US currency not in recession even if Mortgage Rates Increase causing home sales to fall by 20%, Home Price Gains Ease but Expected to Finish Year in Double Digits

The rate of home price gains slowed slightly between April and May, but there was less than a 1% change in each of the three S&P CoreLogic Case-Shiller indices and the FHFA House Price Index.

The nine census divisions included in Case-National Shiller’s Home Price Index increased 19.7% from May 2021 to May 2022. However, the 20-City Composite dipped to 20.5 percent from 21.2 percent in the prior month. The 10-City Index increased 19.0 percent compared to a 19.6 percent from April 2021 to April 2022.

Craig J. Lazzara, Managing Director at S&P DJI said, “The market’s strength continues to be broadly based, as all 20 cities recorded double-digit price increases for the 12 months ended in May. May’s gains ranked in the top quintile of historical experience for 19 cities, and in the top decile for 17 of them. However, at the city level we also see evidence of deceleration. Price gains for May exceeded those for April in only four cities. As recently as February of this year, all 20 cities were accelerating.”

Pending Home Sales Fell 20% in June As Mortgage Rates Soared

The National Association of Realtors reported that in June, fewer contracts were signed to buy existing homes than the same time the prior year. With the exception for the first two months of the coronavirus pandemic lockdowns, when sales momentarily declined and then dramatically increased, that is the slowest pace since September 2011.

Pending home sales decreased every month by a larger-than-anticipated 8.6 percent. A 1 percent decline was forecast by economists polled by Dow Jones. A substantial increase in mortgage interest rates coincided with the severe declines.

The South and West experienced the worst of the sales decline, which was widespread. Pending sales in the Northeast decreased 17.6 percent from June 2021 and 6.7 percent from May. In the Midwest, sales were down 13.4 percent annually and 3.8 percent monthly. Sales in the South fell 19.2 percent from the prior year and 8.9 percent monthly. The worst results were seen in the West, where sales fell by 30.9 percent from June 2021 and 15.9 percent each month.

The U.S. Is Currently Not In A Recession, According to Fed Chair Jerome Powell

Federal Reserve Chairman Jerome Powell stated on Wednesday that he does not think the U.S. economy is in a recession. “I do not think the U.S. is currently in a recession and the reason is there are too many areas of the economy that are performing too well,” Powell said at a press conference following the Fed’s decision to raise rates by 0.75 percentage point for a second consecutive time. “This is a very strong labor market … it doesn’t make sense that the economy would be in a recession with this kind of thing happening.”

The Fed has recently increased interest rates to combat the most significant inflationary pressures in approximately 40 years. Following the announcement of the rise, markets surged, with the tech-heavy Nasdaq Composite rising 4 percent and the Dow Jones Industrial Average gaining more than 450 points.

Investors worry that the Fed’s rate hike campaign could push the economy into a recession. Still, Powell also stated that the central bank would closely monitor economic data to determine future movements. He said there would come a time when the Fed needs to limit the rate of hikes, even though another significant boost may be required.

Next week’s potential market moving reports are:

  • Monday, August 1st – Construction Spending
  • Tuesday, August 2nd – Job Openings, Quits
  • Wednesday, August 3rd – Rental Vacancy Rate, Homeowner Vacancy Rate
  • Thursday, August 4th – Initial Jobless Claims, Continuing Jobless Claims, Trade Deficit
  • Friday, August 5th – 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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We are seeing a Decline in Home purchases due to economic uncertainty: National Association of REALTORS and Commerce Department agrees

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Existing-Home Sales Slid 5.4% in June

According to the National Association of REALTORS®, existing-home sales decreased for the sixth consecutive month in June. In addition, sales fell month over month in three of the four major U.S. areas, while one region saw no change.

Single-family homes, townhomes, condominiums, and co-ops made up the majority of completed existing-home sales, which fell by 5.4 percent from May to a seasonally adjusted annual pace of 5.12 million in June.

The good news is that inventory is finally growing. Although available homes for sale are still deficient, we are seeing a trend of growth which hopefully will begin to offer relief to the relentless increase in home prices. At the end of June, there were 1,260,000 registered housing units, up 2.4 percent from the previous year and 9.6 percent from May. (1.23 million). At the current sales rate, unsold inventory has a 3.0-month supply, up from 2.6 months in May and 2.5 months in June 2021.

As prices rose across the board, the median existing-home price for all property types in June was $416,000, a 13.4% rise from June 2021 ($366,900). This increase represents the longest-ever string of year-over-year growth.

U.S. Housing Starts Drop To Nine-Month Low In June

The number of new homes being built in the U. S. fell to a nine-month low in June, and permits for new construction projects also fell. This is the most recent sign of a slowing housing market, as rising mortgage rates make homes less affordable.

