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The housing market goes through cycles. However, the current cycle is one of the most brutal ones for prospective homebuyers in recent memory. The possibility of a real estate crash is ever-present as the worrisome statistics mount and industry experts sound the alarm bells.
Today’s housing market problems can largely be attributed to demographic shifts, supply chain disruptions and, of course, the Federal Reserve’s “higher for longer” interest rate policy. No matter how you slice it, there are red flags everywhere, and homebuyers are paying the price — literally.
Signs of Trouble in the Housing Market
Among the expert groups raising the red flags is the team behind The Kobeissi Letter. This group has a popular X (the platform formerly known as Twitter) feed. The Kobeissi Letter recently published a posting with multiple data points leading to the conclusion, “There has never been a worse time to be a homebuyer.”
According to the posting, mortgage applications “are now down 50% since the start of 2023 and at their lowest since 1994.” Furthermore, U.S. existing home sales “are at their lowest since 2010.” The posting also states that 90% of borrowers are “locked-in to significantly lower rates.”
Additionally, borrowing a stat from Reventure Consulting, The Kobeissi Letter stated that mortgage demand is now around 25% “below the levels seen at the 2008 lows.” A CNBC report backs up this claim, stating that mortgage demand recently fell to its lowest level since 1995.
It’s been an ultra-tight housing market lately. This is, in large part, because the 30-year fixed mortgage interest rate recently approached and even broke above 8%. This helps to explain why current homeowners are reluctant to sell their homes. They don’t want to sell now and then buy a new home with a sky-high interest rate.
Should You Buy a New Home Now, or Wait?
Homebuilder sentiment is at rock bottom. Moreover, people have to earn more than $400,000 per year to buy a home in certain areas of the country. Plus, some experts anticipate home prices to continue rising next year. This is, to a certain degree, due to a lack of housing inventory.
So, it’s not a bad idea to wait to buy a new home. This is especially the case if you don’t have an urgent need to buy a home now.
Hopefully, the housing inventory problem will resolve in the coming quarters. The dynamics of the housing market may become more favorable. Then, you might get a better deal on a home you actually want, and not just whatever home you can get.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.