From

https://www.realtor.com/news/trends/the-housing-market-is-correcting-so-why-are-home-prices-still-shooting-up/

we read

The Housing Market Is Correcting
So Why Are Home Prices Still Soaring?
By Clare Trapasso

Jul 19, 2022

Home prices have continued their seemingly inexorable rise, despite America’s housing market purportedly being in the throes of a correction, a slowdown—whatever you want to call it. It’s defying what many experts predicted and, just maybe, conventional wisdom.

Buyers can’t afford these higher prices on top of higher mortgage interest rates. Deals are falling through. Bidding wars are drying up. Six-figure offers over the asking price are going the way of the dinosaurs. So how is it possible that median home list prices were 15.9% higher in the week ending July 9 than they were a year ago, according to Realtor.com® data?

The disconnect appears to be that home sellers have yet to adjust to this new reality—the one where they can’t slap whatever price they’d like on their properties, sit back, and wait for the bidding wars to commence. Surging mortgage rates have made it impossible for many buyers to afford what they could have just a few months ago.

Meanwhile, record-high home prices are up more than 31% over the past two years, according to Realtor.com June list price data. And they keep rising. Something seems like it needs to give.

And just because sellers are asking for more money, it doesn’t mean they’re getting it. Buyers are negotiating. The number of price reductions on properties doubled in June compared with a year earlier.

Last month, about 11% of builders dropped prices on newly constructed homes, according to building consultancy Zonda. An additional 70% kept them flat compared with May.

“Real estate markets freeze when you see a big change in mortgage rates or the economy,” says Mark Zandi, chief economist at Moody’s Analytics. “Buyers cannot handle these house prices at these mortgage rates,” he says. “The mortgage payment is just too high for most first-time homebuyers. Trade-up buyers aren’t going to trade up because they’re going to have to get a higher mortgage rate.”

Home prices typically spike in the summer. Larger, more expensive homes go up for sale, and families eager to be settled before the kids start school in the fall compete for them. Plus, there are scores of millennials who are reaching the point in their lives when the idea of homeownership becomes more appealing. But now there still aren’t nearly enough homes for sale, or rent, to go around.

Buyers today are faced with mortgage bills 58% higher than they were just one year ago—when prices were also at record highs—on top of higher inflation, rents, and gas prices. That’s rendered many unable to borrow nearly as much for a home anymore and forced many others out of the market.

“A lot of homeowners are still pricing homes based on the market of six months ago,” says George Ratiu, manager of economic research for Realtor.com. “There is a gap between what homeowners are asking and what they’re getting.”

But prices could continue to rise, at least by low single digits, in other parts of the country.

Says Bachman. “Home values are no longer realistic for today’s buyers. They can’t afford them.”

Recession

The wild card in all of this is a recession. Potential buyers who are laid off or are worried about losing their jobs, probably aren’t going to be attending open houses and putting in offers.

Investors have bought many of the properties that used to house homeowners and turned them into rentals. That demand is expected to keep prices high.

Lenders have become much choosier when doling out mortgages to ensure only the most qualified applicants receive them. 

While the housing correction might not yet be showing up in prices, it’s apparent in the fast-falling number of homes changing hands.

There were about 6.1 million home sales a month in 2021, according to the National Association of Realtors® data. (This doesn’t include sales of newly constructed homes.) In May, the latest month of data available, that fell to about 5.4 million sales a month. That’s a substantial change.

“Home sales have slowed pretty notably. They’re back below their pre-pandemic pace,” says Hale, of Realtor.com. “The housing market is not as hot as it was last year. 

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