Housing Bubble

Chart of the Day: The Bubble Pops in the US Housing Market – A Crash Coming?

The once sizzling US housing market has shown signs that the party may be over. Is a looming US house crash coming in 2022-23? Let’s first take a look at the US housing market data in charts and see where it is at today.

Are home prices still holding? The Case-Shiller 20-City Composite surged 2.42% MoM (more than the 1.93% expected) and surged by a record 21.17% YoY (more than the +20% expected). Moderating demand is still playing a role. Still, homes spend less time on the market than a year ago, and prices are still rising. See this in the chart below and learn more here.

Case-Shiller Home Price Index 2022-06

And what of housing supply? Realtor.com reveals national inventory of active listings increased by 8.0% in May over the same month last year. It explained a “major turning point in inventory” has arrived, and sellers are fueling this turnaround in inventory, with newly listed homes entering the market at a rate not seen since 2019. One can see this in the chart below.

US Realtor Listings 2022-06

Both the month-to-month leap and the year-over-year leap were the largest leaps ever recorded, both in numbers of unsold houses and in percentages. The supply of unsold new houses spiked in a historic month-to-month leap from an already high 6.9 months supply in March to a dizzying 9.0 months supply in April, having nearly doubled from a year ago. Hence, the housing supply is growing, as can be seen in the charts below.

Housing Supply 2022-05

And what of housing demand? Sales of new houses are registered when contracts are signed, not when deals close and can serve as an early indicator of the overall housing market. See this in the chart below and learn more here.

House Sales 2022-05

What is the home financing picture? Often looking at housing prices alone does not tell the story. At the end of the day, people look at what their house payment will be. The combination of skyrocketing prices and rising mortgage rates caused the typical monthly mortgage payment to reach $1,910 in March 2022, up from $1,423 in March 2021 and $1,280 in March 2020. See this in the chart below and learn more here.

Median Monthly Mortgage Payments 2022-06Homebuyers struggle with spiking mortgage rates which make the high home prices that much more difficult to deal with. And with each increase in mortgage rates and with each increase in home prices, entire layers of potential buyers abandon the market, and sales volume plunges. See the home mortgage rate trend in the chart below.

US Mortgage Rate 2022-05From all this data, one could easily postulate that we are at some inflection point in the housing market. For sure there could be significant softening in the housing market coming – but is a severe housing crash in the cards? Here are a few takeaways to consider.

  • Softening housing market – is definitely in the cards over the next six to eighteen months. If you need to move, you better do it quickly now, or the opportunity will pass until the next cycle.
  • No severe housing crash – could be the state of play as it was in 2008. In 2008 there was a huge build-up in shakey credit mortgage risk that isn’t the same in today’s housing market. This credit risk forced sales that crashed prices in 2008.
  • A different kind of recession coming – the coming recession may not be a job loss recession as in the past. Though some job losses will occur, the coming recession will be more of a wage loss (20 to 50% in purchasing power) recession relative to everything else you buy.
  • Zombie homes – could be the state of play. If you are in a home (with a low mortgage rate) and job, for the most part, it will stay stagnant. Your mobility will be limited. To sell and buy again will be cost-prohibitive. When you do eventually move, most will need to rent or trade down their housing purchases.
  • Increased corporate housing ownership – will become the norm, as private ownership of homes will take a sharp decline. Most of the middle class will become renters.
  • Continued rising home prices – after six to eighteen months, prices could accelerate again under continued government and Fed currency debasement schemes.
  • New taxes – such as unrealized capital gains, will ensure that those who think they have hedged for the housing inflation may not win either.

Time will tell the story of what eventually plays out in the housing market.

See more Chart of the Day posts.

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 RWR original article syndication source.

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  1. Different view …
    Referencing American housing market only, I predict by December 1, 2022 the USA housing market will crash. Home prices will be at least 25% of the high and in some regions as much as 35% , with interest rates hovering around 7.5 to 8 %, and inventory up by 15%. Rental market will remain tight and in high demand but prices will level off 15% lower than present.

    1. You do NOT want to make your move presently or you will be paying inflated home prices and moving costs and any seller will find replacing their sold home with new one is a net gain loss if compatible in size and location. The smart move is to wait till Fall and snap up a newer construction that has bit it in the crash for bargain.

