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.