Surging Inventory Starting To Strike Fear In Home Sellers | Nick Gerli

And those expecting Fed rate cuts to ride to the rescue may be disappointed

The US housing market remains in uncharted territory.

Median -- not average -- existing home prices hit another all-time high last month, yet transaction volumes are at lows not seen for decades.

And potentially changing the game from here is that mortgage rates are likely headed downwards now that the Federal Reserve is cutting interest rates.

We're also seeing inventory starting to surge in an increasing number of regions.

What does this all mean for home prices as we head into 2025?

Will we ever return to a normal housing market again?

And what would "normal" look like from here?

To find out, we welcome housing analyst Nick Gerli, founder of reventure Consulting and creator of the reventure app, back to the program.

Nick is seeing more and more examples across more and more states that the prevailing trends are of rising inventory and lower prices ahead.

For the details why (plus a lot of supporting charts), click here or on the video below:

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Adam’s Notes: Nick Gerli (recorded 9.23.24)

EXECUTIVE SUMMARY:

• The US housing market is bifurcating, with regions like the South, Sun Belt, and Mountain West experiencing a notable downturn. These areas are seeing inventory surge and median list prices decline as investors retreat. In contrast, regions like the Northeast, Midwest, and parts of California continue to have inventory shortages, driving up prices due to strong demand. For instance, in New Jersey, home builders are receiving offers well over the asking price, while in Florida, prices are being slashed by significant amounts.

• Despite the Federal Reserve cutting interest rates last week, mortgage rates did not fall after. Although rates have dropped from a peak of around 7.8% in 2023 to approximately 6.1-6.2% — so it seems the 50bp Fed pivot had already been priced in. Moreover and more important, this decline has not revitalized the housing market. Mortgage applications are still at their lowest levels in 30 years, with pending home sales remaining stagnant. Overall buyer demand has not rebounded as expected.

• The housing affordability crisis persists. With mortgage payments spiking post-pandemic, the typical monthly payment for a buyer remains around $2,600, down only slightly from a peak of $2,900. Buyers are largely priced out due to high property prices, taxes, and insurance. To reignite demand, mortgage payments need to decrease to