Townhouses winning as single-family home price is up. Expert anticipates a 25% drop in existing-home sales between February and summer

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Purchase Applications Remain Resilient While Refis Keep Sliding

Interest rates and mortgage refinance demand have a solid and predictable relationship. Rates rise, and refinances fall. Rates are highest in years, but refis are lowest in years. That’s a scenario that’s been unfolding since mortgage rates hit their most recent notable low in August 2021. However, the drop in refinance activity has been relatively linear, with activity only recently reaching long-term lows in 2018. According to the Mortgage Bankers Association’s weekly application survey, refi applications fell 14% in the most recent week, marking one of the steepest drops in this recession cycle. 

Purchases continue to do substantially better in both the short and long term. Except for the post-covid demand boom, they were only down 2% this week and have been mainly flat for the preceding several weeks at levels that are still better than most of the previous decade.

Housing Boom To Lose Steam By The End Of Summer

Ian Shepherdson, chief economist and founder of research consulting firm Pantheon Macroeconomics, anticipates a 25% drop in existing-home sales between February and summer, reducing the yearly rate to 4.5 million from 6.02 million in real terms.

The housing market is in the early stages of a substantial downshift in activity, which will trigger a steep decline in the rate of increase of home prices, starting perhaps as soon as the spring,” Shepherdson wrote in a note.

The forecast is based on the Mortgage Bankers Association’s data, suggesting an 8% drop in loan applications. Shepherdson reckons that the average monthly mortgage payment has climbed by almost $400. It could also be a warning sign for the housing market. If the market slows, many potential sellers may decide not to list to avoid being “the last person trying to sell into a falling market,” which would exacerbate current supply challenges.

Bidding Wars Reached Record High in February, Redfin Reports

According to new Redfin data, bidding wars arose in 68.6% of the house offers filed by Redfin agents nationwide on a seasonally adjusted basis in February. In February, the bidding war rate was the highest in Redfin’s records, which go back to April 2020.

As the government attempts to contain inflation, mortgage rates have risen. For the first time since 2019, the average 30-year fixed mortgage rate surpassed 4%, reaching 4.16 percent during the week ending March 17. This week, the Federal Reserve hiked rates for the first time in four years. Despite economic uncertainties caused by the Ukraine conflict, the administration expects six more rate hikes this year.

Many homebuyers have resorted to townhouses because they have been driven out of the single-family home market due to rising housing prices. With a bidding war rate of 76.6 percent in February, homes listed in the $1 million to $1.5 million categories were the most likely to encounter competition. Properties priced between $600,000 and $800,000 came in second (73.8 percent), followed by homes priced over $1.5 million (73.1 percent).

Next week’s potential market-moving reports are:

  • Monday, March 28th – No Report
  • Tuesday, March 29th – National House Price Index, Job Openings, Quits
  • Wednesday, March 30th – Employment Report, Gross Domestic Income
  • Thursday, March 31st – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, April 1st – Unemployment Rate, Construction Spending

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.

First-time home buyers caught in the middle. Rent cost is up so is the cost of purchasing a home. Check this now!

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Housing Affordability is the Lowest Since 2008

It has become challenging for first-time buyers as they are getting caught between rising rents and the cost of purchasing a home. As home prices continue to rise, buyers are faced with either increasing their budget for purchasing or potentially lowering their standards for the home they purchase.

According to the National Association of Realtors, first-time buyers represented 27% of existing-home sales in January. With mortgage rates above 4% and the highest they have been in three years, buyers with limited funds and budgets for housing are being priced out of the market.

The pandemic created a buying frenzy as the combination of record-low mortgage rates with people’s need for more living space to work remotely. At the same time, housing inventory plunged, and new construction was severely constrained due to supply chain disruptions. Read More

National Association of Home Builders say seven out of ten households in today’s market cannot afford a median-priced home.

Family home

Why Some Owners Are Staying Put

New affordability estimates reveal why there are so few houses for sale: owners who wish to sell may not afford to buy another home even if they could locate one.

As per the National Association of Home Builders, approximately seven out of ten households in today’s market cannot afford a median-priced home. Under typical underwriting criteria, the earnings of 87.5 million families are insufficient to qualify for loans. Worse, for every $1,000 above the average rent, 118,000 more households are priced out, one of the main reasons so many people remain put. Of course, it’s more complicated than simply selling one home and purchasing another. For starters, there’s the expense of selling, which can chip into the earnings you’d intended to put toward your future home. The process of purchasing a home is also not inexpensive. Then there’s the enormous expense of relocation. And if you’re caught between two transactions — selling your old house and buying a new one — you can find yourself with two mortgage payments for a while. Read More