Housing Crash Begins And It's Worse Than You Think
The U.S housing bubble has finally burst, and home prices are in free, fall with no floor in sight. After two years of stratospheric price appreciation, a major shift has begun, and at this point, homeowners are already seeing property values collapse at the fastest Pace. Since the Great Recession, this downturn is escalating much faster than experts anticipated, as mortgage rates surpass. The seven percent Mark and home sales continue to plunge all across the country.
Given that the vast majority of markets are overvalued by 50 or more we're about to witness the worst housing crash of our lifetime and the consequences are gon na be brutal for the U.S economy, we have a lot to cover today, but before moving on, please support Our work with a thumbs up in this video and don't forget to subscribe. The housing market is one of the biggest segments of the U.S economy and the fact that there's a series of flashing red warning signs hitting the sector means that trouble is on the horizon. A massive downturn continues to pick up steam and the latest numbers are quite breathtaking.
Last week the National Association of home builders reported that slumped home construction. Subtracted 1.37 percentage points from the. U S, GDP in the third quarter, which has represented the biggest housing contraction since 2007. At the same time, mortgage purchase applications plunged by 41.
on a year-over-year basis. Total mortgage applications are now lower than at any point during the Great Recession. Home sales are also cratering in September. They decline for the eighth month in a row in the west. Sales dropped the most dramatic sinking, 31.
percent since last year in the Northeast home. Sales have dropped 18.7 from a year ago and they fell 19.7 in the Midwest and 23 8 percent in the South, meanwhile, pending home sales, declined by a staggering 35 Nationwide this month, which is the biggest drop in at least seven years. All of that is thanks to the highest mortgage rate since 2002.
This month they had a new high of 7.16. According to data from The Mortgage Bankers Association that suggests that housing will continue to become less affordable, even if prices keep going down over the past three months, home prices have been dropping by nearly two percent per month. The fastest pace of home price declines recorded since the Great Recession in some Markets, its prices are actually collapsing almost seven times faster than the national average. For instance, new numbers compiled by Black Knight show that in September, prices fell by 13 in San Jose in San Francisco.
They went down by 10.8 percent in Seattle, they slipped by 9.9 percent, and more than one in five homes up for sale had a price drop. Last month, a record rate since Redfin began keeping track in 2012. On the flip side, they're still up 4.
percent in the past six months, 13.1 percent over the past year, and 42.2 percent since the beginning of the Health crisis, and the Market's biggest irony right now is the fact that even as the price of housing is steadily Falling the cost of housing is still climbing to new highs. Axios, analysts estimate that if someone had bought a Canadian-priced home in September rather than June, they would have paid 5.1 percent less for the house, approximately four twenty-seven thousand, rather than four hundred fifty thousand dollars, but assuming a 20 down payment and a 30-year mortgage.
That person would face monthly mortgage payments, almost 10 percent higher at two thousand two hundred and sixty dollars per month. They explained the firm noted that the monthly principal and interest mortgage payment on the median-priced home is up nine hundred and thirty dollars from a year ago. That is a painful 73 increase. In some cases, current mortgage rates are adding an extra one thousand eight hundred dollars to a mortgage payment. It's looking like a 4 500 mortgage payment for the typical home in San Diego.
After putting twenty percent down, that's a lot of money. Frankly, that's more than what a lot of people in San Diego are even paying for rent. So that's the biggest hurdle highlighted Jeff Tucker, an economist with Zillow. So when you factor in soaring mortgage rates along with elevated home prices and wages that aren't increasing as fast buying a home is less affordable now than it has been in decades. The expert added the consensus in the industry right now is that it's very unlikely that the cost of purchasing a home will return to the normal level of affordability anytime soon, today, the average American family would need to spend 30 2 percent of their income on monthly mortgage payments at current rates, which means that the Market's affordability Outlook remains bleak.
Those who work in the mortgage industry are going to feel a tremendous amount of pain in the months ahead. According to the chief Economist at Redfin, the market is facing the most significant slowdown since the last Bubble Burst. This is the sharpest turn in the housing market. Since the housing market crash in 2008 said Daryl Fairweather many people still have fresh in their minds. The pain.
Our society went through in 2008. Back then, National property values fell by 27 from Peak to trough. Although some markets have seen much steeper losses of up to 58 percent this time around property values are set to sink even deeper. There was massive overheating in the housing market in 2021 through this spring that pushed prices higher than what the fundamentals would support now, they're. Finally, coming down Tucker continued for affordability to return to normal levels, home prices would have to lose roughly 92 percent in value to come back to where the value of the typical home was in the fall of 2020.
That is without adding mortgage rates to the equation. A Wall Street Economist recently estimated that a 20 drop would occur in the very first stage of this new bubble collapse that will extend through the end of 2022 and from that point on, they would continue to Free Fall as tumbling demand for homes admits sharply Rising. Mortgage rates add immense pressure on home prices, says Ian Shepardson, Chief Economist, with Pantheon macroeconomics. We expect home sales to keep falling in 2023. By early next year, sales will have fallen to the incompressible minimum level, where the only people moving home are those with no choice.
Due to job or family circumstances, discretionary buyers a disappearing rapidly in the face to the near 400 basis, point increase in rates over the past year. He said the first price plunge will be just the beginning. Shepherdson continued. The bad news is that prices have much further to fall before the market adjusts fully to the collapse in demand. He explained.
Furthermore, in 2008 the housing bubble affected only half of the U.S states. Today, Moody's data shows that, from the nation's 322, Regional Housing markets, 100 percent will see a peak-to-trough home price decline with some of the most overvalued, such as Boise, Idaho, at risk of crashing by 77 percent. The company also predicted that the unemployment rate goes above six percent. The first round of home price declines will be much greater than Shepherdson's current forecast falling between 25 to 30 percent.
Considering that the mortgage rates are expected to continue to see tightening credit conditions for millions of U.S businesses even further, it's only a matter of time before Mass layouts start being announced. Nar Chief Economist Lawrence Young warned that seven percent mortgage rates are the new normal for buyers until the economy begins to improve rates could reach 8.5 percent, which would be another big shock to the market. Nar Chief Economist Lawrence Young, told a group of Real Estate Investors last week.
Other analysts predict mortgage rates could hit double digits in the months ahead as the FED desperately attempts to get inflation back under control. It was The fed's Reckless Behavior that created this horrifying inflation spiral and fueled the growth of the housing bubble in the first place now they're trying to fix one crisis by causing another decision to continue hiking interest rates in one of the most aggressive tightening Cycles. In decades is going to spark an unprecedented financial and economic disaster in the United States. In a recent interview with CNBC billionaire Barry, sternlick told the public to brace for a major housing market crash and a serious recession. The economy is breaking hard.
The chairman and CEO of Starwood Capital Group said If the Fed keeps this up, they're going to have a serious recession and people will lose their jobs. He had it. This is neither a seller's nor a buyer's market. It's an environment where everyone loses arky's financial analyst Bill, halter, alerting us that we could soon see a crash that'll make previous crashes blush the action you're seeing now is exactly what you saw in 1987. This is what happens prior to crashes.
It's massive volatility, both ways. People are losing both ways. Then the whole floor gives way, and that's where we are. We are right on the doorstep of a crash that will make previous crashes blush. Many people are going to lose everything overnight.
All indicators show that this is just the beginning of a nightmarish crisis, and this new crash is going to be way more devastating than what we experienced back in 2008. Very rough weather is headed our way, and everyone is starting to feel that things are about to get really ugly.
Tim Moseley