Unaffordable Housing Market Still Due To Correct By 30-40% | Nick Gerli
Feb 25, 2024
auto_awesome
Exploring the unaffordable housing market in the US with rising prices and mortgage rates. Housing analyst Nick Gerli discusses the future of home prices in 2024. Insightful analysis of regional disparities in the housing market correction and the impact of employment trends on housing. Personal experiences of self-investment and financial decisions for personal growth are shared.
US home prices overvalued by 30-40%, buyer demand collapsed
Housing market challenged by rising mortgage rates above 7%
Regional differences exist in housing market trends and buyer activity
Contractor activity in building new homes as economic indicator, realtors facing challenges
Deep dives
US Housing Market Overview
Home prices adjusted for income and inflation in the US remain overvalued by 30 to 40% compared to their long-term norms, leading to a collapse in buyer demand. Mortgage applications have plummeted to the lowest level since 1995, indicating a lack of affordability. Despite this, sellers have not adjusted prices, resulting in a standoff that is expected to end with prices decreasing.
Impact of Mortgage Rates and Federal Reserve Cuts
The housing market faced challenges due to rising mortgage rates exceeding 7%. The prospect of Federal Reserve rate cuts in 2024 may not be sufficient to counter unaffordability issues. The discrepancy between high home prices and income levels is highlighted, suggesting that prices need to adjust or incomes rise for market stability.
Market Disparities Across the US
Regional differences in the housing market show a split where certain areas face downturns while others continue to see price increases. States like Florida and Texas are experiencing downturns, while areas like New York and Illinois show upward trends. The disparity reflects varying levels of buyer activity and inventory shortages.
Assessment of Undervalued Markets and Intrinsic Value
Certain markets, like North Dakota and Louisiana, are considered undervalued, indicating a closer alignment with historical norms. The importance of evaluating land value alongside home price affordability is emphasized. The discussion shifts to assessing improving affordability in specific regions like San Francisco and Manhattan, seen as undervalued compared to past trends.
Contractor Activity as an Economic Indicator
The level of activity among contractors in building new homes seems to be a leading indicator of economic cycles. Historical data shows peaks in contractor activity occurring about two years before recessions, suggesting a correlation between construction and economic trends. A decline in current contractor activity may indicate a potential economic downturn in the future.
Challenges Faced by Realtors in the Housing Market
Realtors and mortgage brokers are experiencing challenges due to the slowdown in the housing market. With record low sales per realtor and declining membership, professionals dependent on housing transactions are facing income reductions and an increase in individuals leaving the industry. The National Association of Realtors projects a continuing decline in realtor numbers, indicating ongoing struggles in the sector.
Investing in Self as a Non-Monetary Investment
Investing in oneself is highlighted as a valuable non-monetary investment, emphasizing the significance of taking risks and pursuing personal aspirations. The speakers share experiences of making financial investments in their careers and advocating for following one's calling, even if it involves financial commitments. Such investments not only contribute to potential wealth but also align with personal fulfillment and happiness, reflecting the importance of self-investment for long-term success.
Well, the average home price in America remains just about as unaffordable as it's ever been.
In fact, a recent report from real estate data provider ATTOM examined the median home prices last year for roughly 575 U.S. counties and found that home prices in 99% of those areas are beyond the reach of the average income earner.
And to add insult to injury, 30-year fixed mortgage rates just rose back above 7%.
So, what lies ahead for home prices in 2024?
To find out, we welcome housing analyst Nick Gerli, founder of reventure Consulting and creator of the new reventure app back to the program.
WORRIED ABOUT THE MARKET? SCHEDULE YOUR FREE PORTFOLIO REVIEW with Thoughtful Money's endorsed financial advisors at https://www.thoughtfulmoney.com
#homeprices #housingmarket #housing
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
