by Michael Snyder, The Economic Collapse Blog:
This is a very bad time for those that work in the real estate industry. Thanks to the Federal Reserve, mortgage rates are much higher than they were a couple of years ago, and this has deeply frozen America’s housing market. Millions upon millions of U.S. homeowners are currently paying off fixed rate mortgages that were financed when mortgage rates were at historic lows. If you are one of those homeowners, selling your current home and buying another home that will come with a mortgage at a much higher rate would be very painful financially. So vast numbers of current homeowners feel “locked in” to their current homes. At this point, the number of Americans that are selling homes has fallen to a depressingly low level, and the number of Americans that are buying homes has fallen to a depressingly low level. This isn’t going to change until interest rates go down significantly, but the Federal Reserve is very hesitant to reduce interest rates because of the nightmarish cost of living crisis that we are facing. So our housing market will probably continue to be in a deep freeze for the foreseeable future.
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On Wednesday, we learned that sales of existing homes fell once again during the month of April…
Sales of previously owned homes fell by 1.9% to an annual rate of 4.14 million in April, the National Association of Realtors said Wednesday.
That’s the number of homes that would be sold over an entire year if sales took place at the same rate every month as in April. The numbers are seasonally adjusted.
The pace of sales fell short of expectations on Wall Street, which was forecasting a 4.21 million pace for April.
As Zero Hedge has pointed out, sales of existing homes have almost plunged to levels that we last witnessed during the Great Recession of 2008 and 2009.
Normally, when home sales are going down home prices are heading in the same direction, but during the month of April the median price of an existing home actually jumped substantially…
The median price for an existing home in April rose 5.7% to $407,600, as compared with the year before. That’s the highest price recorded for the month of April.
The jump in home prices was the biggest since October 2022.
The reason why this is happening is because it simply does not make financial sense for the vast majority of homeowners to sell their homes right now.
If you got a mortgage when rates were low, that is something that you do not want to give up easily.
According to Zillow, as a result of higher rates the average mortgage payment in the U.S. has almost doubled since January 2020…
A monthly mortgage payment on a typical U.S. home has nearly doubled since January 2020, up 96.4% to $2,188 (assuming a 10% down payment).
I feel so bad for young couples that are looking to buy their very first home in this environment.
My advice would be to keep renting for now and pray that mortgage rates will go down eventually.
Until rates go down, it just doesn’t make sense to buy or sell.
As Lawrence Yun has noted, we are in “new territory as to how the lock-in effect will restrain home sales”…
“When we see these mortgage rates, which is a 300 basis point increase from pre-Covid pace, we are in a new territory as to how the lock-in effect will restrain home sales,” said Lawrence Yun, chief economist for the Realtors.
If the Federal Reserve wants to unfreeze the housing market, the solution is easy.
Slashing interest rates would force mortgage rates down and the housing market would heat up again…
Economists do not expect a significant decline in mortgage rates until the Federal Reserve starts cutting interest rates. The U.S. central bank has raised its benchmark overnight interest rate by 525 basis points since March 2022 to dampen demand in the economy and control inflation.
But the Federal Reserve is not eager to do that, because lower interest rates would just add more fuel to the inflationary pressures that are driving up prices throughout the economy.
So for now, many Americans will just do whatever they have to do to survive in this very harsh environment.
Recently, one 34-year-old woman was discovered living inside a rooftop grocery store sign in Michigan…
Police bodycam footage has been released showing the moment a homeless woman was found squatting inside a Michigan rooftop grocery store sign.
The 34 year old, whose identity remains anonymous, had been living behind the triangle-shaped sign – approximately 5ft wide and 8ft high that has a door accessible from the roof – of the Family Fare supermarket, located in Midland, a city approximately 130 miles north of Detroit.
The woman had turned the crawl space into an apartment, which included flooring the woman had laid down, bedding, a houseplant, clothing, a Keuring coffee maker, a desk, a printer, and a computer. She was resourceful, utilizing a power cord plugged into an outlet on the roof to use the grocery store’s electricity.
I applaud her ingenuity.
And from now on, whenever I see a rooftop store sign I will wonder if someone is living inside.
In the days ahead, all of us are going to have to make the most out of whatever circumstances we find ourselves in.
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