Just a few months ago, real estate was on fire. Prices were blowing past records set during the previous decade’s housing bubble as desperate buyers bought whatever was available at above the asking price while homeowners, confident that prices would keep rising, held out for the next big pop to sell. Notice on the following chart how the ascent steepens at the beginning of this year.
Then, as if someone flipped a switch, the trend shifted into reverse. Not just in the US but nearly everywhere. This list of recent headlines tells the tale:
Housing demand sees biggest drop in more than 2 years
Hamptons property sales slow as caution spreads to the wealthy
Home Prices Are Falling in One of America’s Richest Suburbs
First Time Ever, More Chinese sellers than buyers
Vancouver Suffers Its Worst July for Home Sales Since 2000
Record Drop in Foreigners Buying U.S. Homes
Australian home prices take biggest dip since 2011
The End of the Global Housing Boom
Manhattan Real Estate: Prices Plummet, Sales Tank
What’s happening and why is it happening now?
Several things came together pretty much simultaneously to turn houses from must-have-at-any-price necessities into completely optional and maybe not even desirable: First, prices rose beyond the reach of all but the seriously affluent. The gap between the price of the average home and the size of the mortgage the average local buyer can afford has been rising for years, but recently in the hottest markets it has become a chasm. Meanwhile, mortgage rates have started to rise, increasing the monthly payment on a given house dramatically.
If you live in San Francisco or Sydney or Vancouver, chances are you can’t afford to buy a decent house – not even close. And if you can’t you don’t.
…click on the above link to read the rest of the article…
