Yahoo Finance
Yahoo Finance’s Rick Newman discusses existing home sales dropping for eight months and how rising mortgage rates are weighing on home buyers and sellers.
BRIAN SOZZI: All right, from record home prices to record mortgage rates, 2022 has been a wild ride for the now ice-cold housing market. But could this pain be good for prospective homebuyers down the road? Yahoo! Finance Columnist Rick Newman is here with more. So Rick, I should be cheering these declines because maybe at some point, I’ll be able to buy a home.
RICK NEWMAN: Maybe a year from now or something like that. But it’s getting ugly in the housing market. And it’s probably going to get uglier. So we just saw the eighth consecutive month of declining existing home sales. That’s the worst stretch since 2007.
And what was happening in 2007? That was when the housing bubble was exploding. We got the Homebuilders Index this week. That has been going down. That’s now at the lowest level since the bottom of the COVID downturn. And if you don’t count that, it’s the lowest level since 2012. Again, close to the bottom of the housing bust back then.
So we have a long way to go to get through housing. Everybody has kind of seen this coming. I mean, this has almost everything to do with rising interest rates and mortgage rates. Now, up around 7%. But we haven’t seen prices really fall over yet.
They’ve just started to turn. And they will come down, for sure. But we’re at the beginning of a major correction and we probably have months to go.
BRAD SMITH: Rick, I, like Sozzi, also just want to know when it’s possible to buy a house. But I guess further out down the line, what kind of changes are we really expecting for the consumer environment to look like? Especially given the fact that if you have an absence of those buyers because of rates in the near-term, that sellers as well are gonna be impacted as well, and there are gonna be less listings of existing homes.
RICK NEWMAN: Yeah, this impacts everything on both the buyer, and the seller side, and the builder side, I should add. So we’re– so builders are reluctant to build. We’re seeing that decline. There’s a long-standing problem for builders getting permits.
And you’re right, there’s this lock in effect. So if you happen to be a homeowner– and I’m lucky enough to be one. I’m older than you guys of course– then you probably locked in a mortgage rate of around 3%. And you’re looking at this market and saying to yourself, I’m not gonna sell. I’m gonna go out of my way to stay where I am and keep that– keep that where it is.
So as with many other things we talk about on our air every day, we need to get to the other side of the Fed’s tightening cycle. I think we need to see when– that the Fed has finally feels like it’s gone far enough. And then we can get through this difficult period.
And you know, at some point, it’s reasonable to think interest rates are gonna come back down again. It might take a recession to do that. I mean, I’ve seen some economists saying, yeah, we think the Fed will basically finish up by late this year or early next year.
And then it could be cutting rates again, if we actually get into a recession in 2023. So you know, things do change in the housing market but these are long shifts. This is not like stocks, these are long shifts. We’re talking 6, 9, 12 months till we get to the other side of this.
BRIAN SOZZI: Congrats to your home ownership. Rick Newman, always good to see you. We’ll talk to you soon.