Housing Market Crisis in the U.S
The housing market in the U.S. has been going through a very rough time for the past couple of years leading up to 2023. This crisis was initiated by the effects of the pandemic in 2020 and has gotten worse in recent months. The nose dive experienced in the market these past months does not show any signs of relenting in the foreseeable future. The market’s volume in transactions has almost, totally collapsed and there have been undeniable signs that a price decline can be expected all through 2023.
The housing crisis in the U.S. has been rooted in the demand and supply imbalance, as always. The past few years have been hard on the market mostly because of more of one and less of the other. In the past years, the market has leaned on the sellers’ side because buyers have been readily available.
In this article, we shall highlight the housing crisis as it was in 2022 and what can be done about it.
2022 Summary of the Housing Crisis
2022 was a year like no other in the housing market; the pandemic and the subsequent recovery attempts made it a hard year for all participants in the market.
Housing prices increased to never before reached heights. In 2021 the average home went for about 380 thousand dollars, but in May 2022 the price skyrocketed to well over four thousand dollars. These prices have struck the fear of the 2008 crisis repetition.
As demand increased and left supply limping, trying to catch up, it lead to rent prices increasing by more than 12%. But Taylor Marr, Redfin Deputy Chief Economist had this to say, “We expect rents to fall in nearly every part of the country by the middle of 2023 as supply starts overtaking demand while renters typically get the best deal during the winter months as demand is lower, rents are continuing to ease. Because of this, there won’t be as much of seasonal increases come spring, and thus patience for a good deal will pay off. And don’t be afraid to negotiate; some landlords may be open to concessions like a free month’s rent or free parking.”
In November last year, the year-over-year prices of goods and services rose to 6.48% and just kept rising. Inflation rates have blown out of proportion. Mortgages were affected here and blew up to 7% breaking a record with digits not seen since 2002.
After the rise in Mortgages brought on by inflation, buyers choose to remain silent and thus allowed for the buildup of inventory. There was a record-breaking number in the increase of homes listed for sale in comparison to any other time in history.
Josh Felder, an agent of Redfin in San Francisco advised buyers, who according to him have more leverage now than they have since 2010, saying, “Even with higher mortgage rates, if you intend to stay put for longer than five years, it’s a great investment. Homes are forecast to still appreciate, even in light of current circumstances. Sellers should understand that the market is still moving. Homes don’t sell in five days, well over list price, anymore.”
After the increase in inventory after the pandemic, there came a time in 2020 when months of supply took a roundabout turn and started falling and have been on a nose dive since. The inventory that had been building up for some time was crushed in a short time.
These among others have been the results and effects felt in the housing market throughout 2022.
What Can Be Done
Though Immigration policies may seem like an unlikely candidate for the solution to the housing market crisis, nothing could be further from the truth. The U.S. housing market is dependent on a workforce made up of mostly immigrant labor. These policies if made immigrant friendly may reduce the cost of labor and nullify scarcity of the same.
On both the supply and the demand side, finances play a key role in determining the current inventory buildup and the month of supply. With only the necessary taxes levied on the seller, there would be a sure increase in inventory and ensure that buyers receive affordable prices.
This among others is the thing the government should be considering as investors and stakeholders in the housing market await the government’s plan for this sector.
At the end of the day, investors should be able to tell the best stocks in the housing market to invest in. real estate and construction stocks are among the top picks for this class. Ensuring that you invest in the best company in the country that shows promise in the fulfillment of what is required in this sector to survive the current turbulence. Most importantly stay well informed.