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CBS: 3 reasons to worry about the housing market

CBS: 3 reasons to worry about the housing market

Trouble is brewing in the U.S. housing market, some claim, asserting fear that another housing bubble could be on the horizon.

One main factor: Home values have surpassed their pre-crash high. The most recent Case-Shiller Home Price Index showed that home prices continued to rise across the country, growing more than 6% year-over-year in June.

A CBS article published Monday said “storm clouds are gathering,” pointing to recent indications from Fed Chair Jerome Powell that more interest rate hikes are to come, which could further dampen affordability and suppress demand.

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Here are the three factors the article outlined as worrisome for the future of the housing market:

1. Affordability is declining.

The Fed’s current monetary policy may drive up mortgage rates and seriously impact affordability.

Last week, the 30-year fixed-rate mortgage inched higher for the second consecutive week, according to Freddie Mac, averaging 4.45% compared with last year’s 3.78%

“As a result of rising mortgage rates and higher home prices, Gluskin Sheff economists estimate that housing affordability has crashed to lows not seen since 2008, well off the highs seen in 2011 and 2012 when a combination of lower prices and lower rates helped put an end to the housing collapse,” the article stated.

2. Sales activity is faltering.

The latest data from the Census Bureau and the Department of Housing and Urban Development reveals that new home sales fell short of expectations, falling 1.7% in July.

While demand for new construction remains strong, homebuilder confidence is faltering, as August’s housing market index reveals that it reached its lowest level of the year thanks to concerns about material costs due to recent tariffs.

Additionally, a trend toward stagnation in sales activity could be a sign of trouble, according to the article.

3. Demographics indicate potential for trouble.

Burdened by student debt and earning wages that can’t match home prices, Millennials are being shut out of the market.

“The risk is that the longer this generation delays homeownership, the more Baby Boomers looking to downsize will be pressured into lowering their home prices when they enter retirement,” the article stated, pointing to a Fannie Mae report that warned that Millennials would be unable to fill the void left behind by the older generation.

 

 

Source: CBS News

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