current one.

“If it weren’t for the surge in mortgage rates, the housing market would still be in a boom right now,” said Redfin Bay Area real estate agent James Cappello. “Demand from homebuyers was still extremely high as recently as February, but rates are making it really tough. Going from 3% to nearly 6% almost instantly has scared a lot of people out of the market.”

There's more. In a subsequent report, Redfin reports that competition for existing inventory is collapsing with 57.8% of home offers written by Redfin agents facing competition on a seasonally adjusted basis in May, the lowest level since February 2021. That’s down sharply from a revised rate of 60.9% one month earlier and a pandemic peak of 68.8% one year earlier, and marks the fourth-consecutive monthly decline. On an unadjusted basis, May’s bidding-war rate was 60.8%, down from 67.8% in April and 71.8% in May 2021.

As a result of declining competition, the typical home in a bidding-war received 5.3 offers in May, down from 6.8 in April and 7.4 in May 2021.

“Homes are now getting one to three offers, compared with five to 10 two months ago and as many as 25 to 30 six months ago,” said Jennifer Bowers, a Redfin real estate agent in Nashville.

“Offers also aren’t coming in as high above the list price as before. I recently listed a three-bedroom, three-bathroom home in a super cute neighborhood for $399,900. It ended up going under contract for $12,000 above the list price with an inspection, whereas three months ago, the buyer probably would have paid $60,000 over asking and waived the inspection.”

In light of the above, it's not surprising that today Bloomberg reports that "the fastest-rising mortgage rates in decades have cooled demand so abruptly in many hotspots that it took the industry by surprise. Builders that were artificially limiting sales and auctioning houses to the highest bidder now have inventory to move."

It’s part of a rapid shift in the US housing market as the Federal Reserve sharply raises interest rates to tame inflation, sending home-loan costs to the highest level since 2008 and straining buyers whose affordability limits were already being tested. Just this week, brokerages Compass and Redfin said they would slash jobs, as economic data showed housing starts dropped to the lowest level in more than a year and homebuilder sentiment is at a two-year low while homebuyer sentiment is the lowest on record.

The market has certainly noticed the collapse in housing, and share prices for builders have collapse, with the Supercomposite Homebuilding Index tumbling 42% this year through yesterday, almost double the 23% drop in the S&P 500.

Builders, who last year had so much power that people would wait in line overnight for homes they would meter out, are now contending with both falling demand and high material and labor costs. And with the Fed signaling more big rate hikes in coming months, they’re eager to get contracts signed before house hunters pull back even more.

In Sarasota, Florida, would-be buyers are hesitating because homes are taking so long to build, and it’s impossible to know where borrowing costs will land by the time they’re completed, said Donnette Herring, a Realtor with Keller Williams.

“Inflation makes them nervous,” Herring said.  

The signs of a shift are still early. Conditions vary from region to region and even between subdivisions, including many where demand still far outpaces supply. And rather than cutting prices, many builders are offering incentives such as free upgrades, money toward closing costs and subsidized mortgage rates. But the market is changing fast, said Ali Wolf, chief economist at Zonda. Her company, which tracks new construction, began hearing of price cuts toward the end of May and into June.  

“The builders that are cutting prices are also those that raised prices the most over the past six to 12 months,” she said.

Many of those are in areas that were favored destinations for pandemic migrants who have been moving from pricey regions in search of cheaper homes and more space. In the Phoenix metropolitan area, 22% of new-home listings had price cuts from May 9 through June 5, up from 7% a year earlier, according to data from Redfin. In Tampa, the share jumped to 21% from 9% a year earlier, and in Austin, it climbed to 13% from just 3%.

The cuts have come from both small private builders and big public ones, including D.R. Horton, Meritage Homes and Lennar according to listings in Florida, Texas and Arizona publicly available on sites such as Redfin and Realtor.com. A PulteGroup website shows 146 finished homes in Arizona, mostly with price reductions. Jim Zeumer, vice president of investor relations, said those appeared to be typical incentives used to sell spec houses -  those built without a buyer in place - that are complete or will be finished soon.

“We will typically have one or two finished specs in a community but use incentives to manage inventory levels over the life of a community,” Zeumer said.

During the recent boom, many builders were waiting until homes were nearing completion before allowing buyers to purchase them because of uncertainty around materials and labor costs. As a result, they have a flood of new homes that need to be matched up with buyers.

In the Houston region, it’s the fast-growing areas further from the city, such as Conroe to the north and Alvin to the south, that are cooling the most, said Freer, the local agent. Builders who were only selling homes that were almost done now are telling her that they’ll take orders for “dirt.”

Of her roughly 120 listings for builders, about 70% now have cuts, she said. Soon it will be 100%.

A key metric to watch is the contract cancellation rate, said Rick Palacios, research director at John Burns Real Estate Consulting in Irvine, California. It topped 9% nationally in May, according to his company’s survey of builders, up from 6.6% in April. That’s still short of the 16% pace after the pandemic lockdowns first took hold two years ago.

