UPDATE – 7/3/2018 Housing is dropping, and it’s demand-driven not supply-driven. All three housing market reports released two weeks ago showed industry deterioration. The homebuilder “sentiment” index for May, now known as the “housing market” index for some reason, showed its fourth decline since the index peaked in December. The index level of 68 in May was 10 points below Wall Street’s expectation. The index is a “soft data” report measuring primarily homebuilder assessment of “foot traffic” (showings) and builder sentiment.
Existing home sales for May reported Wednesday June 27, showed the second straight month-to-month drop and the third straight month of year-over-year declines. The month’s supply for May increased from April, and at 4.1 months, is above the average month’s supply for the trailing 12 months. It’s also above the average month’s supply number for all of 2017.
The primary reason for declining home sales is the shrinking pool of buyers who can afford to support the monthly cost of home ownership. The government lowered the bar for its taxpayer-backed mortgage programs every year since 2014. It lowered the down payment requirement, broadened the definition of what constitutes a down payment (as an example, seller concessions can be counted as part of a down payment), thereby reducing even further the amount of cash required from a buyer’s bank account at closing, it cut mortgage insurance fees and it lowered income and credit score restrictions. After all this, the government is running out of people into whom it can stuff 0-3% down payment and 50% DTI mortgages in order to keep the housing market propped up.
MLS data in many 860 zip codes are showing “price change” notices. All of them are price reductions.
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