Bullish sentiment in US housing market disappears

 

Its 2025 and investment company BlackRock, one of the world’s largest asset managers, is reportedly scaling back its real estate investments by selling properties at a loss.

According to citizenswatch.com, this strategic retreat comes amidst whispers of an impending market collapse, with residential prices stagnating and an oversupply of unsold properties accumulating.

The decision by BlackRock to divest from real estate at a loss is not just a business maneuver but a stark indicator of underlying market dynamics.

 Meanwhile JP Morgan reports that the U.S. housing market is likely to remain largely frozen through 2025 although some growth is still expected at a very subdued pace of 3 per cent or less.

Analysts say, “Demand — often understood through existing home sales (EHS) — remains exceptionally low. And though housing inventory is creeping back up, it still remains below the historical averages. Both existing home sales and inventory remain low.”

“Existing homes for sale have reverted to more normalized levels across several key Metropolitan Statistical Areas (MSAs), and new homes have become fairly plentiful,” said Michael Rehaut, head of U.S. Homebuilding and Building Products Research at J.P. Morgan.

“New homes for sale are at 481K, the highest level since 2007, and speculative homes for sale are at 385K, the highest since 2008. These metrics are roughly 50 per cent/40 per cent respectively above long-term averages. Supply should be less of a support for the housing market in 2025.”

Nationally, while single-family existing homes for sale are up roughly 20% year-over-year, but the number remains near record lows, around 20-30 per cent below prior troughs.

A housing shortage is often attributed to supply tightness. In this instance, underbuilding has been evident over the past decade, but a longer-term housing shortage is less clear. 

Mortgage rates

 

JP Morgan states, “But another key issue is at play, which is restraining supply more than any potential underbuilding. People are staying put for longer due to high interest rates, so housing stock is not being freed up. Many borrowers have a significant disincentive to sell their home, and this is creating the dearth in supply.”

Housing market demand, the investment sates, is seriously suppressed by interest rates

“The current housing market stagnation is more closely tied to interest rates than anything else. “The situation is not going to change until we get mortgage rates back down toward 5%, or even lower,” Sim said. “And we aren’t forecasting mortgage rates to breach 6 per cent in 2025 — they should ease only slightly to 6.7 per cent by the year end.” Based on this, demand looks set to remain at exceptionally low levels.

 

Information sources: Citizens watch.com and JP Morgan

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