“We’re not overbuilt, we’re under-demanded.” - Understatement on housing market

 

We're not overbuilt, we're under-demanded" is one of the great understatements on the current housing market. With interest rates increasing and current 30-year mortgages at 5.5%, demand has evaporated from the marginal buyer. Simply put, many buyers think in terms of their monthly payment. If the mortgage rate goes up, then prices must come down to set a fixed monthly payment. 

The spike in rates has caused a housing demand shock.

The supply of housing has moved to the highest level in a decade. What was a housing shortage less than a year ago is now a glut. New home sales have fallen by double digits when last year supply was a problem. Existing homes were in short supply as buyers eagerly paid over the asking price. Sellers are now discounting, and buyers are walking away from signed contracts. All from a change in the interest rate environment and it will not get better anytime soon.