House Prices Take a Chill Pill: Are We Finally Seeing the End of the Great Housing Frenzy?

A Turn of Events: From Frenzy to Flat

Ah the housing market. A landscape as dramatic and unpredictable as the Serengeti during the dry season. For years we've watched with bated breath as prices soared higher than a flock of migrating geese. But now it seems the winds of change are blowing. The latest S & P CoreLogic Case Shiller Index reveals a rather intriguing development: home prices nationally rose a mere 2.7% in April compared to the previous year. A far cry from the dizzying heights we've become accustomed to. Indeed it's the smallest gain in nearly two years. One might say the housing market is finally taking a chill pill.

Regional Rhapsody: A Shifting Symphony

What's particularly fascinating is the reshuffling of the regional deck chairs. The Sun Belt once the darling of the property world is now feeling a bit of a chill. Like a chameleon adapting to its surroundings the market is evolving. As Nicholas Godec eloquently puts it markets that were "pandemic darlings are now lagging while historically steady performers in the Midwest and Northeast are setting the pace." New York Chicago and Detroit are leading the charge while Tampa and Dallas are experiencing a bit of a downturn. It's a veritable geographical ballet with each region moving to its own rhythm.

Mortgage Mayhem: The Interest Rate Impasse

But what's causing this seismic shift? Well one can't ignore the elephant in the room or rather the interest rate in the mortgage. Higher mortgage rates hovering around the 7% mark are making potential monthly payments resemble generational highs. This naturally is pricing out a significant portion of buyers especially those eager first timers. As a result first time buyers now make up only 30% of sales a considerable drop from the historical average of 40%. It seems the housing market is becoming as exclusive as a members only club.

Supply Surge: A Glimmer of Hope?

Now let's talk about supply. The number of homes for sale is on the rise although it's still shy of pre pandemic levels. And while only a small percentage of sellers are at risk of selling at a loss (around 6%) it's a slight increase from last year. This supply demand imbalance as Godec points out continues to provide a "price floor preventing the sharp corrections that some had feared." It appears the housing market is a bit like a well balanced ecosystem with various factors working in harmony to maintain equilibrium more or less.

Echoes of the Past: Learning from History

Of course one can't help but recall the not so distant past the days of the subprime mortgage crisis and the Great Recession. But fear not dear readers we're not quite there yet. While prices are indeed weakening they're nowhere near the precipice of major declines we witnessed back then. As Godec astutely observes "Housing supply remains severely constrained with existing homeowners reluctant to surrender their sub 4% pandemic era rates." It seems the lessons of history have been heeded and the housing market is proceeding with a touch more caution.

A Wiser Future for Housing?

And so as the sun sets on the great housing frenzy we're left with a market that's perhaps a little wiser a little more balanced and certainly a lot less predictable. As I always say "Conserve and preserve!" and that applies to our wallets too. Keep a close watch on this ever evolving landscape for it is a testament to the intricate dance between supply demand and the enduring human desire for a place to call home. After all "the question is are we happy to suppose that our grandchildren may never be able to see an elephant except in a picture book?" Let's hope the housing market doesn't become a similar relic of the past.