July 19, 2024

New Home Sales PLUNGE by 30%

New home sales drop in April by 30%!  Home Builders are beginning to abandon projects (and pull fewer permits) as a result.

US Census Bureau Data showed that Homebuyers purchased 30% fewer Newly Built Homes in April 2022 compared to April 2021. That’s one of the largest YoY declines on record and is further evidence that the housing crash has started.

New Home Sales PLUNGE by 30%

  New Home Sales PLUNGE by 30%
Arizona new home construction

Homebuyers dropped out of the market for new homes due to 1) increasing mortgage rates, 2) inflation, and 3) pessimism regarding the US Housing Market.

Price drops are here! The share of price reductions increased to the highest levels since October 2019. Also, days on the market, the share of houses that went under contract within 1 week and the share of homes that sold above list price have all plateaued. This is according to a new report from Redfin.

These headwinds are combining to make life difficult for home builders, who are building a new record amount of single-family homes in 2022. The declines in new home sales were biggest in the South – across housing markets such as Texas, Florida, and Tennessee. This region saw a 37% decline, compared to 25% in the Midwest and 12% in the West.

Interestingly – Northeast markets increased sales by 17%. Perhaps most concerning – the decline in home sales to go along with peak in home construction is a historical recession predictor. . . Nearly every time in the last 50 Years that Home Building ran up to a peak, a Recession followed in the next two years.

One should keep in mind that all real estate sales are local. So, even though in my humble opinion, I believe we’re already on the path to a huge housing market value drop, how big this drop will be, and when your particular market will be affected, will vary not only from state to state, but from various metro areas within states.  Personally, with the magnitude of decline that I am forecasting, I don’t see any area spared, but, the severity of the market decline will vary greatly.

Keep in mind, that at times like this many real estate insiders will shift over to phrases that they hope will continue to bring them more business. What I’m talking about here, is when asked on the condition of the particular  real estate market,  don’t be surprised to hear phrases like: “this is just a normal correction in a hot market, 

this slight pullback presents a tremendous buying opportunity if you missed out during the last year”, 

“even though interest rates have gone up you may want to consider an adjustable rate mortgage so you can qualify and get in on today’s great bargains”, 

“this is a once-in-a-lifetime opportunity to get in to the housing market before inflation continuous pushing home prices higher!”.

Another thing to watch out for at times like this are the many new homeowners that purchased properties during the last 18 months or so, who are unable to accept the truth of the reality of our housing market turn, because they just can’t admit that there’s any possibility that the home that they recently purchased could ever fall in value.

Always keep in mind, that purchasing or selling a home is a major lifestyle decision, and as such, should not be rushed into. So, by all means, if you’re considering purchasing or selling real estate in today’s market, do your own homework and draw your own conclusions! But, also consult with your legal & financial advisors prior to making your moves.

My opinions here are just that, opinions!  The fact that I’ve been in the residential real estate market for over three decades, does not mean that my opinions are going to be any more accurate then your mother-in-law’s opinion, though I sure hope they are!

For those of you who may not be regular readers here is the link to the first warning blog post that I put out; my first post where I called the real estate market top was June 15, 2021 (https://brokerforyou.com/brokerforyou/real-estate-market-downturn/ ) . On June 17 I had a follow-up post ( https://brokerforyou.com/brokerforyou/real-estate-market-bust/ ) where I added additional indicators, that to me showed that the market was in a topping phase right now! I put the links to each one of those prior post above, and would suggest if you’re interested, to reread those posts!

Buckle up your seatbelt because the downward ride has just started!

New Home Sales PLUNGE by 30%


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