5 reasons why it’s the worst year for housing in decades

Simone Del Rosario:

In the market for a place to live? You know it’s rough out there. Just how rough? Here are five reasons 2023 has been the worst year for housing in decades in this week’s Five For Friday.

You’ve given up on buying your dream home, but even renting’s a bear. Spending 30% of your income on rent is now the new normal, according to Moody’s, a threshold known as being rent-burdened. It’s of little surprise considering the national median rent has jumped by more than 400 bucks a month since January 2020. And the more money you spend on rent, the less you have to save for that insane down payment.

Speaking of, it’s harder to afford a house this year than it has been since 1985, according to the National Association of Realtors. That’s nearly four decades, folks. The median sales price is 416K in the second quarter of this year, up 29% in three years’ time. In fact, nearly 1 in 10 homes is now worth a million or more, while the median household income has actually declined since 2019 when adjusted for inflation.

To add insult to affordability…bring on the high interest rates. The average 30-year mortgage rate in the U.S. spiked from 3% at the end of 2021 to more than 7.5% this month. Heck, rates have jumped a full percentage point this year alone, which may not seem like a lot, but for every point the rate goes up, purchasing power goes down by roughly 10%. And it’s predicted the Fed will raise its benchmark rate one more time this year, which would make the situation even worse.

Let’s say you could afford an overpriced home. Good luck finding one. During the pandemic housing boom, buyers gobbled up inventory. And now that rates are high, homeowners are holding onto those properties and favorable mortgage rates. Inventory is edging up this year, but it’s still below where we were even this time last year. It’s so bad, builders are at max capacity and having a tough time keeping up with demand.

2023 is shaping up to be the worst year for home sales since 2008. You know…when the housing market crashed and pushed the nation into a recession. Anyway, Redfin projects 4.1 million homes will be sold this year. If it falls below 4 mill, that’ll be the slowest since 1995. I don’t think 2023’s woes will end in a Hollywood blockbuster like The Big Short, but that doesn’t mean it hasn’t been rough.

I mean, Michael Burry of Big Short fame keeps shorting the market, but he’s been wrong a lot this year. That’s Five For Friday. I’m Simone Del Rosario. And it’s just business.