Sunday, April 24, 2022 / by Bryan Baylon
Red flag warning. The housing market is changing more rapidly with rising supply and falling demand. While it remains far above normal for now, the Cromford® Market Index is dropping fast.
Here is an image extracted from the weekly CMI chart:
We can clearly see that the CMI is accelerating downwards. Although it remains above 400, representing a very hot market, the downward trend is so powerful it appears possible that it will drop below 300 within a matter a weeks rather than months. It is not possible to predict the CMI, as it is designed to be the very earliest indicator of market changes. We do not know when this decline will bottom out.
Last year we saw a similar but less intense fall during June. However, investors and iBuyers filled the gap left by the fading owner-occupier demand and kept inventory at low levels. The CMI bottomed out well above 340 and staged a second rally.
April is supposed to be one of the best months for the market, but new contract signings are significantly lower than last year. This means active listings are staying active longer and inventory is starting to build in most (but not all) segments. At the moment the number of homes for sale remains very far below normal, but we have seen before how it can increase sharply if more sellers emerge just as demand is declining.
There are a sequence of market indicators that fall like dominoes when a major change occurs in the market. The CMI is specifically designed to be the first of those dominoes. We will be reporting on the state of those confirming indicators over the course of the next few weeks and we advise subscribers to pay close attention. Do not pay attention to prices. They will continue to rise for many months, since they are trailing indicators of market conditions.
This is probably one of those important times when early action may be required. If you are over-extended in your real estate investments, I advise a large increase in caution right now.
Market incites provided by the Cromford report.