The Great Slowdown: The 10 U.S. Cities Where Home Sales Are Down the Most
[Article via Realtor.com, By Evan Wyloge] If the housing market of just a year ago still seemed to be moving at quantum speed, today it’s more akin to an interminable traffic jam—with no exit ramps or HOV lanes in sight. As higher mortgage rates have made buying a home ever more expensive, the pool of buyers who can afford to purchase real estate has dried up. Nationally, the number of existing-home sales plummeted 36% in November compared with a year earlier, according to a Realtor.com® analysis of CoreLogic data. (The data did not include sales of new-construction homes.) There were 395,000 sales in November 2021 compared with 251,000 one year later. So home sales have declined by a third across the U.S. But where are they down the most? The data team at Realtor.com found the parts of the country with the steepest declines in transactions. These were often the COVID-19 pandemic hot spots, particularly in the Sun Belt stretching from California to Florida where buyers flocked to over the Past few years and bid up prices to unthinkable heights. Newtonian laws of real estate ultimately prevailed: Markets that went way up ultimately fell back down to earth, hard. Mortgage rates peaked at over 7% in late October and November—more than double what they were just a year earlier. Remarkably, that made the average monthly payment about 75% more expensive* than what it was a year ago. Buyers who needed a mortgage to purchase a home understandably balked, and sales dried up. “This shows how sensitive buyers are to mortgage rates,” says Selma Hepp, chief economist for CoreLogic. These drop-offs have followed in the wake of the homebuying frenzy that took place during the pandemic. The unique market conditions during that period—mortgage rates at record lows, people rushing to find larger abodes, pent-up demand, and an unprecedented number of workers with the ability to work from anywhere—created a huge surge in the housing market. More than 6 million homes were sold in 2021, the most since the run-up to the Great Recession. “Everything is thrown out of whack because of the pandemic,” Hepp says, adding that data still being collected for transactions after November shows some signs of stabilization. “The rate of decline is shrinking, so I think we’re getting near a ‘bottom-out’ or at least an inflection point.” Home prices have come down a little in some parts of the country, but they’re expected to remain high as there still aren’t enough homes for sale in much of the nation. The market has begun to bounce back, but the recent rise in mortgage rates could plunge it back into a freeze. “It’s very uncertain right now,” says Hepp. The list of metropolitan areas where existing-home resale transactions have declined the most was derived from CoreLogic sales data, comparing November 2022 with November 2021. Only one metro per state was included to ensure geographic diversity, and new construction was not tracked. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.) Los Angeles was excluded from the ranking due to data issues. So where are home sales down the most?
USA Surfing Names Oceanside Official Training Ground on Cusp of Upcoming Championships
USA Surfing has named Oceanside an official training ground, while thanking city leaders and the community for their longstanding support for all surfing disciplines. That ranges from shortboard and longboard to stand-up paddle and para-surfing. USA Surfing’s junior team also trains in Oceanside. Oceanside, in fact, soon will host a high-profile event – the USA Surfing Championship competition beginning June 14. Athletes from across the mainland and Hawaii will compete for national titles and qualification to compete internationally. The goal, though, is not just to promote Oceanside’s surf, but also the businesses that serve the travelers ready to ride the waves. “Oceanside has a vibe, multiple great surf breaks, and an authentic community that surfers have loved for decades,” said USA Surfing CEO Brandon Lowery. “We are proud to partner with the City of Oceanside and Visit Oceanside to help more surfers and action sports athletes take advantage of Oceanside’s exceptional facilities, world-class hotels restaurants and retailers.”
The housing market recession could be bottoming out. What does it mean for home prices?
