The housing market’s lights are on, but nobody’s home
The delicate balancing act between volumes and prices across the economy
Higher prices. Slower sales.
That’s the short version of the American residential real estate market at the moment. The latest numbers from the National Association of Realtors on the market for previously existing homes — the overwhelming majority of those sold — showed prices for single family homes hitting a new record of nearly $433,000 in June.
That’s a 4% price rise from the already high levels of June 2023. Meanwhile, sales volumes of single family homes are likewise down about 4.3%. The same holds for a longer time period, the price of houses is up 39.8% over the last four years, while annualized monthly sales rate is down about 34%.
A lot of this dynamic is due to lack of inventory available to buy, as so many homeowners are loath to give up the roughly 3% mortgage rate they’re enjoying, to move and likely take on a new mortgage at around 7%.
The market structure in real estate (with red tape, NIMBYs, and the like) is quite a bit different than consumer goods, such as potato chips, where certain brand name producers have pushed prices too high, sending volumes, down, down, down.
True enough, but if you squint and tilt your head, you could argue that this dynamic — corporations slowly trying to figure out whether they need to lower prices to in order to re-invigorate growth — is the broad quandary facing virtually all corporations, investors and the economy at the moment.
After all, if executives ultimately cave on prices, like UPS seemed to do last quarter (much to Wall Street’s dismay), that essentially confirms that inflation is, indeed, dead. On the other hand, if they don’t, and activity continues to keep sales on a lackluster simmer, that could bode poorly for the economy.
Either way, it seems that the Fed would be well set up to cut rates later this year, as everyone expects.
