We are seeing a Decline in Home purchases due to economic uncertainty: National Association of REALTORS and Commerce Department agrees


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 make 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.

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


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.

Fed Sees ‘More Restrictive’ Policy As Likely If Inflation Fails To Come Down, Minutes say

More Restrictive

According to meeting minutes disclosed on Wednesday, Federal Reserve officials highlighted the need to combat inflation in June even if it meant slowing an economy that already looked like it was headed for a recession. On top of the 75 basis point rise adopted in June, members predicted that another 50 or 75 basis points would likely be moved at the July meeting. A basis point is a fraction of a percentage point or 100th.

The Federal Open Market Committee, which sets interest rates, decided to take a more restrictive stance in response to statistics showing that consumer prices are increasing at an annual pace of 8.6 percent, and inflation expectations are rising. At the June 14–15 meeting, officials said they needed to act now to reassure the public and the markets that they are committed to battling inflation. The actions, along with information about the policy’s stance, “would be essential in restoring price stability,” the letter continued.

According to officials who predicted a succession of increases, the Fed Funds rate will reach 3.4 percent this year, exceeding the longer-run neutral rate of 2.5 percent. The minutes stated that following several rate increases, the Fed would be in an excellent position to assess the results of the changes before deciding whether to proceed. They said that “more restrictive measures” may be put in place if inflation doesn’t go down. The likelihood that the Fed will have to start lowering rates as soon as the summer of 2023 is factored into futures markets.

Redfin: Asking Prices Come Down from Record High

According to Redfin, a record-high percentage of sellers reduced their asking price over the four weeks that ended on June 26th, and the median asking price of recently listed houses for sale is down 1.5% from the record high it achieved in the spring. The most significant drop in pending sales since May 2020 was recorded, but there are indications that demand from first-time homebuyers is beginning to level off.

Leading indicators of homebuying activity:

Redfin stated that 30-year mortgage rates decreased marginally to 5.7 percent on June 30.
Google searches for “homes for sale” decreased by 7% from the prior year during the week ending June 25.
The Redfin Homebuyer Demand Index, which accounts for requests for home tours and other services related to home buying from Redfin agents, increased 7 points from the week before but was down 15% year over year during the week ending June 26.
According to home tour technology company ShowingTime, the amount of touring as of June 26 decreased 3 percent from the start of the year, compared to a 24 percent growth the previous year.
Compared to a year ago, mortgage purchase applications were down 24%, although the seasonally adjusted index increased 0.1 percent week over a week during the week ending June 17.

Redfin also reports that the median home sale price increased 14% yearly to a record $399,249. Although it grew by 15% year over year to $405,547, the median asking price of recently listed homes fell by 1.5% from the record high established during the four weeks ended May 22.

MBA Weekly Survey July 6, 2022: Applications, Rates Take Tumbles

According to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 1, mortgage applications decreased for the first time in four weeks, and mortgage rates slipped for a second consecutive week. Results for this week have been adjusted for holidays to reflect early closings on July 1 due to the Independence Day holiday.

The Market Composite Index dropped by 5.4 percent from one week earlier on a seasonally adjusted basis. The refinance share of mortgage activity decreased to 29.6 percent of total applications from 30.3 percent the previous week. The seasonally adjusted Purchase Index fell by 4% compared with last week. Although the previous week’s unadjusted Purchase Index rose by 7%, it was still 17% lower than the last week a year earlier.

As per MBA, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) dropped from 5.84 to 5.74 percent, while the number of points (including origination fees) increased for loans with 80 percent loan-to-value ratios from 0.64 to 0.65. Since last week, the effective rate has fallen.

Next week’s potential market-moving reports are:

  • Monday, July 11th – 3-Year Inflation Expectations
  • Tuesday, July 12th – Small Business Index
  • Wednesday, July 13th – Consumer Price Index, Federal Budget (Comparison vs. Year Ago)
  • Thursday, July 14th – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, July 15th – Retail Sales, Industrial Production Index, Consumer Sentiment 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.