U.S. Pending Home Sales Fall to Second-Lowest Level on Record But…
According to a statement released on Wednesday, the National Association of Realtors index pending home sales fell 4% this month to the lowest since before the pandemic for records dating back to 2001. Although the decrease exceeded all predictions from an economist survey conducted by Bloomberg, many feel that we are very close, if not already at the bottom of the market. This means that better times for housing may lie ahead in 2023.
The aggressive tightening effort by the Federal Reserve to control inflation has significantly affected the housing market in 2022. Home sales and, consequently, prices have been falling for months as borrowing costs have approximately doubled from where they were at the beginning of the year.
“There are approximately two months of lag time between mortgage rates and home sales,” Lawrence Yun, NAR’s chief economist, said in a statement. “With mortgage rates falling throughout December, home-buying activity should inevitably rebound in the coming months and help economic growth.”
MBA Weekly Survey Dec. 21, 2022: Falling Rates Boost Refis for 2nd Straight Week
The Mortgage Bankers Association said Wednesday that its Weekly Mortgage Applications Survey for the week ending Dec. 16 showed an increase in refinancing activity for the second consecutive week due to the lowest interest rates since September.
Although the unadjusted refinance index rose 6% from the previous week, it was still 85% lower than the last week a year earlier. More mortgages were for refinances, from 29.4% the last week to 31.3 percent of all applications.
Double-digit U.S. Home Price Growth Streak Skids To An End
When mortgage rates spiked above 7% in October, and further limited demand, annual price growth in the U.S. housing market fell into the single digits for the first time in roughly two years, a pair of highly monitored surveys indicated on Tuesday.
The S&P CoreLogic Case Shiller national home price index saw its first single-digit gain since November 2020 in October, rising 9.2% as opposed to 10.7% in September. This is the index’s first non-double-digit gain since September 2020. The annual home price increase rate decreased to 9.8% in October from 11.1% in September, according to the Federal Housing Finance Agency.
The Fed’s aggressive interest rate increases, intended to lower high inflation by reducing demand in the economy, have negatively impacted the housing market. The Fed increased rates by half a percentage point this month, capping a year that saw its benchmark rate grow at the fastest since the early 1980s, from nearly zero in March to between 4.25% and 4.5%. In 2023, rates, according to Fed experts, will likely reach 5%.
The National Association of Realtors predicted earlier this month that existing home values, which comprise the vast majority of the market, will stay steady in 2023.
Next week’s potential market-moving reports are:
- Monday, January 2nd – No Report
- Tuesday, January 3rd – Construction Spending
- Wednesday, January 4th – Job Openings, Quits, FOMC Minutes
- Thursday, January 5th– – Initial and Continuing Jobless Claims, ADP Employment Report
- Friday, January 6th – Unemployment Rate, Average Hourly Earnings
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