The U.S. housing market has reached a critical juncture, according to real estate expert Michael Bordenaro. In a recent video, Bordenaro argues that the long-awaited inflection point in the housing market has finally arrived, with key data points showing troubling trends that signal a shift from the booming post-pandemic market to one that is now in “emergency mode.”
Steep Decline in Home Sales
Bordenaro highlights that despite recent reductions in mortgage interest rates, the anticipated resurgence of buyers has not materialized. Instead, the market is experiencing a significant downturn. “The amount of cancellations of contracts is going way up right now,” Bordenaro notes, pointing to data that shows seasonally adjusted home sales plummeting to 3.95 million as of July 2024—a figure not seen since the last housing crash.
Comparing to Previous Years
To put this into perspective, Bordenaro compares the current numbers to previous years. July 2024 home sales were 2.5% lower than in 2023, 19.1% lower than in 2022, and a staggering 34.2% lower than in 2021. Even more concerning is that these figures are 26.7% lower than in 2019 and 2018, years that saw relatively stable markets. With these declines occurring during what is traditionally the peak sales season, Bordenaro suggests that the market could be heading towards one of its worst years on record.
Rising Inventory Levels
As sales drop, inventory continues to climb across the country. According to Bordenaro, the U.S. housing market had 1.33 million homes available as of October 2020—marking the highest inventory levels since then. This rise in inventory, he explains, is bringing the market back to pre-pandemic levels, which could indicate a looming oversupply issue.
Forecasting Inventory Trends
“You’re going to see this number continue to climb, especially into 2025,” Bordenaro predicts. He attributes the rising inventory to several factors, including homeowners who failed to sell at desired prices in 2023 and are hoping for better luck next year. However, Bordenaro warns that these sellers might be disappointed as they could face even stiffer competition in 2025, potentially driving prices down further.
Surge in Price Reductions
One of the most alarming trends Bordenaro discusses is the surge in price reductions across the housing market. As of July 2024, 37.6% of listings had a price reduction, making it the second-highest on record, only behind July 2022. He suggests that many sellers are getting desperate, leading to significant price cuts as they attempt to attract buyers in a sluggish market.
Minimal Home Price Increases
Bordenaro also points out that home prices have barely increased over the past two years, with a mere 1.8% rise since June 2022. When considering the rising costs of property taxes, insurance, and other expenses, any appreciation homeowners might have seen has been effectively nullified.
Impact of Interest Rates and Economic Outlook
Despite the slight drop in interest rates, Bordenaro argues that this has not been enough to rejuvenate the market. “How far are these interest rates really going to have to come down to get people excited about buying again, especially at these prices?” he asks. He expresses skepticism that even significant rate cuts will be enough to reignite buyer interest, particularly as the economic outlook remains uncertain.
Cautious Buyer Behavior
Bordenaro also notes that potential homebuyers might be taking a wait-and-see approach, visiting open houses and monitoring the market but holding off on making purchases. He attributes this caution to a combination of high prices, economic uncertainty, and a general lack of enthusiasm for buying in the current environment.
“There Will Be a Housing Catastrophe”
People in the comments shared their thoughts: “There’s an abandoned and condemned house on my street. It was flooded out and gutted following a hurricane in 2012. It’s in awful condition but is on a deep-canal and almost bayfront. Someone bought it last year for 550k. A flipper is now trying to sell it for $1 million. Nobody has looked at it for months now. Screw greedy people.”
Another commenter said: “Because so many people overpaid for homes even while loan rates were low, I believe there will be a housing catastrophe because these people are in debt. If housing costs continue to drop and, for whatever reason, they can no longer afford the property and it goes into foreclosure, they have no equity since, even if they try to sell, they will not make any money. I believe that many individuals will experience this, especially given the impending mass layoffs and rapidly rising living expenses.”
A Looming Crisis in the Housing Market
The overall picture Bordenaro paints is one of a housing market in trouble, with rising inventory, declining sales, and significant price reductions all signaling a potential crisis. He suggests that the market could be entering a downward spiral, driven by economic factors such as job losses, demographic shifts, and the broader impact of AI on the workforce.
Strategic Opportunities for Buyers
As Bordenaro puts it, “The housing market is finally starting to crack in a way that’s favorable for buyers,” urging potential buyers to be strategic and patient as they navigate these challenging conditions. He emphasizes the importance of being prepared to act when the right opportunities arise but also cautions against rushing into the market without careful consideration.
Fluctuating Interest Rates
What do you think? With rising inventory and declining sales, how might the housing market adapt to avoid a full-blown crisis, and what role should policymakers play in this process? As interest rates continue to fluctuate, how should potential buyers assess the risks and rewards of entering the market now versus waiting for further developments? Given the economic uncertainties and potential job losses highlighted by Bordenaro, what strategies can homeowners and potential buyers employ to safeguard their investments?
To dive deeper into this topic, check out the full video on Michael Bordenaro’s YouTube channel here.
