The Cromford® Market Index has plunged by over 50% over the last 3 months without losing any of its downward momentum. Most of that fall took place in the last 9 weeks

This is a very negative indicator for the housing market and with mortgage interest rates moving sharply higher again, there seems to be little chance of a recovery in demand that would quickly pull the CMI out of its steeply diving trajectory.

If the next 2 months look a bit like the last 2 months then we could hit the balanced zone for the CMI between 90 and 110 during August. Readings below 90 denote a buyer's market.

It is a surprise to no-one that demand should fall after a sudden and large increase in mortgage rates. This would normally cause a slow increase in supply. However we have witnessed a fast increase in supply, due to a significant increase in the arrival rate of new listings. It is not so obvious why the number of new listings would rise at an elevated rate. Clearly people are choosing to exit the market - sell a property without buying a replacement.

Where are all the extra listings coming from?

Those with homes that they do not actually need are likely to be the first to sell. These include:

• wealthy people with multiple homes who can easily do without their Arizona getaway
• landlords with multiple properties who would like to reduce their exposure by selling one or more of their investment properties
• short-term rental owners (Airbnb style) who can quickly cancel their bookings and exit the market if they see risky times ahead

Long-term rental owners take slightly longer to sell up if their properties are occupied by tenants. If they are empty, then it is easy and quick to add the homes into the for-sale inventory.

The new supply is not distressed and owners will be looking to achieve top-dollar. However, they may be feeling an increasing sense of urgency the longer the market cools. So selling for slightly less is better than not selling at all.

Market incites provided by the Cromford report.