Fed Chair Jerome Powell made it crystal clear last summer: Spiking mortgage rates would help to “reset” the U.S. housing market, which had turned into a buyer’s nightmare during the pandemic. Of course, spiking mortgage rates wouldn't magically build more homes. However, higher rates in theory could "rebalance" the U.S. housing market by throwing cold water on the pandemic's housing demand boom, allowing inventory breathing room to rise, and pushing home prices lower. That's also exactly what unfolded in the second half of last year: Sales for both new and existing homes went into free-fall mode, while U.S. home prices started to fall for the first time since 2012. But fast-forward to 2023, and it looks like that free-fall in home sales could be over. In fact, just this week Goldman Sachs published a paper titled "2023 Housing Outlook: Finding a Trough." The paper argues that home sales are bottoming out, while the home price correction has a bit longer to run. "We suspect that existing home sales could decline slightly further but will likely bottom in Q1," write Goldman Sachs researchers. "We expect a peak-to-trough decline in national home prices of roughly 6% and for prices to stop declining around mid-year [in 2023]. On a regional basis, we project larger declines across the Pacific Coast and Southwest regions." To better understand if the U.S. housing market recession is actually bottoming out, Fortune reached out to Zonda chief economist Ali Wolf. When she’s not traveling around the country speaking to homebuilders, she’s advising the White House on housing matters. Below is Fortune‘s Q&A with Ali Wolf. Fortune: There are early signs that housing demand, which plummeted last year as mortgage rates spiked, is starting to recover. Are you also seeing this? If so, is this simply seasonality, or also a result of mortgage rates coming down a bit? There has been an uptick in buyer interest since the beginning of the year related to three key things: seasonality, acceptance, and discounts. Seasonality: The housing market traditionally is the slowest at the end of a given year, picks back up in January, and goes into full force during the spring selling season starting around the Super Bowl. Early indications are that buyers are out shopping again. Right now, it seems there are more buyers looking than actually signing contracts, but the increased traffic indicates underlying interest: 38% of builders reported to Zonda that traffic has been stronger than expected in January so far. A key thing to watch in the coming months is resale inventory. We saw many existing homeowners de-list their homes in November and December when their home didn’t sell as quickly or for as much money as they had hoped. The spring selling season usually brings more inventory with it, so we are watching to see if these sellers decide to re-list in this traditionally stronger time of the year for housing. Acceptance: Consumers have been mourning the loss of record-low mortgage rates. For example, if a consumer was able to afford the monthly payment of a $500,000 house at the beginning of last year, without changing their budget, they are now looking for a house in the $350,000 range. For some consumers, they are unwilling or unable to move forward with a purchase. For others, they are entering the acceptance phase. We are on the 10th consecutive week of mortgage rates averaging below 7%. This stability in rates is giving consumers a bit more confidence about where the market is right now. Some existing home sellers and many builders are offering funds to help buy down the interest, with adjustable-rate mortgage options and 30-year fixed rate mortgage options. Discounts: Homebuilders now represent over 30% of overall housing inventory. Builders are in the business of building and selling homes. As a result, we’ve seen builders offer both price cuts and incentives to entice consumers. What we saw happen was that in the early days of the housing slowdown, builders offered modest price cuts to the tune of 1 or 2% of the base price. All that did was tell consumers it made sense to wait, because home prices will likely be lower in the future (i.e. consumers got in a deflationary mindset). Builders learned quickly that it was a lot better to “rip the Band-Aid off” with home prices, but just adjusting once hard and fast to find the market. As a result, roughly 40% of builders have already lowered home prices between five and 15%. For consumers, the FOBATT [fear of buying at the top] mentality is calmed a bit because they are no longer waiting for prices to start coming down. Are builders finding success with rate buydowns? Zonda data shows that over 50% of new home communities across the country are offering some kind of incentive to consumers. These incentives can range from extended rate locks to funds for closing costs or options and upgrades and mortgage rate buydowns. Mortgage rate buydowns are essentially builders paying points to lower the mortgage rate. Builders are paying anywhere between $10,000 and $70,000 to lower the rate. For consumers, a main reason they pulled back from the housing market is the record affordability shock. Lower rates, especially when the builder offers a lower rate on a 30-year fixed mortgage, are proving effective at bringing some consumers back into the market. Put simply, the buydowns are expensive but effective. Do you have any data on how much/how many builders have cut prices? Our December builder survey showed that 43% of builders cut prices month over month, while 56% left prices flat. For January, our early read is that 56% of builders held prices flat, 32% lowered prices, and 12% increased [home prices]. In some markets we have seen average detached new home list prices come down 20% from peak; in others current pricing is still at peak. Heading into 2023, Zonda predicted that U.S. home prices would fall around 15% peak to trough. Have you made any shifts in your expectations for U.S. house prices? We still expect home prices to be down in 2023 compared to 2022, but how deep a decline will depend on how quickly sellers "find the market" with price cuts, what happens with mortgage rates, how inventory levels trend, and what happens related to a U.S. economic recession. BY LANCE LAMBERT | Fortune.com
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