Home Sales CRASH by 20% in some cities according to data from Redfin. And by 7% Nationally according to the National Association of Realtors. Is this the sign of a Housing Bubble turning into a Housing Crash?
One indicator of a healthy Real Estate Market is growing Home Sales. And for much of 2020-21 home sales were growing. However, they've started to crash back down to earth in early 2022. Homebuyers and real estate investors are dropping out of the market.
Redfin Article: https://www.redfin.com/news/home-sales-down-11-pct/
This decline is occurring for 4 REASONS:
1) Sky-High Home Prices: data from the Case Shiller Home Price Index shows that home prices in America are at an all-time, inflation-adjusted high. That means many homebuyers are priced out of the market.
2) Record Low Inventory: there have never been so few homes on the market in early 2022. Such low inventory means that buyers have a difficult time finding a home that suits them, which means many drop out of the market.
3) Inflation: rising inflation means that Americans are poorer today than they were one year ago, causing many first-time homebuyers to cancel or delay their real estate acquisition plans.
4) Interest/Mortgage Rates: perhaps the biggest reason for the slowdown is rising interest rates, which makes homeownership more expensive and means that many buyers can't qualify for a mortgage at today's prices.
The decline is worse in some cities. California has seen a big drop in sales, particularly in markets surrounding Los Angeles and San Francisco. Some of the pandemic exodus from these cities could be subsiding. Meanwhile, Atlanta experienced a massive 18% decline in sales on a year-over-year basis. Dallas, Austin, and San Antonio each experienced a 10-12% sales crash.
Home sales and homebuyer demand in Midwest and Southeast Markets is faring better. Greenville, Greensboro, Tulsa, Dayton, Miami, and Tampa exhibited relatively stable home sales over the last year, suggesting that these Real Estate Markets are healthier.
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