The housing paradox: as rates rain on property’s parade, Americans are losing all around

Monday, September 12, 2022 by Robinhood Snacks |
A white-picket paradox (Jon Lovette/Getty Images)

A white-picket paradox (Jon Lovette/Getty Images)

Zillow-scrolling has us pillow-sobbing… The US has come down with a case of housing blues: Americans are either sad because they can’t buy a house or sad because they did buy a house. Nearly three in four homebuyers have at least one regret related to their recent home purchase. Meanwhile, wannabe buyers are getting priced out. Let’s unpack that:

  • Homeowners are watching their net worth fall as soaring mortgage rates soften demand. Home prices dropped in July for the first time in 32 months as rates doubled from January.
  • #1 regret: overpaying. Buyers paid a median of $65K over asking price for their new cribs.
  • Meanwhile: Wannabe buyers are far from their white-picket-fence dreams because prices are still significantly elevated (blame: pandemic housing boom).

“Squid Game” vibes… No one wins in this market. Prospective buyers lose: home prices in June were 18% higher than a year earlier, a historically steep jump (plus: mortgage rates are wild). Owners lose too: home prices dipped 0.77% in July — sounds negligible, actually the largest monthly decline since 2011.

  • The housing-price drop could get worse since the Fed is determined to unleash ’flation-fighting “pain” (read: higher interest rates).
  • 275K mortgage holders would fall underwater if their homes lost 5% of their current value. Over 80% of those borrowers bought homes in the first half of this year (aka: housing peak).

It’s a chill, but likely not a crash… Homeowners are way more cash flush now than they were when the housing market crashed in ’07 (flashback: prices plunged and millions owed more than their homes were worth). Mortgage leverage is at a record low, and losing some paper value on a home won’t harm most Americans. While housing inventory is rising at a record pace, home supply is still relatively tight, so prices likely won’t crash.