One of the top real estate and mortgage analysts, The MBS Highway, surveyed over 3,000 mortgage and real estate professionals around the county for current housing market conditions.
The results were in line with what many experts are seeing, as mortgage rates and inventory are starting to impact the market.
The Survey
The national results for the July 2022 release showed that 66% of respondents reported their market was still active to very active. 33% saw moderate to significant pricing pressures.
Of those that said activity was slower, many cited that it was due to a lack of inventory.
Out in the west and southwest, things seem to be a bit slower, however. Those surveyed see the market slower or normal, versus rapidly expanding.
Many are still seeing multiple offers, but less than previously. Overall, demand is still outpacing supply, but to a lesser extent.
I’m linking to a great article regarding today’s housing market. Essentially, climbing housing costs caused many house hunters to drop out in recent months, which is now providing some relief for the buyers who remain.
‘Homebuyers are getting some relief as sellers slash their prices at a record rate and mortgage rates drop following months of increases’ – Tim Ellis, Market Analyst
Leading indicators of homebuying activity, per Ellis:
For the week ending July 7, 30-year mortgage rates fell to 5.3%—the largest 1-week drop since 2008. This was down from a 2022 high of 5.81% but up from 3.11% at the start of the year.
Fewer people searched for “homes for sale” on Google—searches during the week ending July 2 were down 2% from a year earlier.
The seasonally-adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—was down 15% year over year during the week ending July 3.
Touring activity as of July 3 was down 14% from the start of the year, compared to a 7% increase at the same time last year, according to home tour technology company ShowingTime.
Mortgage purchase applications were down 17% from a year earlier during the week ending July 1, while the seasonally-adjusted index was down 4% week over week.
“Conditions for homebuyers are improving. Housing remains expensive, but mortgage rates just posted their biggest weekly drop since 2008, which makes buying a home a bit more affordable,” said Redfin chief economist Daryl Fairweather. “One way buyers can take advantage of the shift in the market is seeking concessions from sellers. That could include asking the seller to buy down your mortgage rate, pay for repairs or cover some of your closing costs.”
The Data
A few other key facts regarding today’s housing market, from Ellis’ analysis:
The median home sale price was up 13% year over year to $396,000. This growth rate is down from the March peak of 16%.
The median asking price of newly listed homes increased 15% year over year to $399,973, but was down 2.1% from the all-time high set during the four-week period ending June 5.
New listings of homes for sale were down 1.4% from a year earlier.
Active listings (the number of homes listed for sale at any point during the period) fell 2% year over year—the smallest decline since October 2019.
45% of homes that went under contract had an accepted offer within the first two weeks on the market, down from 49% a year earlier.
Also, pending home sales were down 13% year over year, the largest decline since May 2020.
On average, 7% of homes for sale each week had a price drop, a record high as far back as the data goes, through the beginning of 2015.
In Conclusion
Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s market. It would be my pleasure to help you!
More data has been released on both home prices and home sales…and the numbers are fascinating.
The numbers are a month or two behind, due to the time it takes to gather and report the information, but the trends are clearly visible.
Home prices are continuing to appreciate, although the number of sales is declining year-over-year.
Home Prices
The National Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 2.1% in April and 20.4% year over year, which is basically flat from the previous report…but still blistering hot.
The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts.
While you can have a million-dollar home with a conforming loan amount, it’s typically measuring your mid-priced homes.
Prices rose 1.6% in April and are up 18.8% year over year, which is a slight decrease from 19.1% in the previous report, but also extremely hot.
“House price appreciation continues to remain elevated in April,” said Will Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics.
“The inventory of homes on the market remains low, which has continued to keep upward pressure on sales prices. Increasing mortgage rates have yet to offset demand enough to deter the strong price gains happening across the country.”
Home Sales
Pending Home Sales, which measures signed contracts on existing homes, rose 0.7% in the month of May. This was much stronger than the 4% decline expected, but sales are still down 13.6% year over year.
There is no doubt that higher interest rates are impacting demand, but this report does include the majority of the rise. Additionally, the fact that sales were higher with the rise in home prices and lack of inventory clearly shows that the purchase market still remains strong.
New Home Sales, which measures signed contracts on new homes, were up 10.7% in May to a 696,000 annualized pace, which was above expectations.
The report is actually stronger than it appears as there was a positive revision to the previous month. When factoring that in, sales are up 18% from the initially reported number. Year over year sales they are down 5.9%. There were 444,000 homes for sale at the end of May, but only 37,000 or about 6% are actually completed. The rest are either not started or under construction.
The median home price remained steady at $449,000, which is up 15% year over year and points to an increase in higher priced homes sold. The Average priced home came in at $511,400, which is up 16% from last year.
In Conclusion
Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s market. It would be my pleasure to help you!
I can’t take credit for the popular phrase “Marry the house…but date the rate”. It’s being posted by mortgage professionals and real estate agents all over the place.
What does this expression mean?
It means that if you find a home you love, don’t let current interest rates prevent you from moving forward and buying it.
Essentially, don’t be afraid to buy the house you want right now because of external market conditions!
A mortgage does not have to be long term, in fact most people refinance their homes several times as mortgage rates improve or should they need to take cash out from their equity.