    2. Just like 2008 , but for an entirely different causation – there will be a build – up of residential real estate open up in the market. This time it will be related to personal income and not being able to afford existing mortgages. Generally, those who purchased a home or home builders in the last 2 years and obtained a mortgage to do so – did so in a mortgage banking period that were still practicing variable interests and lack of sound banking principles as in low down payments. Government has been playing in the mix again nearly as bad as before i that led to the 2008 crisis. The concept that most homeowners in America who purchased in the last 5 years were on good financial ground is not accurate. Those who may have been ran into Covid Lockdown head winds and financial turmoil on top of all other issues mentioned.

    3.Recession is what we should all be praying for – more like a deep global depression is on the horizon. It makes no difference if your financial crisis is related to loss of job or loss of wages when the result is the same- you cannot afford your mortgage payments. Inflation means your present budget no matter economic strata is already 20% bleeding over energy and food prices. Wages zero sum gains or actually dropped means making that housing or rental payment becomes a crisis.

    4. Presently , is the Zombie home phenom making a sell and new purchase cost prohibitive and restrictive mobility in play( as discussed in #1) By late Fall when market crashes ,those who have fair financial stability can jump and relocate at a lower cost.

    5. ( Increased corporate housing ownership – will become the norm, as private ownership of homes will take a sharp decline. Most of the middle class will become renters.) I agree there will not be a change in this paradigm to any great degree for the foreseeable future. The Middle Class will become more of the renter class and the cost to rent will fall off some but not return to previous more reasonable levels.

    6. Home prices will fall and remain at those new levels for at least 2-3 years. There is a good chance the whole enchilada goes up in smoke and global economies incinerate. If that is the course we are all looking at a massive cultural /economic transition where the US dollar hegemony is RIP, and life quality in Western countries become that of Third World. The Great Reset will result in one centralized control and quality of life will mean small boxes in cities and public transport central planning and the concept of home ownership will be for most elite only.

    7.Agree, new tax games most likely will be implemented, no matter which face of the Uni party appears to have control in future.

    Bottom line: If you one of the lucky ones whose financial pillars are sound and within your means then you get one shot on the horizon to position yourself for the decade or longer ” Transitions” coming all of our way. Think rationally and make decisions that insulate you as much as possible for the financial/cultural tsunami barreling down .

    Get as independent and debt free as possible and somewhat liquid. This will provide flexibility and resilience to navigate the multiple earthquakes that will be erupting around you. Invest in land, precious metals, mining companies, actual natural and oil drilling companies, and AI/Robotics. Unlike the last 25 years steer away from FANG Stocks and Pharma , both sectors will not weather well without total government prop up and those days are ending as the spigot is tapped.

    The goal should be to relocate away from big cities and own property /home outright when applicable. Down size , prep up , and settle in . Become as free of utilizing the credit system as possible and attempt cash only transactions. Focus on building community network of support and if capable choose a community with sustainable freedom oriented models. This means living near successful independent agricultural / water/ energy systems and local and state gov. who focus on constitutional model and liberty preserving measures. No matter ideology – personal security means get local and choose conservative communities.

    Start right now preparing to take advantage of the drop in housing prices this fall… what comes after is not going to be pretty.

  2. I’ve been through all the crashes and ‘predicted-but-non-crashes’ since the 70’s and this feels like 1995 to me. A predicted crash that fizzled into a flat spot with low growth. Predicting the timing of return to better times is impossible since the radical nature of our current governance is unprecedented and prosperity for the middle class is of no importance to it. It also doesn’t care about our system of checks and balances. That means uncertainty and economies don’t run well on uncertainty. If we are lucky we may move into an extended period of very slow growth.

  3. GREATER DEPRESSION INCOMING!!!! This will make the 1929 Stock market crash seem like a walk in the park………..

  4. Bekah, I believe your predictions are absolutely spot on. I try and make since of what the business channels are shoveling and all I can gather is they are only interested in prolonging the profits they incur in an over valued stock market. I’ve been 100% correct in what will happen in our economy and housing sectors mainly because I am in the true economic engine class. (middle class) It was refreshing to read your comments keep it up.

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Written by Tom Williams

Born down on the farm in America's Midwest, my early life was spent climbing the ladder via a long career in information technology. Starting as a technician, and after earning a degree going to night school, I eventually found a place working at ATT Bell Laboratories as a software engineer.

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