“It’s the marginal buyer who’s supporting current valuations, so that could mean significant impact on the housing market,” said Matthieu Arseneau, deputy chief economist at National Bank of Canada, who says home prices nationally could fall as much as 10%. “Will new buyers be able to afford those prices at these rates?” — Ari Altstedter
U.S.
Mabel Melendi could tell the housing market in Cape Coral, Florida, was slowing after a week went by and she still hadn’t received any inquiries or offers on a newly constructed home she listed in mid-April. Just three months ago, she received a bid on a similar property within three days of putting it on the market.
But after three price cuts — knocking the asking price down to $425,000 from $510,000 — and more than two months after the initial listing, she was still looking for buyers in mid-June. One offer that came in over Memorial Day weekend fell through after the buyer couldn’t qualify for a large enough mortgage.
“Most of the people don’t qualify for what they used to qualify for before,” Melendi said.
Mortgage rates have increased this year at the fastest pace in records dating back a half century, according to Freddie Mac. The average rate for a 30-year loan reached 5.78% last week, the highest since 2008. That’s led to price cuts for both builders and existing-home sellers as demand rapidly cools.
Almost 20% of US home sellers cut prices in the four-week period ended May 22, the most since October 2019, according to the brokerage Redfin Corp. The share was higher in some markets that became hot destinations during the pandemic for people seeking more affordably-priced homes. In Boise, Idaho, for example, 41% of sellers dropped prices in April. In Cape Coral, it was about one in three.
Sellers Drop Prices | The share of homes for sale with price cuts is climbing in once-hot areas
Sellers are realizing that prices may not keep rising at the same pace they previously did as buyers are increasingly squeezed, said Daryl Fairweather, Redfin’s chief economist. “Prices are going to have to come down to match demand,” she said.
After rising by an estimated 18% in 2021, US single-family home prices are forecast to grow by a more moderate pace of 10% in 2022 and 5% in 2023, according to Freddie Mac. “It’s a pretty significant slowdown, but coming from scorching-hot house-price growth,” said Len Kiefer, the company’s deputy chief economist. A shortage of homes for sale and pent-up demand from people seeking more space — along with millennial buyers getting older and starting families — means prices nationally should still trend higher, he said.
Still, the effects of slowing demand are reverberating through the real estate industry: Redfin and Compass Inc. said last week that they will lay off employees after the sudden cooldown in the market. — Jonnelle Marte
CZECH REPUBLIC AND HUNGARY
The Czech Republic stands out in Europe for its high homeownership rate, fast inflation and low unemployment, said Vit Hradil, a senior economist with Prague-based investment firm Cyrrus. Combined with a uniquely complex construction permit system and growing demand from expats seeking work in the capital, the country has faced staggering price increases that have far outpaced income growth.