“The writing is on the wall that more supply is coming, no matter how you slice and dice the data,” Palacios said. “Builders are trying to get in front of that wave. We could have the double-whammy of the economy cooling and a lot of supply coming on. That’s not the best recipe to sell homes.”

Tyler Durden Fri, 06/17/2022 - 15:20

Read More

Continue Reading

Government

Survey Shows Declining Concerns Among Americans About COVID-19

Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…

Published

on

Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.

(SARMDY/Shutterstock)

What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will  catch the disease and require hospitalization.

"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.

According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.

What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.

"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.

More via the Epoch Times;

The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.

Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.

“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.

COVID-19 No Longer an Emergency

The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.

The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.

“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.

The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.

Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.

The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.

According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.

Tyler Durden Sun, 03/10/2024 - 22:45

Read More

Continue Reading

Government

Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

Published

on

Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

Read More

Continue Reading

Government

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While “Waiting” For Deporation, Asylum

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several…

Published

on

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several months we've pointed out that there has  been zero job creation for native-born workers since the summer of 2018...

... and that since Joe Biden was sworn into office, most of the post-pandemic job gains the administration continuously brags about have gone foreign-born (read immigrants, mostly illegal ones) workers.

And while the left might find this data almost as verboten as FBI crime statistics - as it directly supports the so-called "great replacement theory" we're not supposed to discuss - it also coincides with record numbers of illegal crossings into the United States under Biden.

In short, the Biden administration opened the floodgates, 10 million illegal immigrants poured into the country, and most of the post-pandemic "jobs recovery" went to foreign-born workers, of which illegal immigrants represent the largest chunk.

Asylum seekers from Venezuela await work permits on June 28, 2023 (via the Chicago Tribune)

'But Tyler, illegal immigrants can't possibly work in the United States whilst awaiting their asylum hearings,' one might hear from the peanut gallery. On the contrary: ever since Biden reversed a key aspect of Trump's labor policies, all illegal immigrants - even those awaiting deportation proceedings - have been given carte blanche to work while awaiting said proceedings for up to five years...

... something which even Elon Musk was shocked to learn.

Which leads us to another question: recall that the primary concern for the Biden admin for much of 2022 and 2023 was soaring prices, i.e., relentless inflation in general, and rising wages in particular, which in turn prompted even Goldman to admit two years ago that the diabolical wage-price spiral had been unleashed in the US (diabolical, because nothing absent a major economic shock, read recession or depression, can short-circuit it once it is in place).

Well, there is one other thing that can break the wage-price spiral loop: a flood of ultra-cheap illegal immigrant workers. But don't take our word for it: here is Fed Chair Jerome Powell himself during his February 60 Minutes interview:

PELLEY: Why was immigration important?

POWELL: Because, you know, immigrants come in, and they tend to work at a rate that is at or above that for non-immigrants. Immigrants who come to the country tend to be in the workforce at a slightly higher level than native Americans do. But that's largely because of the age difference. They tend to skew younger.

PELLEY: Why is immigration so important to the economy?

POWELL: Well, first of all, immigration policy is not the Fed's job. The immigration policy of the United States is really important and really much under discussion right now, and that's none of our business. We don't set immigration policy. We don't comment on it.

I will say, over time, though, the U.S. economy has benefited from immigration. And, frankly, just in the last, year a big part of the story of the labor market coming back into better balance is immigration returning to levels that were more typical of the pre-pandemic era.

PELLEY: The country needed the workers.

POWELL: It did. And so, that's what's been happening.

Translation: Immigrants work hard, and Americans are lazy. But much more importantly, since illegal immigrants will work for any pay, and since Biden's Department of Homeland Security, via its Citizenship and Immigration Services Agency, has made it so illegal immigrants can work in the US perfectly legally for up to 5 years (if not more), one can argue that the flood of illegals through the southern border has been the primary reason why inflation - or rather mostly wage inflation, that all too critical component of the wage-price spiral  - has moderated in in the past year, when the US labor market suddenly found itself flooded with millions of perfectly eligible workers, who just also happen to be illegal immigrants and thus have zero wage bargaining options.

None of this is to suggest that the relentless flood of immigrants into the US is not also driven by voting and census concerns - something Elon Musk has been pounding the table on in recent weeks, and has gone so far to call it "the biggest corruption of American democracy in the 21st century", but in retrospect, one can also argue that the only modest success the Biden admin has had in the past year - namely bringing inflation down from a torrid 9% annual rate to "only" 3% - has also been due to the millions of illegals he's imported into the country.

We would be remiss if we didn't also note that this so often carries catastrophic short-term consequences for the social fabric of the country (the Laken Riley fiasco being only the latest example), not to mention the far more dire long-term consequences for the future of the US - chief among them the trillions of dollars in debt the US will need to incur to pay for all those new illegal immigrants Democrat voters and low-paid workers. This is on top of the labor revolution that will kick in once AI leads to mass layoffs among high-paying, white-collar jobs, after which all those newly laid off native-born workers hoping to trade down to lower paying (if available) jobs will discover that hardened criminals from Honduras or Guatemala have already taken them, all thanks to Joe Biden.

Tyler Durden Sun, 03/10/2024 - 19:15

Read More

Continue Reading

Trending