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Despite sky-high prices, today’s homebuyers aren’t paying more than they can afford

Seattle, Portland, San Francisco
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New home sales in July ↓ 28% from their peak earlier this year, according to the Census Bureau, while NAR reported declines for 4 consecutive months. While a decline in buying frenzy was expected, given ultra-low mortgage rates, tight supply, and fundamental shifts, the current boom is likely to stay. Rather than a market turnaround, the weakened numbers may attribute to builders selling homes later, expecting an extra 1-2% of revenue. In July, compared to the pre-pandemic, existing-home sales ↑ 11% and national home prices ↑ 16.4% YoY. Remote-working high earners have also increased home prices in smaller and still relatively affordable metros in the Midwest, South, and Southwest. After decades of sustained strong housing prices, CA now has the second-lowest homeownership rate in the country today, after NY. It is estimated that a gradually replacing 1-unit homes with 2-4-unit ones could add perhaps up to 1.4M units over 10-yr.

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