The U.S. housing market – particularly in areas like Seattle, Silicon Valley and Austin, Texas – appears to be headed for the broadest slowdown in years. Buyers are getting squeezed by rising mortgage rates and by prices climbing about twice as fast as incomes, and there’s only so far they can stretch.
This story by Prashant Gopal and Sho Chandra originally appeared in Bloomberg.
“This could be the very beginning of a turning point,” said Robert Shiller, a Nobel Prize-winning economist who is famed for warning of the dot-com and housing bubbles, in an interview. He stressed that he isn’t ready to make that call yet.
A slew of figures released this week gives ample evidence of at least a cooling. Existing-home sales dropped in June for a third straight month. Purchases of new homes are at their slowest pace in eight months. Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values.
Prices for existing homes climbed 6.4 percent in May, the smallest year-over-year gain since early 2017, and have gained the least over three months since 2012, according to the Federal Housing Finance Agency. Shares of PulteGroup fell as much as 4.9 percent Thursday morning after the national homebuilder reported that orders had declined 1 percent from a year earlier, blaming rising mortgage rates.
“Home prices are plateauing,” said Ed Stansfield, chief property economist at Capital Economics Ltd. in London. “People are saying: Let’s just bide our time, there’s no great rush. If we wait six or nine months we’re not going to lose out on getting a foot on the ladder.” That means “we’re now looking at a period in which prices move more or less sideways, or increase no more quickly than growth in incomes, over the next few years.”