People are still slashing their listing prices. It increased to its highest level this week, 4,172. This will continue to put huge downward pressure on prices.
We have exactly 3 months of supply also going to put downward pressure on prices. The number I’m waiting for this to break is 3.9. Once this happens will have the most supply since 2016. I expect this will continue upward until Jan-Feb of ’23 (it’s cyclical).
The number we should be watching now is listings under contract. It sits this week at 7,343. This is the lowest it’s been for at least 3 years. I don’t have data that goes back any further. This number will tell you where the ‘bottom’ is because it means people started buying again. Right now they still appear to be sitting on the sidelines.
Listing prices are where they were a year ago. I’m not sure who is running things over at Zillow but their estimates don’t show any downturn. This appears to me to be highly inaccurate. I would not trust your ‘Zestimate’ right now. It seems their algorithm has no method to adjust for a ‘listing price’ variable.
It’s understandable why houses are not moving. Since the huge injection of capital into the system in early 2020(Covid) people are broke again. This can be seen in the personal savings rate. It is the lowest since 2009. I think this will also have an adverse effect on retail stocks. I’m willing to bet this will continue to decline to all-time lows in the next year or two. America is addicted to stimulus. With Fed rates going up the balance sheet of individuals is going to deteriorate.
The question now is will the Fed continue to raise rates or pause as Powell hinted at last week?
I’m a huge believer in I Bonds right now. They are one of the most solid investments you can make. They yield 9.62% risk-free. That being said I follow the inflation numbers pretty closely so I can determine what their new rate will be, come November 1st. There is nothing that indicates a slowdown in CPI-U(inflation). The next report is due on August 10th. I imagine that one won’t be friendly and the Fed will be back on track to raise rates for their September meeting. If inflation continues on its current trajectory then I bonds will yield north of 12% in November.
Mortgage rates are also where they were back in 2008/2009. With housing values up and rates up people cannot afford this market.