Housing isn't getting any cheaper. But an expensive mortgage is not the only thing making homes so unaffordable.
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Phil Rosen
Nov 4, 2022, 17:10 IST
John M Lund Photography Inc / Getty Images
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Now, for one last time before the weekend, let's get to the news. Today we're breaking down the very tight, still quite unaffordable housing market.
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1. Everyone's talking about how the Fed's rate hikes have sent mortgage rates skyrocketing. But even as mortgage rates have climbed above 7%, my colleague Alcynna Lloyd and I report that there's more to the story.
"There's still this gap between demand and supply because we were underbuilding for many years," Nadia Evangelou, senior economist for the National Association of Realtors, told us. "So now we see demand is slowing, but it still outpaces supply."
The general gist is that the surge in home prices — fueled by the low rates of the pandemic era — hasn't come down as fast as mortgage rates have come up.
And that shortage, Evangelou said, can be traced back to the early aughts leading up to the 2008 financial crisis. Homebuilders built so many houses that inventory dramatically outpaced demand.
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But companies have overcorrected since then. The rate of building dipped below the historical average for the next decade.
"We know that higher mortgage rates price out demand across the board for both new and existing markets, but the challenge is particularly acute in new construction because you also have the run up in construction costs," he said.
Any meaningful declines in prices remain unlikely, according to real estate experts, and inflation, high cost of materials, and tight supply of homes look like they'll persist for some time.
Evangelou's prognosis leaves little room for Americans seeking a new home: "Home buying activity is slowing down, it's the biggest slowdown since 2007, with eight straight months of home sale declines. But we don't see that in home prices."
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There's a saying, "all real estate is local." What trends have you noticed in your community? Are prices increasing or decreasing in recent months?
2. US stocksrose after Thursday's downbeat session as investors ready themselves for the October jobs report due early Friday. The nonfarm payrolls data will shed light on where the labor market stands. Dow Jones economists expect 205,000 jobs were added last month, with unemployment holding steady at 3.5%. Take a look at how the S&P 500 is moving now.
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3. Earnings on deck: Berkshire Hathaway, Hershey, and Cardinal Health, all reporting.
6. The International Energy Agency warned that Europe's at risk of a natural gas shortage next year. It's possible that stockpiles may only get 65% full next winter, with Russian supply cut-offs increasing as well as a rebound in gas demand in China. "There is a danger of complacency creeping into the conversation."
10. Moderna shares swung wildly Thursday after the COVID-19 vaccine maker slashed its yearly sales outlook. It also missed on third-quarter expectations, as short-term supply constraints hampered the company's revenue expectations. Get the full details here.
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