Dropping Mortgage Rates Spurs Housing Recovery

This week, home sales are increasing while mortgage rates keep falling, encouraging a potential strong spring market. According to Freddie Mac’s Thursday report, the 30-year fixed-rate mortgage averaged 6.32% for the week ending March 30. Since crucial housing indicators, including existing-home sales, new-home construction, and contract signings for house purchases, have increased over the previous three months, borrowing costs are decreasing.

According to the NAR’s recent 2023 Home Buyers and Sellers Generational Trends Report, baby boomers, who have surpassed millennials as the nation’s most significant homebuying force, maybe the group most impacted by changes in mortgage rates. As per Nadia Evangelou, senior economist and director of real estate research for the National Association of REALTORS®, this demographic transition will likely be seen in the real estate market for the next ten years. By 2030, an additional 20 million families with members over 65. Baby boomers have significantly more wealth than younger generations because approximately 80% are homeowners.

Interest For Early-Stage Homebuying Hits Its Highest Level Since May

As mortgage rates and home prices keep falling, more people are looking to buy a home again, but they need more inventory to do so, according to a new Redfin survey.

The technology-driven real estate brokerage reported that mortgage purchase applications increased for the fourth consecutive week last week and that its Homebuyer Demand Index—a seasonally adjusted measure of requests to tour homes, submit an offer, or speak with a Redfin agent about a home search—rose to its highest level since last May during the week ended March 26.

As per Redfin, the minor uptick in early-stage demand has yet to increase sales. In the four weeks that concluded on March 26, pending sales nationally experienced their most significant loss in approximately two months, down 19% year over year. Since there aren’t enough homes available, potential buyers are constrained, according to Redfin, so demand for homes has yet to translate into an increase in sales.

Key Housing Market Takeaways

• The median sale price of a property was $360,500, a 1.8% decrease from the previous year. Redfin’s monthly dataset, which dates back to 2012, shows that after more than a decade of price hikes, prices have been dropping annually for the sixth consecutive week.

• The worst drop in nearly two months was seen in pending home sales, which were down 19.2% year over year.

• All 50 of the most populated U.S. metros saw a decline in pending home sales. Los Angeles (-52.6% YoY), Sacramento (-48.6%), San Jose (-46.4%), Oakland (-45.4%), and Seattle (-45.2%) experienced the most significant declines.

• Active listings increased by 13.9% from a year earlier, the weakest growth in more than four months.

• The number of months it would take for the current inventory to sell at the current sales pace, or months of supply, was 2.8 months, up from 1.9 months a year earlier but down from 3.5 months a month earlier. Months of supply is a measure of the balance between supply and demand.

Still An Improvement: 94% of Counties Have Housing Prices Below Historical Levels

Based on new data from Attom Data Solutions, median-priced homes will be less accessible in 94% of the nation’s counties in the first quarter of 2023 compared to historical averages.

In 537 of the 572 counties with sufficient first-quarter data to evaluate, the median home price is more expensive than it was previously. In Q1 2021, just 91 counties fit this description.

In 373 of the 572 counties analyzed by Attom Data (65%), the major monthly homeownership expenses are out of reach for average local income workers or are more than the 28% DTI threshold.

Nonetheless, despite how terrible the market is for prospective homebuyers, Attom Data claims that things may improve. The percentage of average wages needed nationwide to cover typical primary homeownership costs has marginally decreased. Mortgage payments, homeowners insurance, mortgage insurance, and property taxes typically cost $1,758 in the first quarter of 2023. That is nearly 30% of the $70,460 average yearly pay.

Given that as of the fourth quarter of 2022, the proportion of average salaries needed to cover these costs was slightly higher than 31%, the highest level in 15 years, it is a negligible decrease. Also, the commonly used 28% DTI test deems it costly. Nevertheless, Rob Barber, CEO of Attom Data, welcomed any relief for homebuyers. “The soaring housing market has finally come back down in much of the U.S., at least for now, while worker pay is growing,” he said. “That’s produced some benefits for home seekers in the form of slightly better affordability, especially as lending rates have flattened out.”

 

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.