Mortgage Rates are going up, Homes sales are falling, Home prices are going down, and Banks are tightening!
According to Reding, “the typical U.S. homebuyer’s monthly housing payment hit an all-time high of $2,538 as average weekly mortgage rates rose to 6.39% after five consecutive weeks of declines”. Home sales have fallen another 2.6% and homes prices fell 3.3% year over year. Banks are tightening to levels not seen since early 2020 and 2008 as they hit the discount window at 5% to new records (higher than 2008-2009).
Now if you have been following my posting on LinkedIn this is no surprise. Home prices will start hitting double-digit declines by June/July just when we hit a new crisis with the debt ceiling because we don’t have enough problems already.
Now many in the real estate industry are defensive and still claim low supply and home prices to rise this year. Not sure if this is just a marketing narrative or a complete lack of understanding of macroeconomics. If banks are sitting on potential large losses, the Fed not coming to save them, and households leveraged to their nose is not a sign that maybe the exuberance in real estate should be curtailed a bit I don’t know what is.
When banks borrow at record levels at 5% versus .50% in 2008, sitting on long-term assets with low rates, have deposits flights or asking for higher rates, and they are curbing lending at the fastest rate since the GFC this is not a good sign. Maybe dialing down the enthusiasm should be appropriate.
There is risk out there and the risk hasn’t been this high since the GFC. To just continue the same old narratives of real estate prices only going up is not going to have the public praising and trusting the industry if and when the risk turns into reality.
The responsibility of the industry is to make sure the public is protected. The best way to protect the public is to give them accurate data and factual opinions, not narratives.
