Not quite.
The National Association of Home Builders released their Housing Market Index on Monday, showing a continued drop in the sharp decline of Current Sales, Sales Expectations, and Buyer Traffic. While a slowdown is expected and we are seeing it in real-time, the media never fails to sensationalize any sort of less-than-favorable condition.
CNBC brought on Ivy Zelman, CEO of well-known real estate research and investment firm Zelman & Associates, who echoed the reality of the slowdown and mentioned her expectation of "home prices to decline nationally both in the new and existing home market in the low to mid-single digits." Let me repeat that - low to mid-single digits.
Currently, home prices are up 20.2% year-over-year according to CoreLogic's HPI report. While a slight decline in prices is realistic, 4-6% is hardly a crash. Buyers are seeing some relief, but overall we are not yet seeing big changes from the blistering hot housing market last year. More than half of the homes out there are still selling above the asking price and quickly. And while there are some listing price reductions, as on average 7% of homes for sale each week had a price drop, this shows that there is less demand, and sellers who are not listing their homes realistically are having to make adjustments. Homes that are listed competitively are still selling quickly.
By now, you've likely seen the latest inflation numbers. The Consumer Price Index (CPI), which measures inflation on the consumer level, rose 1.3% in June. On an annual basis, inflation rose to a new cycle high from 8.6% to 9.1%, the largest 12-month increase since November 1981.
Of note within the report, rents rose 0.8% in June and are now up 5.8% year over year. Energy prices rose 7.5% in June, bringing the annual gain to almost 42%. Gasoline prices rose 11.2% last month and are up nearly 60% year over year. Food costs climbed another 1% in June, bringing the year-over-year gain to 10.4%. Used cars were up 1.6% last month and 7.1% for the year.
The Fed was expected to hike the Fed Funds Rate by 75 basis points at its meeting next week, but last week’s higher-than-expected inflation readings have added speculation that the Fed may even hike by 100 basis points. This remains a crucial meeting to monitor as we continue to deal with the soaring costs of goods.
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