Moody’s drops 2-word warning on housing market | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

The U.S. housing market is no longer defying gravity.

Listings have been piling up, home sales are slowing, and prices are no longer guaranteed to climb.

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At the same time, builders are hitting the brakes, while even seasoned buyers and investors are unsure of what’s to come.

Behind the numbers, though, something deeper may be unraveling.

And now, one of the most closely watched institutions in real estate just weighed in, with a comment that’s short, sharp, and impossible to ignore.

The housing market is under fresh scrutiny after Moody’s weighed in.

Image source&colon; Bloomberg/Getty Images

A shifting U.S. housing market: from frenzy to freeze

The U.S. housing market is shifting quickly.

Following three years of healthy Covid-fueled demand and record-tight inventory, existing supply has tanked, well below the 5- to 6-month level economists consider balanced.

By midyear, we’ve seen the cracks widen even further.

Active listings grew roughly 29% year-over-year in June, with homes lingering on the market for an average of 53 days.

That’s a concerning 15th straight month of slower sales.

In major metro areas, the shift was even deeper. Austin and Denver, two pandemic-era boomtowns, saw active listings rise north of 50% compared to 2019. Memphis wasn’t far behind.

New single-family home sales cratered 13.7% in May, falling to a 623,000 annual pace. That’s backed with just a 9.8-month supply of new listings, which significantly lags behind the six-month threshold where leverage flips to the buyer.

Builders have tried their best to keep the pace alive with incentives and rate buydowns, but rising costs have compelled them to hit pause. Land deals are still on hold, and project delays are stacking up.

Construction is cooling, too, with May housing starts falling 9.8% overall, dragged by a drop in multifamily units.

Moreover, single-family starts rose just 0.4%, and are still behind 4.6% from a year earlier. Builder confidence hit 32 in June, the lowest it has been since early 2023.

Even home prices are slowing.

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Having peaked in February, the S&P CoreLogic Case-Shiller index has edged down since. Year-over-year gains have dropped to 2%, the weakest increase since 2012.

Affordability? Still brutal.

First-time buyers need an estimated $126,700 a year to afford a median home, up more than 50% from 2021.

It seems that for now, the market remains stuck between high costs and weakening demand.

Moody’s ‘red flare’ puts housing market on high alert

Mark Zandi isn’t mincing words anymore.

Moody’s chief economist feels the warning lights are flashing bright red for the housing market.

“Home sales are already uber depressed,” he said on X, saying that even the builders who’ve been holding things up are looking to back off.

On top of that, buying down mortgage rates is just too expensive now, too. Also, builders are walking away from land deals, which is another major warning sign.

The numbers have been far from comforting.

In key markets such as Austin and Denver, active listings have surged over 50% from 2019 levels.

That kind of inventory bump usually signals one thing: that sellers are struggling, and buyers are tapping the brakes.

Zandi feels the market’s soft spot is about to get even worse.

He highlights that mortgage rates, still hovering around 7%, could lead to a sharp slide in prices, new home starts, and even project completions.

What’s even more troubling is that it isn’t just housing taking the hit.

Zandi warned that, once a tailwind for the economy, home prices have now become a ‘full-blown headwind.’

Prices that had held mostly firm are starting to slide, and that could drag down broader economic growth in the process.

Even homeowners who were locked into low rates are starting to buckle under the pressure. “They can only work around these needs for so long,” he said.

That said, many are left wondering if this is the worst housing market in the history of America.