In August, 66% of consumers reported that it’s a good time to sell a home, compared to only 18% who said it was a good time to buy a home. Additionally, despite the significant rise in rates over the last couple of years, only 18% expect mortgage rates to go down in the next 12 months. Overall, the full index is up 4.9 points year over year. Such unusual housing market dynamics contribute to a general stall in consumer sentiment, Duncan suggested.
“The index tends to move slowly in different directions, but it rarely plateaus and right now it’s sort of plateaued at the same place for about five months,” Duncan said. “That’s unusual in the history of the index, which typically moves from month to month. It’s sort of a signal that people have resolved themselves to living with the current level of house prices and interest rates for a while.”
He pointed to even more aberrations to what we once knew. “There are two things in the market today, two measures, that are anomalies,” he said. “One is there’s a long term relationship between the share of homes sold which are new homes versus the share of home sold that are existing homes.
“Today, the share of total home sales that are new home sales is the highest it’s ever been. So the lock-in effect of low interest rates and the Boomers aging in place has meant it has pushed the business more toward new home sales and construction,” Duncan said. “Then within new home sales, the first-time homebuyers’ share of new home sales is the highest it’s ever been.”
Builders putting the cart before the horse
Builder behavior yields another oddity, as Duncan noted: “So one of the things that you’ve seen that is unusual is when builders are typically trying to work down inventory they all offer attributes of the house – a finished basement, granite countertops, classic things that will add some attribute upgrades to the house to sell the house. But, first-time home buyers are not looking for upgrades; they’re looking for a basic house and their problem is affording the house in the first place.
Comments are closed, but trackbacks and pingbacks are open.