Be it ever so humble, there’s no place like the US housing market for standing conventional wisdom on its head.
Although American housing prices are still rising, those gains slowed in both July and August according to data released Tuesday from the Case-Shiller Home Price Index. The slowdown implies that the theory that homeowners are ‘locked-in’ to lower mortgage rates might have to be thrown out the window.
Fetch The Bolt-Cutters
The American dream of homeownership has become increasingly unaffordable, and recent history has been especially unkind to would-be buyers. In the past year alone, 30-year mortgage rates have more than doubled from 3.1% to just under 7%. This has put the onus for keeping home prices afloat squarely on the shoulders of aforementioned locked-in homeowners, because prevailing wisdom holds that most people would not sell their home to trade up for one strapped with a much higher mortgage rate. That would keep supply low enough to protect home values — or so the logic goes.
But locked-in homeowners turn out to be more flexible than imagined, with some potential sellers jumping at the chance to turn a profit now. One hot market, in particular, provides a compelling case study:
- Austin, Texas has more houses listed on the market now than it did in 2011, according to a new Bloomberg report. Economist Jim Gaines told Bloomberg that signs of a cooling market in Texas may be spooking homeowners to strike while the iron is still lukewarm.
- While Austin — one of the pandemic’s prime real estate destinations — is an outlier, it’s possible the selling bug could spread, especially if the US ends up in a recession. “If people start losing their jobs willy nilly, then yeah, these home prices will decline rapidly because there will be a surge in distressed sales,” Gaines said.
Gains in the Sunshine State: Case-Shiller’s August data shows Miami and Tampa led the herd on gains with prices rising around 28%, followed by Charlotte, North Carolina with 21%. Meanwhile, the West Coast fared less well as San Francisco, San Diego, and Seattle saw the biggest monthly declines. Hey baby, I hear the price a-fallin’…