US Housing Costs Soar as Listings Surge

The median monthly housing payment in the US nearly reached its historical peak, hitting $2,686 by March 10, only $30 less than the record high last October when mortgage rates surged above 7%. This surge in housing costs is primarily attributed to persistently high mortgage rates and escalating home prices. Although mortgage rates have slightly decreased after a continuous four-week rise, they still linger close to 7%. Nationwide sale prices have risen by 5% compared to the previous year, with all 50 largest US metropolitan areas experiencing price hikes for the first time since July 2022.

Despite the high cost of housing, there has been an increase in buyer activity, evidenced by a surge in mortgage-purchase applications for two consecutive weeks, propelled by an improvement in housing supply. New listings have increased by 13%, marking the largest year-over-year rise in nearly three years, while the total number of homes for sale has seen a significant expansion of 3%, the most notable in nine months. However, Redfin’s economic research lead, Chen Zhao, suggests that rate cuts are unlikely in the near future, advising potential buyers to proceed with a sense of urgency as housing costs are not expected to decrease soon. Zhao also emphasizes that the increase in listings should motivate buyers, as it offers more options and may bring forth increased competition among buyers as spring progresses.

February Sees Surge in US Single-Family Housing Starts

In February, US single-family homebuilding experienced a significant rebound, surging by 11.6% to reach a seasonally adjusted annual rate of 1.129 million units, as the Commerce Department’s Census Bureau reported. This surge follows a mild temperature trend and persists amidst a shortage of previously owned houses in the market. Additionally, data for January was revised upwards, indicating a stronger performance than initially reported, with single-family starts falling to a rate of 1.064 million units.

Despite aggressive interest rate hikes from the Federal Reserve to battle inflation, the housing market remains buoyant due to the acute shortage of available housing units. Homebuilders continue to be optimistic about sales, with confidence among single-family home builders reaching an eight-month high in March, according to a National Association of Home Builders survey. The Federal Reserve, scheduled for a two-day meeting, is expected to maintain the policy rate unchanged at the current 5.25%–5.50% range, having raised it by 525 basis points since March 2022.

Forecasted Mortgage Rate Rise Dampens 2024 Home Sales Expectations

The Fannie Mae Economic and Strategic Research Group’s March 2024 commentary suggests a modest downgrade in expectations for total home sales and mortgage originations due to the increase in mortgage rates in February. The group now predicts the 30-year fixed mortgage rate to end the year at 6.4 percent, up from the previous forecast of 5.9 percent. Despite mixed labor market indicators and a likely return to disinflation, recent data are not expected to prompt the Federal Reserve to ease monetary policy in the near term. However, existing home sales are anticipated to trend upward in 2024, partly due to increased activity from households needing to move due to life events, who are less sensitive to interest rate fluctuations.

Fannie Mae’s Senior Vice President and Chief Economist, Doug Duncan, highlights that the housing market will likely grapple with affordability challenges from high home prices and elevated interest rates in 2024. Hotter-than-expected inflation data and robust payroll numbers are expected to exert upward pressure on mortgage rates, with markets adjusting their expectations for future monetary policy. Despite limited expectations for a surge in home supply, an increase in market transactions relative to 2023 is anticipated, even with persistently elevated mortgage rates.

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.