Falling Home Sales Send Shock Waves Through Home Retailers And Flippers: How Bad Could It Get?
As mortgage rates topped 6%, for the first time since the 2008 financial crisis, new home buyers are being squeezed on multiple fronts since elevated home prices, interest rates, and rising inflation are adding to everyone's bottom line.
With the bond market pricing in theFed hiking interest rates by at least 75 bps, investors can expect more pain to come in the housing market, which will trickle down to the rest of the economy.
For instance, when home sales fall, other parts of the economy also decline, sending headwinds to home retailers that provide furniture, hardware, appliances, lighting and fixtures, as well as decor.
What Happened: Early Monday, the Zillow Group Z announced that 5.1 million existing home sales are expected in 2022, down 16.4% since 2021, which was the strongest calendar year for home sales since 2006.
Also, Zillow expects home value growth to slump over the next year, from the current rate of 14.1% annual growth to 1.4% in 2023, which was a downward revision from Augusts year-ahead outlook of 2.4%.
Similarly to Zillows online buy and sell services, home flippers such as Opendoor Technologies Inc OPEN have also been hitby rising interest rates, as the company lost money on 42% of its transactions in August, according to YipitData.
Opendoor's pricing problems are starting to resemble the same issues Zillow had before exiting the buying and selling business. Mike DelPrete mentioned that his analysis shows that September is likely to be even worse than August, although it doesn't mean Opendoor will close the door on this business segment.
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