Housing market settlement will offer no salvation to potential homebuyers

A new year has begun for the US housing market, which experts believe will bring a much-needed correction to the imbalance between rising house prices, rising mortgage rates and a low supply of affordable first-time buyer homes that has forced many to stop selling their dream to get a foot on the corporate ladder.

Record high home prices coupled with a chronic shortage of stocks in the market have sidelined countless Americans who are unable or unwilling to take on the staggering monthly mortgage payments.

Home prices have skyrocketed in the first half of last year, frustrating many seeking the traditional security of home ownership. As mortgage rates soared in the second half of 2022, hitting their highest levels since 2008, experts said the market had reached an inflection point and house prices started falling.

Though they say this trend will continue in 2023, it doesn’t necessarily mean clear skies for first-time buyers.

real estate market
This stock image shows a house made out of hundred dollar bills. Although experts expect home prices to fall throughout the year, renters and first-time buyers in the United States are still struggling with affordability.
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“The current state of the housing market is that it’s certainly in transition,” said Cristian deRitis, deputy chief economist at Moody’s Analytics.

“We have falling home prices, sales rapidly falling below pre-pandemic levels. Construction is also being hampered by higher interest rates; we have declining permits and housing starts,” he said news week. “The only saving grace is that there is a large pipeline of homes that have been started but not completed because of all the supply chain issues. So the construction work continues right there.

“We’re actually hiring construction workers, so we’re still building single-family homes and especially multi-family homes. There’s a very large pipeline of that going on.”

Things in the real estate market are slowing down, according to deRitis, to the point where Moody’s Analytics is predicting house prices will fall about 5 to 10 percent this year.

The slowdown would definitely be felt in regional markets, where a double-digit price drop is expected, but some areas — those that haven’t seen a price increase in recent years — “may not see a drop at all.”

But is the American dream of owning a home still a reality?

While experts say the future ahead has reasons to be positive, things still look bleak for many renters and aspiring homebuyers stuck between rising rents and prohibitive home prices.

“It’s devastating, especially in the wake of the pandemic when people have already been struggling,” said John Pollock, coordinator of the National Coalition for a Civil Right to Counsel (NCCRC). news week.

“Although the country has done – or tried – a lot to help people during the pandemic with rent subsidies and expanding legal assistance rights, there were still many people who did not get help in a timely manner,” he said.

“These people then not only faced the potential loss of their units because they owed rent for their location, but they also faced a market that they couldn’t return to because there wasn’t affordable housing.”

Pollock described the current situation, which many low- to middle-income renters are struggling in, as “the worst of both worlds.”

“It’s a devastating combination to come out of a pandemic like this, where so many people have been low-income and vulnerable, and at the same time rents are rising.

That situation became “a recipe for homelessness” in those places, where thousands of people waited for rental assistance during the pandemic and didn’t receive it in time to avoid eviction, Pollock said.

Over the past year, rental markets have been “hyperinflated” across the country. Many tenants in the US have been evicted in areas undergoing gentrification as landlords often look for “rent-increasing opportunities” at the expense of evicting current tenants, Pollock said.

The right to legal counsel can prevent tenants from being evicted, but this is not widely enforced in the United States. Also, evictions are not the only way landlords can get rid of an unwanted tenant.

Such is the case of William Hohmann, a 75-year-old retiree who has lived in Connect55+’s senior living community in the small town of Meadville, Pennsylvania for two years. Now that the owners have increased the rent by 30 to 40 percent, he is threatened with moving out.

“We have made so many requests for Welltower and Calamar Corporation (the owner and manager of the property, respectively) to meet and negotiate this exorbitant rent increase,” Hohmann said news week. “They sent their lawyers down and told us they had no plans to renew our leases.”

news week contacted Welltower and Calamar Corporation for comment.

“This can happen to anyone, not just the people who live in this facility,” said Hohmann. “It could happen to anyone in the community because the community isn’t that wealthy.”

Experts agree that the market is currently not kind to renters and first-time buyers.

“Now if we just talk about it, it’s difficult for a first-time homebuyer, I don’t want to sugarcoat that,” deRitis said. “The opportunities for single people interested in single-family homes simply don’t exist in many markets. Homeownership is elusive for people, but the prospects are looking brighter.

“We expect the labor market to remain resilient and wages to continue to rise – perhaps not at the pace seen during the pandemic, but this will give people a chance to start homeowning when interest rates stabilize somewhat.”

Something that could help unlock and improve the current situation is an increase in inventories, said Thomas LaSalvia of Moody’s Analytics news week.

“Ultimately, when inventory is low and no one is ready to go to market, it just impacts the entire residential ecosystem,” LaSalvia said. “Our legislative leaders and the general public and various organizations have certainly recognized that we need to increase the housing supply in this country.

“Sure, the private market is there and will continue to work to make that happen. But that recognition and emphasis can also help move forward.

“Additional units will be added to the economy and that will open up new options for people to either rent as a first step or eventually buy. As the market recovers and finds its new balance, there will be buyers who we will be able to move forward with on this American Dream.”

https://www.newsweek.com/housing-market-reckoning-wont-provide-salvation-homebuyers-1774415 Housing market settlement will offer no salvation to potential homebuyers

Rick Schindler

Rick Schindler is a Worldtimetodays U.S. News Reporter based in Canada. His focus is on U.S. politics and the environment. He has covered climate change extensively, as well as healthcare and crime. Rick Schindler joined Worldtimetodays in 2023 from the Daily Express and previously worked for Chemist and Druggist and the Jewish Chronicle. He is a graduate of Cambridge University. Languages: English. You can get in touch with me by emailing: RickSchindler@worldtimetodays.com.

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