Is It A Good Idea?
Committing to the house doesn’t mean you have to commit to today’s financing forever. Buyers can always look for a better financing opportunity down the road and make a change when the time is right.
It is absolutely possible to change your financing to more favorable terms later, should better rates and products become available… and if rates only get worse, then you’ll be glad you married the house when you did.
Interestingly, the average tenure of a mortgage is under 6 years…meaning most homeowner’s either move or refinance their mortgages quite often.
It does look a recession is around the corner, which almost always results in lower mortgage rates. I know that sounds counter intuitive, but mortgage rates actually fall during recessions.
Also, one of the few areas that seem relatively immune from recession is the housing market. Historically, one of the safest bets during recession is real estate.
The chart below shows how housing stays quite resilient during and through recessions:
Looking back at eight of the nine recessions since 1960, home prices significantly increased or at least remained stable each time during and after the recession. One of the reasons this occurs is because interest rates significantly fall during recessionary periods.
What Buyers Should Do Now
Essentially, all of these factors listed above should combine for LOWER rates later this year into 2023.
Of course, things can change, but it sure is looking like a recession is on the horizon, which will undoubtedly bring lower mortgage rates.
Well, waiting to purchase a home and “timing the market” is one option…but it’s almost always a bad idea.
Why? Because no one knows exactly when rates will hit rock bottom – and home prices will continue to accelerate.
More importantly, buyers will miss out on the gains of owning a home. Homes increased in value over 15% last year in the west…and things aren’t getting any cheaper. More on trying to time the market here…
Purchase Strategy
I recommend making your purchase now – and NOT paying extra discount points to lower your interest rate. As a matter of fact, you could use “negative” points to help offset any closing costs.
Instead of paying discount points to access lower mortgage rates, borrowers can receive credits from their lender and use those monies to pay for closing costs and fees associated with the home loan.
Yes, the interest rate might be slightly higher, but you will want to refinance this mortgage when rates drop later this year or next year! This will also limit your out-of-pocket fees for the initial transaction.
In Conclusion
Although things look a little grim currently, the future is actually looking bright for mortgage rates later this year and into next year.
Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s market. It would be my pleasure to help you!
Rents across the U.S. have risen above $2,000 a month for the first time ever…and that’s just the nationwide number. Rents here in the west are rising at a much higher rate.
In Arizona, for example, rents are up over 33% year-over-year…and in California, they are up nearly 25%, per Rent.com.
A new report from Redfin shows that nationally listed rents for available apartments rose 15% from a year ago. Again, that’s the national figure – and rents in the west have gone up even more.
In Los Angeles, the median asking rent is $3,400. Rents are up more than 30% in Austin, Seattle, and Cincinnati. Even in formerly affordable cities such as Nashville it’s now $2,140, up 32% from last year.
So, Should You Rent or Buy?
What all of this information is telling us is that housing is becoming more expensive, whether you buy or rent.
“Housing is getting less affordable for everyone at every level,” says Daryl Fairweather, the chief economist for Redfin. She says after the last housing crash we didn’t build enough homes for a decade. And that lack of supply is the biggest force pushing up home prices.
Fairweather says home builders built fewer homes in the decade starting in 2010 than in any 10-year period since the 1960’s. “So I think it’s going to take at least another decade to dig ourselves out of this hole.”
On the lending side, I personally have been advising my clients to take a look at their overall housing expenditures to see if purchasing a home might actually be cheaper in the long run.
In many cases, it’s smarter to pay even a slightly higher monthly payment early on to take advantage of building equity instead of paying someone else’s mortgage.
For investors, this looks like a good time to purchase, even with higher interest rates. Rents are increasing, and because of supply shortages, valuations (and expected rents) should continue to rise.
1. Prospective homebuyers gain some hope in the housing market
According to that Redfin report, more than one in five home sellers dropped their prices in the past month. It’s the largest drop rate since Fall 2019.
“The sudden surge in mortgage rates led to a sudden and significant cooldown in the housing market in May,” said Redfin Economics Research Lead Chen Zhao.
With interest rates continuing to climb, mortgage applications have gone down 14 percent when compared to last year. This housing market cool-down should give current renters a moment to decide their next steps in their home buying journey.
2. Along with interest rates, rent prices are skyrocketing in some areas
With cities like Phoenix and Los Angeles continuing to see dramatic increases in rent prices, it’s difficult to determine whether to move to a new unit, stay, or purchase.
That’s why it’s important to do your research to see if purchasing might be the most strategic move.
Fairweather thinks that landlords are less likely to raise rents by a significant amount for existing tenants versus a new one. Be sure to read over your lease for any restrictions in yearly rent increases and negotiate with your landlord on new terms, if needed.
In Conclusion
Although home prices and interest rates are up, purchasing a home might very well be the best option available, as rents are rising faster than home prices at this point.
Don’t hesitate to contact me to discuss your current situation and how you might be able to take advantage of today’s changing market. It would be my pleasure to help you!
Thomas Eugene Bonetto
Mortgage Loan Originator
NMLS: 1431961
About The Coach
Tom Bonetto has been helping his customers and players achieve their best for nearly 30 years. His goal is to provide both a superior customer experience and tremendous value for both his business associates and his players alike.
