Sales of new and existing homes are falling, construction of single-family homes is basically flat for the year, mortgage rates are rising and affordability is weakening.
We know that because the price gains are finally starting to shrink, according to a report this week from the National Association of Realtors.
The reason the housing recovery isn't over is because demand is very solid, and the price gains are starting to ease.
Sales of existing homes have been lower for five straight months, according to the Realtors, and mortgage applications to purchase a home have also been falling, although they are still slightly higher than a year ago. "I think the market still has legs, but if rates continue to rise it will price out entry-level buyers and they have been carrying the market the last few years," said Khater. "While monthly home sales slipped, yearly growth pushed the three-month average to 8.1 percent, back above what is forecasted for 2018 (7 percent)," said Danielle Hale, chief economist at realtor.com.
A historically normal level of single-family housing starts, going back 40 years or so, is about 1.1 million per year. "Builders need to manage rising construction costs to keep their homes competitively priced for the newcomers to the housing market," said Danushka Nanayakkara-Skillington, senior economist at the National Association of Home Builders.
Mortgage rates are higher now than they were one year ago, but not by a lot, and they are still, by historical measures, pretty low.
As more supply hits the market, sales will grow again.