US Housing Prices Fall for First Time Since 2012 Market seeing a great deal of unfulfilled housing demand Homebuyers Relieved By Slightly Lower Mortgage Payments

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Homebuyers Relieved By Slightly Lower Mortgage Payments

The hot seller’s market is beginning to cool off, helping US homebuyers despite economic headwinds. In August, the national median mortgage payment dropped marginally to $1,839 from $1,849.

According to the Purchase Applications Payment Index (PAPI) of the Mortgage Bankers Association, which gauges how new monthly mortgage payments change over time – relative to income – homebuyer affordability improved for the third consecutive month in August.

The national PAPI decreased to 157.9 in August, a 0.3% decrease from July and an increase of 36.5% from the previous year. As a result, new mortgage payments use an average person’s salary less quickly. The national mortgage payment between July and August 2022 remained constant at $1,210 for borrowers applying for lower-payment mortgages (the 25th percentile).

In August, the median loan amount was $313,500, down from a peak of $340,000 in February, according to Seiler. Edward Seiler, MBA’s AVP of housing economics and executive director of the Research Institute for Housing America.

US Housing Prices Fall for First Time Since 2012

The S&P CoreLogic Case-Shiller index revealed on Tuesday that a national index of prices in 20 major cities dropped 0.44% in July, the first decline since March 2012. The most recent real estate crash ended in 2012, kicking off ten years of price increases that were followed by a two-year pandemic purchasing frenzy.

However, the Federal Reserve quickly ended the celebration in its fight against inflation. Mortgage rates doubled this year, pricing out many potential purchasers and triggering a decline in sales.

Values are currently declining. San Francisco (-3.6%), Seattle (-2.5%), and San Diego (-2%) experienced the most significant month-over-month drops in July.

Yes, prices are still very high. In July, the Case-Shiller national index increased 15.8% year over year. However, it was the weakest advance since April 2021, and the index’s regression from the 18.1% increase in June was the biggest ever.

There are indications that there is a great deal of unfulfilled housing demand. According to government data released Tuesday, new home sales in the US unexpectedly increased in August. The rate of new home sales was at its highest since March, possibly due to purchasers racing to beat additional hikes in borrowing prices and take advantage of price reductions by some builders. All regions saw an increase in new house sales, with the South seeing the most significant increase of 29.4% this year.

Compared to the two-year epidemic frenzy, characterized by many offers and a scarcity of listings that compelled buyers to make giant bids, the falloff appears dramatic. Fewer properties are entering the market, which might help maintain prices high. Due to the decreased demand, postings are now staying on the market longer, increasing the available inventory.

Humor of the Week

I really wish I could find out what happened with my friend that couldn’t pay his mortgage.

You know, just for closure.

 

Next weeks potential market moving reports are:

  • Monday, October 3rd – Construction Spending
  • Tuesday, October 4th – Job Openings, Quits 
  • Wednesday, October 5th – ADP Employment Report, Pending Home Sales Index
  • Thursday, October 6th – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, October 7th – Unemployment Rate, Average Hourly Earnings

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (800) 216-1047.

 

 

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Mortgage Demand Is Up In Six Weeks, Despite Much Higher Interest Rates – Housing Construction Rebounds Seen in August While Existing Home Sales Fall

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Housing Construction Rebounds In August While Permits Drop

According to the U.S. Census Bureau and Housing and Urban Development Department, residential building unexpectedly picked up in August, with home starts up 12.2% month over month to a seasonally adjusted annual rate of 1.58 million units.

Both multifamily and single-family starts increased during the month. The growth occurred even as the housing sector battles a slowdown brought on by the unpredictability of the economy and the climate of rising mortgage rates.

After falling for five consecutive months, single-family starts increased by 3.4% in August, perhaps as a result of some improvements in the supply of building materials. However, the single-family building is still insufficient by modern standards.

Today’s housing starts report is more evidence that the housing recession is deepening for the single-family market, with the pace below 1 million for the last two months,” added Jing Fu, the NAHB’s director of forecasting and analysis. “Expected additional tightening of monetary policy from the Federal Reserve, falling builder sentiment, and a 15.3% year-over-year decline in single-family permits points to further weakening for the housing sector.”

Even while the August numbers are positive, the construction recovery might only be temporary. August saw a 10% drop in all building permits, with single-family permits falling by 3.5% and multifamily permits falling by 17.9%. The August reversal indicates that builders are still reducing production due to continued material cost concerns and muted demand. Permitting is a reliable predictor of future new-home supply.

Existing Home Sales Fall in August; Prices Soften Significantly

As the National Association of Realtors reported, sales of previously owned homes dropped 0.4% from July to a seasonally adjusted annualized rate of 4.80 million units. That is the lowest sales pace since May 2020, when the Covid epidemic’s beginnings temporarily caused activity to stall.

All price ranges saw a decline in sales, but the lower end saw the most significant drop. While sales of properties priced between $750,000 and $1 million were down just 3% from the previous year, those priced between $250,000 and $500,000 saw a 14% decline—a decline primarily due to supply, which is most scarce at the bottom end of the market.

