Home Sale Prices Increase Incrementally with Lower Mortgage Rates, Redfin Reports

According to a new Redfin study, the median home sale price in the U.S. rose by 0.9% from a year earlier to $350,250 for the four weeks that ended on January 15^th. This increase was the largest in a month. There continues to be a lot of speculation on whether home prices will start rising again or if they will continue to fall. There seem to be many opposing opinions on the future of home prices.

Prices are still elevated because buyer activity has improved, and mortgage rates are dropping as inflation reduces. Pending home sales are down 29% year over year, a sizable reduction but the first drop under 30% in three months. The week ending January 13^th saw a 25% increase in mortgage purchase applications from the week before, suggesting that more pending purchases will be in the coming months.

Mortgage purchase applications increased by 25% during the second week of January compared to the previous week. Applications for purchases remain 35% lower than a year ago.

Potential Home Sales Growth Could Herald Optimistic Prospects If Supply and Demand Both Improve

According to First American, a new measurement created by the company, potential existing home sales increased to a seasonally adjusted annual pace of 5.31 million units in December. This metric tries to determine the market’s “healthy” level of home sales based on economic and demographic variables.

Although sales were down 16.7% (or 1.07 million annually) from December 2021’s rate, this pace was up 3% month over month. This was partly because of some interest rate easing to close the year. According to First American Chief Economist Mark Fleming, the slight gain from November meant 2022 concluded with a two-month uptick in market potential.

Fleming used the rise in mortgage applications over the previous two months as evidence for his claim.

The growing increase in demand is welcome news for the housing market, which has been desperately in need of it. First American predicts more good times as rising affordability and demographic advantages eventually combine to support the demand rebound even more.

However, he also noted that additional housing supply is necessary for such variables to thaw the housing market from its current ice state. Simply put, Fleming said, “You can’t buy what’s not for sale.”

Existing Home Sales Fell For The 11th Consecutive Month In December

The National Association of Realtors reported that sales of previously owned homes fell 1.5% in December compared to the previous month. Sales ended the year 34% lower than the last year. It is the slowest rate since November 2010, when the country was dealing with a housing crisis caused by subprime mortgages in which payment defaults were soaring.

Mortgage rates have dropped by an entire percentage point since their peak in October last year, but they are still roughly double what they were a year ago. Total housing inventory fell 13.4% from November to 970,000 units at the end of December. It was, however, 10.2% higher than the previous December. At the current sales rate, unsold inventory has a 2.9-month supply, down from 3.3 months in November but up from 1.7 months in December 2021.

Low supply continues to support prices to some extent, but gains are dwindling compared to last year. The median price of an existing home sold in December was $366,900, a 2.3% increase from the previous year. It is still the highest December price, but annual gains were double-digit last summer.

Source:

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.