US housing market has entered unusual state

The US housing market is currently experiencing a unique set of circumstances that are challenging the traditional laws of supply and demand. Despite a rise in the supply of homes for sale and a decrease in demand, housing prices are hitting record highs, creating a situation that some experts are calling "bizzaro world."

Economist David Rosenberg noted that existing home sales dropped to a four-month low in May, while the supply of existing homes for sale increased by 18.5% year-over-year. This has resulted in an unsold inventory backlog that has not been seen since June 2020.

Despite these trends, the median home price jumped 5.8% year-over-year to a record $419,300 in May. The disconnect between falling demand, rising supply, and increasing prices has left many scratching their heads.

Part of the explanation for this phenomenon lies in the regional nature of the real estate market. Some areas, such as Texas and Florida, have seen home prices decline amid an increase in supply. Additionally, high mortgage rates, hovering around 7%, have deterred potential buyers and sellers from entering the market.

While some experts predict a potential collapse in housing prices, others believe that prices will continue to rise once the Federal Reserve cuts interest rates. Lower mortgage rates would not only ease borrowing costs but also stimulate demand as more buyers enter the market.

Famed investor Barbara Corcoran has even suggested that a decline in mortgage rates could lead to even higher home prices. Overall, the current state of the US housing market is complex and uncertain, with various factors at play that could impact future trends.


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