In this video, we're going to talk about the inevitable housing market crash, and why it doesn't make sense to buy a house right now.
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I've done some extensive research and gathered a ton of statistics from various sources. I've placed a significant emphasis on insights from Redfin.
Now, here's a big takeaway right off the bat: Monthly mortgage costs, compared to the median household income, have hit unprecedented levels.
I'm talking about a scenario where you're looking at a 10% down payment and a 75% mortgage rate – these costs are skyrocketing, reaching heights we haven't seen since 2005.
But why is this happening? Well, one major factor is the scarcity of homes available in the market.
It's a situation where folks who secured those low mortgage rates are thinking twice about selling and buying new homes because of the substantial rate difference. This tight supply and growing demand are pushing prices up, following the good old rules of supply and demand economics.
Here's another fact: Monthly payments for homebuyers have shot up by a whopping 8.5% year-over-year.
Just to give you an example, in 2023, the median monthly mortgage payment has soared to an all-time high of $2,666. That's a jaw-dropping 77% increase compared to the costs in 2020, and it's mainly due to those higher mortgage rates.
Speaking of mortgage rates, they're currently on the rise, and it's not just affecting folks with less-than-stellar credit. Even those with excellent credit scores are seeing rates in the mid to high 7% range.
This rate hike is hitting monthly payments hard. To put things in perspective, let's compare a 2.49% fixed-rate mortgage from a few years ago to an 8.09% rate in 2023. The difference in monthly costs is substantial and can't be ignored.
Adding to the challenge, active listings in the housing market are down by a significant 15.3% year-over-year. This further tightens the supply constraint. But here's the kicker – demand has also decreased by 7% year-over-year, as shown by Redfin's homebuyer demand index.
Pending sales are even worse, with a significant drop of 13.3%, continuing a streak of double-digit declines over the past 15 months.
But wait, there's more! Despite these headwinds, the median asking price for homes has risen by 4.4% year-over-year. This raises questions about whether this trend is sustainable or not.
In conclusion, the housing market is throwing some major curveballs at us right now.
The primary thing keeping it together is low unemployment.
However, any uptick in unemployment could potentially trigger a recession. So, if you're in the market for a home, be prepared for potential corrections. It might not be the best time to buy, and it's crucial to consider factors like low rates combined with low prices, which historically lead to the best deals.
Remember, the future of the housing market is uncertain, and it's essential to make informed decisions based on your unique circumstances.
Thanks for tuning in, and if you found this video helpful, don't forget to check out Whiteboard Finance University. You can snag a 20% discount on membership using the code "HOUSING20."
Have a fantastic day!
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