Market Overview

The Current U.S. Housing Market Is A Homebuyer's Nightmare


The housing market in the United States is red-hot. Strong demand is driving home values up all over the country, and the average number of days a home stays on the market has dropped to 35. All in all, there have been plenty of reasons for homeowners and sellers to cheer — but it has left buyers feeling the pinch.

In many parts of the country, prospective homebuyers are facing a perfect storm, of sorts, that's making finding and buying a new home harder than it has been in decades. There are plenty of reasons that it's happening, some internal, and some external, and the eventual result of the current trajectory isn't going to be good for anyone. Here's a rundown of what's making the U.S. housing market so difficult for buyers, and where it's likely to end up in the very near future.

Buyers Feeling The Rush

In April, the last month for which data is available, the average home for sale spent just 35 days on the market. That continues a downward trend that has been in evidence for over a year. For buyers, that means less time than ever to consider their purchase and more competition for each home. That competition is part of the reason that home prices are soaring, raising the average home sale price by 6.3 percent in 2017 alone. For potential buyers, that's just the beginning of the problems.

The End Of Cheap Borrowing

In addition to fierce competition and rising home prices, potential buyers are facing another, more worrisome trend – rising mortgage rates. Since January, the average rate for a 30-year fixed mortgage has risen an eye-popping 48 basis points. With the Federal Reserve poised to continue raising the benchmark lending rate in the months to come, it's a trend that is going to continue. That is compounding the problem for those pursuing a purchase, as each missed opportunity means a far higher cost for their next offer. With wages remaining stagnant, the rising cost of a mortgage is making home ownership harder than ever for many Americans.

Trade Tensions And Foreign Pressures

There are also external forces that are making the U.S. housing market a nightmare for buyers. First, a weakening U.S. Dollar is leading purchasers from overseas to consider investing in American real estate. A glance at a European mortgage calculator illustrates the vast difference in purchasing power that a weak dollar creates. With each foreign purchaser entering the market, the housing supply tightens further. Homebuilders also haven't been able to keep up with demand, as trade tensions with Canada have resulted in a tariff on Canadian lumber, pushing new home construction lumber costs up by around 60% nationwide, and slowing housing starts.

A Worrisome Outlook

To the casual observer, the current U.S. housing market is the picture of success. There is healthy demand and prices are rising, creating wealth for sellers. The problem is, the underlying economic and political factors suggest that a correction is coming soon. After all, buyers will be priced out of the market if the upward trends continue. At least one market analyst believes that the housing market is showing all the signs of a looming crash, similar to the one that derailed the U.S. economy in 2008. While there are plenty of others that don't share this outlook, it's an opinion worth considering. That's because it's the opinion of James Stack, who was one of the only industry analysts that predicted the last housing market calamity. If he turns out to be right, there's no telling where the bottom could be this time around.

Related Links:

Renters' Top 8 Concerns About Buying A Home

What These 7 Cities Are Doing To Promote Homeownership

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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