While activity in the single-family category fell to a two-year low, multi-family construction activity increased as rising rents enhanced the attraction of apartment complexes, cushioning the total decline. As a result, the second quarter’s U.S. gross domestic product is anticipated to be impacted by the changes in the housing market.

The Commerce Department said on Tuesday that housing starts dropped by 2 percent last month to a seasonally adjusted annual rate of 1.559 million units, the lowest level since September 2021. The rate for May’s data was increased from the previously reported 1.549 million units to 1.591 million units.

The number of homes whose construction has been approved but has not yet begun rose by 1.1% to 285,000 units. The backlog for single-family homes decreased by 1.3 percent to 147,000.

For the fourth consecutive month, the number of homes under construction but not yet finished reached a record high of 1.68 million units, highlighting the challenges contractors face in completing jobs on time when labor and materials are in short supply.

Higher Mortgage Rates, Economic Uncertainty Behind Declining Home Purchase Applications

According to the Mortgage Bankers Association’s (MBA) builder application survey, new home purchase applications decreased 12 percent year over year in June due to rising mortgage rates and general economic anxiety. Application volume decreased by 10% from one month to the next.

Fewer properties were available for home buyers from March through May due to a decline in new residential construction and permitting activity. Moreover, MBA reports that a seasonally adjusted annual rate for new single-family home sales in June was estimated to be around 620,000, representing a 15% decrease, or more than 100,000 units, from May.

Next week’s potential market moving reports are:

  • Monday, July 25th – No Report
  • Tuesday, July 26th – S&P Case-Shiller National Home Price Index, New Home Sales
  • Wednesday, July 27th – Pending Home Sales Index, Fed Funds Target Rate
  • Thursday, July 28th – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, July 29th – PCE Inflation Index, Real Disposable Income, Employment Cost Index

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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Homebuyers Are Canceling Deals At The Highest Rate Since The Start Of The Pandemic. Will Aging Baby Boomers Affect Housing Inventory?

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Homebuyers Are Canceling Deals At The Highest Rate Since The Start Of The Pandemic

Since the Covid epidemic began, Americans have been canceling home purchase deals at the highest pace ever. According to a recent Redfin survey, the percentage of contracts for sales of existing homes that were canceled in June was slightly under 15% of all contracts for new homes. The proportion hasn’t been higher since the beginning of 2020, when home sales abruptly, albeit momentarily, stopped. One year ago, cancellations were at roughly 11%.

Many prospective homebuyers are rethinking their purchases due to rising mortgage rates and inflation. Some consumers are no longer eligible for the loans they want due to rising mortgage rates. According to a survey by property data supplier Attom, the expenditures of owning a median-priced home in the second quarter required 31.5 percent of the typical U.S. wage. This represents the most significant increase in more than twenty years and is higher than the previous year’s 24 percent and the most significant percentage since 2007.

Homebuilders also observe higher cancellation rates. In a survey of builders conducted by John Burns Real Estate Consulting, cancellations in May increased to 9.3 percent even before the most pronounced rate increase in June. Comparatively, that to 6.6 percent in May 2021.

As Boomers Age Out, How Will Housing Inventory Be Impacted?

The aging-out of the oldest generations will create a large portion of the future available inventory. Per some estimates, more than 4 million existing homes will hit the market in the coming decade due to the limited morality of older homeowners. However, experts believe this will only result in a “minimal excess” in housing supply and “no measurable reduction” in home prices.

The Mortgage Bankers Association (MBA) recently released a study titled “Who Will Buy the Baby Boomers’ Homes When They Leave Them?” to evaluate the potential effects of the aging and eventual passing of the Boomers on future demand and the availability of homes offered for sale by Americans over 50. The MBA’s study indicates that through 2032, there will only be a “modest” amount of extra homes for sale—roughly a quarter million units—which will not have a discernible effect on property prices. Reduced home starts and completions will account for most of the adjustment to the surplus inventory, which should also cause some softening in the rental market.

U.S. Jobless Claims Rise To Highest Level Since Last November

According to the U.S. Labor Department, initial jobless claims increased by 9,000 to 244,000 in the week ending July 9. Since the beginning of November 2021, this has been the highest level of claims. The Wall Street Journal surveyed economists who predicted that new claims would decline somewhat from last week’s prediction of 235,000 to 234,000.

The number of individuals already receiving jobless benefits decreased by 41,000 to 1.33 million. These ‘continued claims’ have now returned to their pre-crisis levels. Although claims have risen gradually, the job market is still quite tight. According to the Federal Reserve’s Beige Book, several businesses were hesitant to fire employees because they were concerned that hiring and keeping employees would continue to be challenging.

Next week’s potential market moving reports are:

  • Monday, July 18th – NAHB Home Builders’ Index
  • Tuesday, July 19th – Building Permits, Housing Starts
  • Wednesday, July 20th – Existing Home Sales (SAAR)
  • Thursday, July 21st – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, July 22nd – 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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