Current State of the Housing Market

This is a market overview for mid-July.
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Here is a graph using the Altos inventory data of the trend comparing to 2020 and 2019. The dotted red line is the recent trend compared to 2020 – and at the current pace, inventory will be up compared to 2020 in late August. The dashed grey line is comparing to 2019, and based on the current trend, it is possible inventory will be back to 2019 levels by the beginning of 2023.

…We are seeing a clear slowing in the housing market, with more price reductions, more inventory, and fewer sales. It will take some time to see the impact on house price growth, but that is coming too.

Next week, existing home sales will likely show a sharp year-over-year decline in sales for June, and housing starts will probably show further declines (and still a record number of homes under construction).

It is important to remember that housing is a key transmission mechanism for Federal Open Market Committee (FOMC) policy. As long as inflation remains elevated, the Fed will keep raising rates – and that will impact the housing market (although mortgage rates have already jumped in anticipation of the FOMC actions).