To say that our US housing market is in crisis would be an understatement. Home prices are falling across the country, and building permits are declining at an alarming rate. In June, the median price of a new home sold reached an all-time high of $401,800. This was the lowest amount over the last four years, except for a drop to $397,600 last November 2022. This 6.5% price decrease marks a significant downturn from prior strengthening market fundamentals, leaving both investors and potential homebuyers uneasy.
Though the price of materials decreased, new housing starts increased by 5.2% in June, according to the U.S. Census Bureau. Nationally, new housing starts were up 5.9% from last month. This increase is a sign that builders are doing everything they can to keep up with the seemingly endless demand. After hitting their low watermark in March, housing starts have been increasing sharply, trending strongly upwards. Residential building permits have been down steadily over the last four months. The pace of new building permits has surged to a rate not experienced in the last five years.
The inverse correlation between the housing market and interest rates has been quite obvious. That boom began to reverse in 2022. That change occurred just as the Federal Reserve embarked on perhaps its most consequential cycle of monetary tightening. Last year’s rate cuts—in December—bought some time. These steps fell far short and ultimately did nothing to stop the trend downward. As a byproduct, the key housing sector has been further sinking into a downward spiral over the course of 2023.
Here’s where home price declines during this cycle line up with history, in looking exactly like previous downturns. Prices were down roughly 15% from the top in March 2007. This decline didn’t stop until the global financial crisis came crashing down in September 2008. Recent trends indicate that the market could still have more pain in store as it continues to adjust to these ups and downs.
Demand among Americans to utilize new loans that are based on their rising home values has never been higher. The recent slump in new home sales and prices should worry anyone looking to invest or buy a house. The stakes go well beyond the fate of individual purchasers; they have begun to shake consumer confidence and could soon be shaking economic conditions at large.
Additionally, data indicates that a substantial percentage of retail investor accounts lose money when trading Contracts for Difference (CFDs) and Spread Betting with certain providers. Indeed, to date 77.37% of retail investor accounts have lost money. All of this points to the dangers of putting taxpayer feet to the fire in an unpredictable housing market.