The US Housing Market Begins to Feel the Pain

by Wolf Richter • Feb 21, 2019

Fact is, home prices cannot outrun wages forever.

The market, if it’s allowed to, can fix the affordability problem that exists in many cities in the US by finding price levels were first-time buyers can afford to buy a home with the income they’re making. At its glacial pace, this is starting to happen in some markets, with sales volume dropping, and inventories rising, and sellers having to step down the aspirational ladder to make deals. In some of these markets, price levels have a long way to go before they make sense, where a household with a median income on the local scale can afford a median home. And there are now enough local housing markets that have turned south to where the impact is starting to creep into national averages.

Sales of “existing homes” – single-family houses, townhouses, condos, and co-ops – across the US in January dropped 8.5% from a year earlier, to a seasonally adjusted annual rate (SAAR) of 4.94 million homes, according to the National Association of Realtors, after having dropped 10.1% year-over-year in December and 8.9% in November. All three were the biggest year-over-year drops since May 2011, during the final throes of Housing Bust 1 (data via YCharts):

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The US Housing Market Begins to Feel the Pain

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