The “hot” housing market is about to experience a serious cooldown
By: Wolf Richter, Wolf Street
“For more than 30 years, consistently falling mortgage interest rates have helped spur more home sales. But in about a year’s time, that decades-long tailwind will likely shift to a housing headwind.” Sales will be hit hard, according to a worried analysis from Zillow.
But not yet.
Home sales have been hot, by post-Financial Crisis standards. According to the National Association of Realtors, sales of new homes rose to a seasonally adjusted annual rate of 546,000 in May, fastest pace since February 2008. The pending home sales index hit the highest level since April 2006. Existing home sales rose 9.2% from a year ago to a seasonally adjusted annual rate of 5.35 million, the fastest pace since November 2009. And the median price of existing homes jumped 7.9% to $228,700, the highest since 2006.
The median home price had hit the all-time crazy peak of $230,000 in 2006, during the insane Housing Bubble that had such dramatic consequences when it imploded. So in May, the median price was almost back where it had been during that all-time crazy peak in 2006. Just $1,300 off! Surely in June, the record will fall and a series of new all-time crazy records will be set. In a number of cities, insane records are already being set month after month, but no way that this is a housing bubble this time [read… San Francisco vs America in Housing Bubble 2].
There is nothing like a big bubble to perk up everyone’s mood. The whole industry is drooling. “It’s been a booming year for mortgage origination growth,” Equifax reported breathlessly on Monday:
Total mortgage origination balances jumped 74% year-over-year in the first quarter to $466 billion. Of them:
First-lien mortgage balances soared 80% to $430 billion; the number of mortgages originated in Q1 jumped 55% to 1.78 million; and average loan amounts rose 12% to $232,547.
Home equity lines of credit (HELOCs) rose 30% to $31 billion, with new accounts up 21% to 285,700, the highest since 2008; the average credit limit rose 9% in March to $108,533.
New home equity installment loans rose 14% to $5.0 billion; new loans originated in Q1 jumped 20% to more than 142,800.
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