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A ‘buyers’ market’ for homes is still elusive in the US

by Ozva Admin

The US real estate market is cooling faster than expected as supply chain issues continue to plague that sector, according to Goldman Sachs.

The bank expects US home price increases to slow for the rest of this year and then level off in 2023, it wrote in a note this week. This is not because supply tensions are improving, but because demand is falling as US mortgage costs rise. Economists took a look at the state of the market in a note this week and found some interesting trends. Here we will summarize the most outstanding.

First, the economists write, the housing market has slowed faster in areas that received a boost during Covid-19.

© Redfin, Department of Commerce, Goldman Sachs Global Investment Research

Secondly, the supply problems continue to worsen and it seems that the owner vacancy rate has reached an all-time low. This figure, from the Census Bureau, includes homes that are open and for sale, so it could be due to the proliferation of homes that aren’t exactly vacant (because they’re vacation rentals), but aren’t exactly occupied. , either.

© Department of Commerce, National Association of Realtors, Goldman Sachs Global Investment Research

Third, and perhaps most interestingly, the number of homes for sale has increased significantly in the last 18 months, but essentially all of the increase is due to homes that are not yet complete. We don’t want to make a direct comparison between the US market and China’s property slump, but it’s notable that unfinished houses have been the cause of the much covered “mortgage boycott” there.

The number of completed homes for sale, shown in the bank chart below (dark blue), remains very low:

© Department of Commerce, Goldman Sachs Global Investment Research

In other words, supply chain problems will be here for a while. As Goldman Sachs says:

In our view, the growing construction backlog is a symptom of the problems that have contributed to the current shortage, rather than a sign of the end of the shortage. Homebuilders continue to face the same hurdles that were present before the pandemic and have slowed construction activity, and those constraints have only been further exacerbated during the pandemic (Exhibit 6, left). While supply chain disruptions and labor shortages have started to subside, they remain at extreme levels. And with the sequential pace of home completion already near the highest level since 2007, it seems unlikely that the backlog of incomplete construction, now totaling roughly 650,000 units, or 0.8% of the their owners, above pre-pandemic levels. will decrease significantly in the coming quarters.

As a result, completed new homes are selling faster than they have since at least 1975, according to the bank’s work (which includes some seasonal adjustments):

© Department of Commerce, Goldman Sachs Global Investment Research

So for would-be homeowners waiting for a slowdown to buy, the bank writes that in a mild recession, perhaps one of the most optimistic economic scenarios as the Fed continues to rally, the likelihood of a buyer’s market is slim: National house prices are possible and seem quite likely for some regions, large declines seem unlikely.

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