Although there was a slight increase in single-family housing starts in August, the U.S. Census reports that homebuilders have been cutting back in response to declining demand. That might have been brought on by a momentary dip in mortgage rates that increased buyer interest. Building permits, a sign of upcoming construction, decreased since mortgage rates were anticipated to rise once more.

Mortgage Demand Is Up In Six Weeks, Despite Much Higher Interest Rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances—$647,200 or less—rose from 6.01% to 6.25%, with points for loans with a 20% down payment falling from 0.76 to 0.71 (including the origination fee).

Applications to refinance a home loan, often particularly susceptible to significant rate changes, actually increased 10% for the week. The prior week’s holiday adjustment might have impacted part of that. It’s also possible that the few remaining borrowers who could profit from a refinance finally decided to do so after realizing that rates might increase soon.

Despite an increase of 1% for the week, mortgage applications for home purchases were 30% fewer than during the same week last year. Since there is currently less competition in the expensive market, some buyers might act quickly. Even so, costs have not decreased much, and because interest rates are currently so high, affordability is historically poor. The slight weekly increase in mortgage demand does not accurately reflect the current severe decline in home sales.

A bank advertises that it offers mortgage loans with no interest.

Customer: “Hello, I’d like to apply for a mortgage.”

Bank Employee: “Yeah, whatever.”

Next week’s potential market moving reports are:

  • Monday, September 26 – Chicago Fed National Activity Index
  • Tuesday, September 27 – S&P Case Shiller and FHFA U.S. Home Price Index (SAAR), New Home Sales (SAAR)
  • Wednesday, September 28 – Pending Home Sales Index
  • Thursday, September 29 – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, September 30 – Core PCE Price Index, Real Consumer Spending, Chicago PMI

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

 

 

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The Current State of Refinancing Inflation, Home Price Growth Headed Downward: Fed Report but based on the Bureau of Labor Statistics, Inflation Rose 0.1% In August Even with Sharp Drop In Gas Prices

Inflation, Home Price Growth Headed Downward: Fed Report

According to the most recent Survey of Consumer Expectations (SCE) from the Federal Reserve inflation is predicted to continue “to decline across all horizons” over the coming year while home price growth is also predicted to decline “sharply” to the lowest level since July 2020.

The August SCE survey reports that the median one-year inflation outlook decreased from 6.2% in July to 5.7%. The median estimate for home price growth decreased by 1.4 percentage points from July to August, falling to 2.1%, the lowest SCE reading since July 2020.

Even so, he ome prices during thyear’s second quarter hit a high peak, despite the gloomy predictions for the housing market as we approach the third quarter of 2022. According to the Federal Reserve Bank of St. Louis, average home prices increased dramatically in the second quarter of this year, rising to $525,000 from $440,600 for the same time in 2021. According to the research, the median sales price in the second quarter of this year was $440,300, up from the second quarter of last year’s median sales price of $382,600.

Inflation Rose 0.1% In August Even with Sharp Drop In Gas Prices

Based on the Bureau of Labor Statistics, inflation increased more than anticipated in August as rising housing and food prices partially offset a decline in gas prices.

The consumer price index, which measures the cost of a wide range of goods and services, rose 0.1% in the month and 8.3% in the previous 12 months. When volatile prices for food and energy were excluded, the CPI increased 0.6% from July and 6.3% in the same month in 2021.

For the month,energy costs decreased by 5%, with the gasoline index falling by 10.6%. However, other increases more than countered those reductions.

In August, the food index rose by 0.8%, while the cost of housing, which accounts for nearly one-third of the CPI’s weighting, increased by 0.7% and is now up 6.2% from a year earlier.

Medical care services also experienced significant growth, increasing by 5.6% from August 2021 and 0.8% monthly. Prices for new cars increased by 0.8%, while those for used vehicles decreased by 0.1%.

Following the news, the stock market had its worst single trading day since June 2020. The market dropped almost 1,300 points in the session.

The August data also contained some positive news for employees, with real average hourly wages increasing by a seasonally adjusted 0.2% for the month. They were still 2.8% lower than they were a year earlier.

The Federal Reserve has increased interest rates four times this year for a total increase of 2.25 percentage points to fight the overall rise in the cost of living. The central bank wants to control inflation without wrecking the economy; therefore, Tuesday’s report is anticipated to have more impact through the remainder of the year and into 2023 than on the September meeting.

The Current State of Refinancing

“Higher mortgage rates have pushed refinance activity down more than 80 percent from last year and have contributed to more home buyers staying on the sidelines. Government loans, which tend to be favored by first-time buyers, bucked this trend and increased over the week, driven mainly by VA and USDA lending activity.” –Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.

Next week’s potential market moving reports are:

  • Monday, September 19 – NAHB Home Builders’ Index
  • Tuesday, September 20 – Building Permits, Housing Starts
  • Wednesday, September 21 – Existing Home Sales, Federal Reserve Statement
  • Thursday, September 22 – Initial Jobless Claims, Construction Spending,
  • Friday, September 23 – No Report

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

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