By John Gittelsohn and Prashant Gopal | Bloomberg Businessweek
After a decade of boom-bust-boom, the U.S. housing market is going downhill just when many economists thought it would be heading upward. Sales of previously owned properties tumbled 7.5 percent in March from the previous year, to the slowest pace in 20 months, while purchases of new houses sank 14.5 percent from February. And applications for mortgages to buy homes are down 21 percent from this time last year, indicating fading demand during what is typically the busiest season for deals.
Mortgage interest rates are rising from record lows as the Federal Reserve reduces its bond-buying program. Hedge funds and other big investors have decreased their purchases of homes to rent out. “The very-low-rate environment and the high level of investment activities really masked how weak the housing market was,” says Sam Khater, deputy chief economist at CoreLogic (CLGX). “Once it goes back to the normal owner-occupied purchase market, you really realize how weak the market is.”
