According to the National Association of Realtors (NAR), existing home sales have been on a 12 month decline prior to the 14.5% increase in February. Additionally, the reported annual rate of existing home sales for February was 4.58 million. This is down from the reported annual rate of 5.92 million for February 2022. The increase in demand can be attributed for falling mortgage rates and continued constraints on inventory. Freddie Mac reported the 30-year fixed mortgage rate fell to 6.60%, which is down from 6.73% the previous week. However, this is 4.16% higher compared to a year ago. Furthermore, February housing inventory sat at 980,000 units, up 15.3% from a year ago. Inventory remains historically low, at the current sales pace inventory would be expended within 2.6 months. Despite the large increase in overall sales in February, experts expect home prices to begin leveling off.
Article: https://www.nar.realtor/newsroom/existing-home-sales-surged-14-5-in-february-ending-12-month-streak-of-declines
To increase housing inventory, what policies (if any) do you think the government should adopt?
ReplyDeleteIs there a reason why mortgage rates are falling? Does it have a relationship at all with rising interest rates? Also I'm curious with Blake as well, how we can increase housing inventory?
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ReplyDeleteIn general, home inventory (supply) is inelastic, especially in the short-run. There is one major reason for this inelasticity. That is, there’s a limit as to how quickly homes can be constructed. Additionally, there has been little innovation/attempts to supplement the efficiency of home construction. Furthermore, continuing cost-push inflation has further hindered supply. Consequently, all these factors make increasing the supply of homes quite difficult. The government can help with the cost component of supply (which they do), but again we can only make homes so quickly. Hypothetically, the government could incentives innovation by offering contracts to individuals who can find an efficient solution. However, the government already spends big contracting private entities for a multitude of things (military related items being the largest). Therefore, I don’t see the government intervening anytime soon.
This is very interesting, do you know if there is any difference for more temporary housing, like an apartment, where one is not paying a mortgage or buying the property as a whole? Have we seen more people choosing to live in apartments because of this?
ReplyDeleteIs the reason that home sales are down because of high prices, leading to people not wanting to buy homes?
ReplyDeleteIt's also worth noting that experts anticipate home prices to start leveling out despite the significant increase in overall sales in February. In the next quarters, it will be interesting to see how the housing market develops and whether changes in inventory and mortgage rates will have an impact on home sales and pricing.
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