Amidst a backdrop of slowing home sales and an increasingly inverted yield curve, industry groups are petitioning for government intervention in the U.S. real estate market. Notably, sales of existing homes have dipped to their slowest pace since 2010, particularly in the West, signaling a downturn that defies the optimistic forecasts of recent years.
Data suggests a stark decline in demand, with existing home sales plummeting 14.6% year-over-year. This drop has occurred despite historically low housing supply, implying that market demand is at a nadir, a concern for homeowners and realtors alike.
The real estate sector’s response has been to seek legislative relief. A proposed tax credit for long-term homeowners willing to sell could, in theory, incentivize an increase in market supply. However, critics warn of potential misuse by investors and unintended consequences that could further distort an already fragile market.
This push for intervention arises as key economic indicators, such as the inverted yield curve, presage a potential recession. The 10-year Treasury yield’s fall below 4.4% has confounded the expectations of those who predicted a relentless surge in interest rates. Conversely, the 2-year Treasury yield has risen, exacerbating the curve’s inversion and stoking fears of an economic downturn.
Recent actions by major market players reinforce these anxieties. Jeff Bezos’ sale of over a billion dollars in Amazon shares and Jamie Dimon’s divestment from JPMorgan Chase suggest a lack of confidence in near-term economic prospects. Jack Ma’s planned sale of Alibaba shares further underscores the global reach of these concerns.
The proposed seller tax credit, while aiming to alleviate housing shortages and price pressures, is scrutinized for its potential to disproportionately benefit investors, thereby failing to address affordability issues for the average buyer.
New home prices have peaked as homebuilders cut prices to win market share.
Existing home prices still near record as current owners less pressured to sell, chase bids, comparable mortgage rates ridiculously high. pic.twitter.com/8dIXWBV26B
In an exclusive interview, economist David Rosenberg cautioned against interpreting the current “soft landing” as a harbinger of stability, suggesting that such periods are often precursors to recessions. Rosenberg’s insights, alongside the unfolding market dynamics, point to a cautious path ahead for policymakers and market participants.
The real estate industry’s call for a seller tax credit is a clarion call to address deeper systemic issues within the housing market. As the economic landscape shifts, the efficacy and implications of such interventions will be closely monitored by stakeholders and policymakers alike.