May New Home Sales Jump 11%

In a month of generally negative housing data, May’s new home sales stood out as the only bright spot. New home sales jumped by over 11% from April, according to HUD and the Census Bureau report. In May, new single-family home sales increased to a seasonally adjusted annual rate of 696,000, up 10.7 percent from the revised April pace of 629,000 but down 5.9 percent from a year earlier.

The sales vary by region: the largest area, the South, increased by 1.5 percent from a year earlier to 413,000 units after being adjusted from 366,000 units in April. Sales in the West increased by 0.5 percent from a year earlier and increased by 39.3 percent to 202,000 units up from 145,000. Meanwhile, the Northeast declined 42.5 percent from a year earlier. Sales in the Midwest fell by 37 percent from last year and 18.3 percent in May to 58,000 units from 71,000 units in April.

“There was a surge in completions of single-family homes in May reported in the housing starts data earlier this month, which we believe was driven by buyers racing in to lock in mortgage rates before rates rose even higher,” said Mark Vitner, Senior Economist with Wells Fargo Economics, Charlotte, N.C. “Sales of new homes under construction accounted for the largest share of May’s increase, although sales of homes where construction has not yet started and sales of completed homes also rose last month.”

June Sees Big Home-Price Deceleration Coupled With Record Inventory Jump

Recent homebuyers have experienced a severe double blow of rising interest rates and sky-high home prices, but Black Knight‘s most recent Mortgage Monitor report might provide some hope for purchasers.

Annual home price growth fell sharply from 19.3% in May to 17.3% in June. According to Black Knight Data & Analytics President Ben Graboske, the reduction in the price growth rate of over two percentage points was the most significant deceleration observed by the company since at least the early 1970s. The real estate analytics firm found that although prices are rising, they are doing so at a noticeably slower rate. This deceleration is likely to continue in the near future.

A further indication that high prices and rising rates are eventually slowing the previously overheated housing market is that the price growth rate slowed down for the third month in a row in June. Another promising development for prospective buyers was that the decline in rate hike in June was accompanied by the biggest month-to-month gain in inventory in the previous 12 years. According to Black Knight’s research, on a seasonally adjusted basis, the number of homes offered for sale increased by 22 percent for the last two months, or nearly 114,000 new listings.

Pending Home Sales Post Surprise Increase In May, Likely Due To Brief Pullback In Mortgage Rates

According to the National Association of Realtors, pending home sales—a gauge of contracts to buy existing homes—rose modestly in May, up 0.7 percent from April. That ended a six-month trend of dropping demand. Sales were still 13.6% below May 2021 levels.

Mortgage rates have been on the rise for buyers since the beginning of the year, but in May, they started to decline slightly, which may be the cause of the increase in sales. The overall active inventory climbed as more supply entered the market, and some homes remained on the market for longer.

As per Realtor.com, the number of homes for sale has finally started to increase, up 21 percent from a year ago. However, it is still only approximately 50% of pre-Covid levels. Additionally, the median listing price increased by around 17% last week, remaining stable for the third week in a row.

Next week’s potential market-moving reports are:

• Monday, August 8th – Construction Spending
• Tuesday, August 9th – Job Openings, Quits
• Wednesday, August 10th – Rental Vacancy Rate, Homeowner Vacancy Rate
• Thursday, August 11th – Initial Jobless Claims, Continuing Jobless Claims, Trade Deficit
• Friday, August 12th – 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.

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 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 at 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.

Resource Link: https://www.cnbc.com/2022/07/27/pending-home-sales-fell-20percent-in-june-versus-a-year-earlier-as-mortgage-rates-soared.html

Homebuyer Demand is Slowing

The housing market continues to show signs of slowing. Although Redfin is not the only real estate company in the country, they seem to be reporting the most about the changing housing market versus other national real estate firms. Redfin reported another double-digit decline in homebuyer demand when compared to the same time last year. This is the second time they have reported a decline in the last three weeks.

Redfin’s homebuyer demand index was down 12% annually for the week of June 5, compared to a 9% decline for the last week of May and a 12% decline from the week before that. This is the largest index drop since the pandemic’s early days.

It is clear that more and more sellers are no longer in control of home prices with bidding wars. Repeatedly, we hear stories of sellers reducing their home prices to increase traffic.

However, let’s not assume that the housing boom is over. Despite home prices declining and mortgage rates rising, we are seeing some buyers return to the market. Housing inventory is increasing, offering purchasers more homes to choose from. It has been quite some time since buyers have had this many homes to choose from and not have to enter a bidding war.

Mortgage Rates, Home Prices Expected To Stabilize, Forecast Says

The housing and stock markets have been troubled by the quick rise in mortgage rates and inflation since 2022. Fears of a recession and general economic instability have caused analysts to adjust their year-end estimates to account for these changes.

The housing market is projected to alter in the coming year, but not all changes will be unpleasant. Some respite may be on the way for purchasers who have been dismayed by the shortage of available homes and fierce competition. Furthermore, while mortgage rates and property prices are unlikely to fall, they are predicted to steady and may relieve purchasers who have been trying to keep up with escalating costs and rates.

As demand cools and supply rises, Realtor.com updated its home market projection for 2022 and concluded that calmer waters might be ahead. According to the revised prognosis: Mortgage rates will average 5 percent in 2022, rising to 5.5 percent by the year’s conclusion. This is compared to an initial projection of a 3.3 percent average increase and a 3.6 percent increase. Moreover, buyer demand is projected to decline over the summer, but most markets will continue to favor sellers.

Fed Hikes Interest Rate Benchmark By 0.75 Percentage Point, The Biggest Increase Since 1994

The Federal Reserve took its most aggressive stance against inflation yet on Wednesday, boosting benchmark interest rates by three-quarters of a percentage point, the most significant increase since 1994.

The Federal Open Market Committee, which sets interest rates, raised its benchmark funds rate to 1.5 percent -1.75 percent, the highest level since just before the Covid epidemic began in March 2020. After the decision, stocks were unstable, but they rose when Fed Chairman Jerome Powell spoke at his post-meeting news conference.

“We want to see progress. Inflation can’t go down until it flattens out,” Powell said. “If we don’t see progress … that could cause us to react. Soon enough, we will be seeing some progress,” Powell said. Based on one widely cited metric, FOMC members projected a significantly steeper path of rate increases to stop inflation from reaching its highest level since December 1981.

According to the midpoint of the goal range of individual members’ views, the Fed’s benchmark rate will end the year at 3.4 percent. This represents a 1.5 percentage point increase above the March estimate. The committee predicts that the rate will rise to 3.8 percent in 2023, an entire percentage point more than the March forecast.

Next week’s potential market-moving reports are:

Monday, June 20th – No Report
Tuesday, June 21st –Existing Home Sales
Wednesday, June 22nd – No Report
Thursday, June 23rd – Initial Jobless Claims, Continuing Jobless Claims
Friday, June 24th – Consumer Sentiment Index, New Home Sales

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.

Resource – https://time.com/nextadvisor/mortgages/mortgage-news/housing-market-is-slowing-but-home-prices-still-high/