The US housing sector is losing momentum as borrowing rates soar and transactions collapse, but prices are holding up, even in feverish markets during the pandemic.
U.S. older home sales showed a more than 38% decline in November when they peaked for 2022, according to the National Association of Realtors (NAR).
At the end of October, rates on 30-year mortgages, a reference point on the American market, reached 7.16% per annum, the highest for 21 years. They have eased somewhat since then, but still remained at 6.58% at the end of December.
The monetary tightening by the American Central Bank (Fed) launched in March to curb inflation has put an end to the era of very cheap money, which began with the arrival of the coronavirus.
« The market has clearly taken a turn« , explains David Schlichter, the Compass, real estate agent in Denver (Colorado).
« We have gone from the hottest market in history, (…) with goods mostly sold above price in a few days, in a context in which it is no longer rare for transactions to be concluded for less than the amount initially requested.
« This is the best time to buy for a year and a half or two years, if you have a fairly stable job and your contribution is reasonable“, believes Drake, who did not want to give his last name. He is about to finalize the purchase of a house in Austin (Texas), sold at 4% below list price.
Since its all-time high in June, the median home price has dropped nearly 11 percent to $370,700.
But it remains up 3.5% from the same period last year and up 30% from May 2020, just 18 months ago, before the pandemic-driven shopping fever began.
CoreLogic expects only a slight 2.8% decline in average price between November 2022 and November 2023.
No one foresees a re-edition of the crisis of ” subprime“, which had plunged US real estate into a depression for several years, with existing home prices falling 27% between their June 2008 peak and January 2012 trough.
Insufficient stock
First element of market stability: the transformation of the mortgage credit landscape in the United States. From almost 35% in 2006, the share of floating rate loans has dropped to less than 10%.
Benefiting from a fixed rate, the vast majority of borrowers are therefore protected from the tightening of credit conditions, which had triggered insolvencies and foreclosures with the 2008 financial crisis.
Even with the central assumption of a moderate recession this year and the rising unemployment rate possibly prompting some to sell,” the increase in inventories (of real estate) should not really be significant“announces Lawrence Yun, chief economist at NAR.
At present, US home inventory is just over a quarter of its pre-crisis level. subprime“, which maintains an imbalance between supply and demand.
As for new buildings, the pace of construction is gradually accelerating but remains one-third lower than the 2006 rate.
« During the previous cycle, the promoters had built too much, (…) but in the last decade they have not produced enought,” says Lawrence Yun, speaking of a sector still marked by numerous bankruptcies following the financial crisis.
On the demand side, the still historically high price level, combined with escalating credit rates, has driven many candidates out of the market, he explains. ” Many young people who want to buy do not have the necessary financial resources.«
« I would have thought interest rates would have had a more pronounced effect on the market, but that’s not what we’re seeing right now“, moderates however Richard Stanton, of the Stanton Company agency, in Montclair, New Jersey.
« We are still in a market dominated by sellersConsider Levi Lascsak, of the Living in Dallas agency, which focuses on Texas’ third largest conurbation. ” Last year we received an average of 25 or 30 offers for the home. ” Today we have two or three. »
