Housing Market Big News - New Home Sales are DROPPING

Housing Market Big News - New Home Sales are DROPPING
That big real estate shift that we keep talking about is HERE. We have arrived at the point where supply has caught up with demand for new-build homes, and home builders are starting to feel the crunch.
If you want to purchase new construction, this is the time for you to act because we have arrived at that moment you might have been waiting for since the beginning of the pandemic in 2020!
New residential construction for April 2022 is DOWN 3.2% from what we saw in March. That is a drop in the new residential construction of SIXTY THOUSAND HOMES. And this is when we are right into the summer months when recent construction home sales usually would pick up. Because you have warm weather nationwide, you should not have too many construction delays. At a time when homes should be flying up on empty lots left and right, new construction home sales have taken a step back!
But that is not what we are seeing here. We are seeing a drop in building permits, which means this is not a reduction because there is not enough material to build homes; it is a reduction because home developers realize that demand is dropping, and they do not want to be caught with a bunch of empty properties just sitting there.
I don’t have to tell you that home developers are very sharp regarding the macro trends of the real estate market. They aren’t going to suddenly pull the plug on the opportunity to make a lot of money without a really sound reason behind it.
So what’s changed to scare these builders off?
The answer is obvious…
We are talking about these incredibly high mortgage rates that have pushed above 5%. Look at the current figures for the average 30-year fixed APR on NerdWallet. This is a great site to see the historical view of different mortgage rates. On June 2, 2022, you’ve got that 30-year fixed APR average at 5.236%. That’s a little bit down from where it was a week ago, which is good news for buyers, but let’s roll back the clock and look at the trends here. On January 3, 2022, the first day that banks were open this year, the average 30-year fixed APR was at 3.069% - that’s more than 2 percentage points lower than it is right now. If we rolled it back to this time a year ago, we see rates were slightly lower at 3.002% on June 2, 2021. If you have never bought a house before, the difference between 3% and 5.2% might not seem like a difference, but it is a driving force in slowing people’s desire to invest in a house right now.
We all know the market has been crazy for inventory the last couple of years, starting with the pandemic, when people began flocking out of the cities and into the suburbs to escape these massive population centers. If you have been needing to make that switch and buy a new home in the last year or so, you probably decided, “You know what, we know we are going to have to pay over market value for a home, but the peace of mind is worth it if we pay 20% or 25% above what we had hoped for.” So maybe instead of $400,000, you pay $500,000, and you’re OK with that.
But when that interest rate jumps 2 percentile points, that’s a 74% rise in your interest rate. Let’s break down that math to paint an accurate, clear picture of why the high mortgage rate is slowing down demand.
It’s 2021, and I am taking out a $400,000 loan on a new house with a 3% interest rate. My monthly payment is $1,686 on the home.
It’s early 2022, and prices have shot up, so I’m taking out a $500,000 loan with that same 3% interest. Now my payment is $2,108, OK? $100,000 extra dollars, the same interest rate, comes out to be about $422 extra per month.
But it’s June 2022, and I want that same $500,000 house, except now the interest rate is 5.236%. It’s the same house, street, and neighborhood, but that interest rate climbed up, and now I’m paying $2,757 per month - an extra $649 per month. Multiply that by 12 months a year, and I’m dropping an extra $7,788 yearly on mortgage payments. If I go the whole 30 years of the loan, I am paying an additional $233,640; this is almost a quote of a million dollars for the EXACT SAME HOUSE due to that interest rate hike.
👔 Ron Cohen
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🌐 Website: roncohen.kw.com/
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#housingmarket #housingmarket2022 #housingmarketupdate
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[@roncohenrealtor5702]

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[@lisayi-samala3530]

Biggest difference that a lot of realtors are missing- 2019-2021 new construction average was 450-500k. Now, 2022- 700-750k. Interest rate at 5.4%- nobody wants to buy. This is why there is new home supply. Builders are hoping to attract only 300k annual income households to buy. They most likely will not come down in price- maybe only 20-50k- but not a pummel to 500-600k.

[@roncohenrealtor5702]

I agree, thanks for your feedback