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"Housing Crash Imminent: As Mortgage Rates Explode
Price Cuts Soar And Buyer Demand Collapses"
by Epic Economist
"We obviously didn’t learn from our past mistakes. And today, we are seeing another massive housing bubble – even larger than the previous one – falling apart right before our eyes again. The Federal Reserve has created the perfect conditions for another financial disaster to occur, and the next housing market crash is about to wipe out millions of American families whose main asset is their home, while the economy faces a dramatic slowdown, and chaos takes over Wall Street. Even after economists, real estate experts, and market strategists relentlessly warned that this bubble would inevitably burst, authorities just continued to fuel its growth month after month, and year after year. But a reckoning has come - and the crash we’re going to witness will be absolutely breathtaking. Home sales have been steadily falling for the past six months, and prices just started dropping like a rock.
About a month ago, when mortgage rates surpassed the 5% mark for the first time in nearly a decade, real estate agents and industry executives shared a series of devastating anecdotes validating the worst fears of millions of Americans: the U.S. housing market was imploding again. Since then, the downfall has gained speed, with subsequent observations confirming that property values were sharply dropping, a dire outlook for the most popular asset class among middle-class families.
Last week, however, things have gone from worse to catastrophic as 30-year mortgage rates surged at the fastest pace ever recorded, hitting 6.28% - a rate last seen just before the last housing bubble burst. As ZeroHedge analysts recently highlighted, the latest rate hike sent the average mortgage payment on a median mortgage up by almost $800 in just the past 6 months, resulting in the most unaffordable housing prices in the entire history of America. On top of that, new home sales have plunged at the fastest pace since the peak of the health crisis, right after facing the longest negative streak since 2010.
Right now, homebuyer sentiment is at the lowest level in generations, and conditions continue to deteriorate with each passing week. According to the latest housing market summary released by real-estate brokerage Redfin, things are not pretty at all. The report shows that after a period of unprecedented gains for home prices and a uniformly sellers' market, conditions have drastically flipped, and now real estate agents are seeing the highest share of sellers on record dropping their list price as mortgage rates shoot up to levels not seen since 2008, shrinking the pool of potential home buyers.
Most of the markets that benefitted from pandemic migration patterns and recorded massive price gains have started facing a correction. Realtor.com released a report that shows the top ten cities across the country where the median price has dropped. On average prices have fallen by 20%, with asking prices “plummeting by up to $400,000 in wealthy areas while poorer neighborhoods have seen house values nosedive by as much as $115,000,” it revealed.
As inventory piles up, and demand hits a wall, sellers are left with only one choice: cutting the price enough to where the next buyers can afford the mortgage.The Federal Reserve, on the other hand, is stuck in a crossfire. After letting inflation run wild, their only choice is to keep on raising rates and triggering chaos in financial markets. They have repeatedly told us that they had everything under control over the past few years. They said they knew exactly what they were doing. Once again, they lied. And the truth is that the Housing Bubble Burst 2.0 has begun. And sadly, it is already too late to reverse course."
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