Monthly Archives: July 2022

When a buyer has their offer accepted by a home seller, a contract is signed. The transaction isn’t closed, though, until after the details of the home’s sale and financing have been worked through. During that process, the home’s sale is considered pending. Typically, there are several weeks between signing a contract and closing, which is why contract signings are considered an important indicator for the housing market. After all, most signed contracts lead to closed sales, so they’re a good predictor of future sales numbers. That’s why the National Association of Realtors tracks them each month with their Pending Home Sales Index. In June, the index fell 8.6 percent. It’s now down 20 percent from where it was last year at the same time. NAR chief economist, Lawrence Yun, says rising mortgage rates are behind the decline. “Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” Yun said. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.” Yun expects sales to fall in 2022 but begin rising again next year. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates for 30-year fixed-rate loans with conforming balances fell last week from the week before. Rates for jumbo loans, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans each saw small increases. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says rates may be stabilizing, which would be good news for buyers. “Weakening purchase applications trends in recent months have been consistent with data showing a slowdown in sales for newly constructed homes and existing homes,” Kan said. “A potential silver lining for the housing market is that stabilizing mortgage rates and increases in for-sale inventory may bring some buyers back to the market during the second half of the year.” Right now, buyers remain cautious. The MBA’s purchase index – which measures demand for home purchase loans – fell 1 percent week over week and is now 18 percent lower than last year at the same time. (source)

Home prices have been increasing at an accelerated pace for years now. That’s great for homeowners but an obvious challenge for buyers, who could likely use some relief. Fortunately, they’re starting to get it. The number of homes available for sale is improving and the added inventory should begin to correct some of the imbalance that’s been driving prices higher. According to one recent analysis, it’s already started. The latest S&P Case-Shiller Indices – considered among the leading measures of U.S. home prices – shows price increases are slowing. S&P’s National Composite Index found home prices increased about one percent less in May than they did in April. But though the increases weren’t as big as the month before, they were still significant. “The market’s strength continues to be broadly based, as all 20 cities recorded double-digit price increases for the 12 months ended in May,” Craig J. Lazaara, S&P’s managing director, said. “However, at the city level, we also see evidence of deceleration. Price gains for May exceeded those for April in only four cities.” The fact that the majority of the included cities saw slower increases in May is a big change from earlier this year when all 20 were accelerating. (source)

Fannie Mae’s Economic and Strategic Research Group releases a forecast each month detailing their expectations for the economy and housing market. According to the group’s most recent release, there are a number of signs that the once hot housing market is beginning to cool off, including a rising number of active listings, fewer sales, and an increasing number of listings that have undergone a price cut. But despite several signs that things are beginning to slow down, there are other indicators that have yet to show any meaningful change. Home prices, for one. “Home price changes tend to lag changes in home sales as prices tend to be ‘sticky,’” the group says. “Sellers are often reluctant to cut their asking price, and buyers’ expectations are based on recent comparable sales.” In other words, despite rising inventory and fewer buyers, home prices have yet to respond to changing conditions. Still, Fannie Mae expects they will decelerate as the year goes on. They also expect buyer demand to cool further. But while the market’s expected to continue to loosen through the end of the year, the group expects the changes will be gradual as we head into 2023. (source)

The rate of new home construction is an important housing market indicator. It not only says something about the economy and buyer demand, it also tells you something about where home prices are headed. If new home construction is rising, inventory is improving and – with more homes available for sale – price increases are more likely to moderate. That means every prospective buyer benefits when more new homes are built, since the added housing supply helps keep prices in check. So what’s currently happening in the new home market? Well, according to the U.S. Census Bureau and the Department of Housing and Urban Development’s monthly measure of new residential construction, the number of new homes completed in June was nearly 5 percent higher than it was last year at the same time. That’s good news for home shoppers. Similarly, the number of permits to build new homes rose from last year, increasing 1.4 percent year-over-year. But while housing completions and building permits are up over last year’s pace, they both declined from where they were in May. That could be an indication that construction in the near term is beginning to slow. (source)

Home sales fell in June, according to new numbers from the National Association of Realtors. Sales of existing homes dropped 5.4 percent from the month before and were 14.2 percent below where they were last year at the same time. The decline is the latest sign that the housing market is starting to slow down. But while falling sales are evidence that buyer demand has begun to cool off, there are also signs that the market remains hot. For example, the NAR’s report found that home prices saw a double-digit, year-over-year increase in June. Also, the typical property was on the market just 14 days and nearly 90 percent of homes sold during the month were on the market less than a month. In short, the market is adjusting but the transition has only just begun. Lawrence Yun, NAR’s chief economist, says the data is mixed. “Finally, there are more homes on the market,” Yun said. “Interestingly though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.” (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased last week from one week earlier. Rates moved higher for 30-year fixed-rate mortgages with both conforming and jumbo balances and loans backed by the Federal Housing Administration. The increase, though slight, contributed to the third consecutive week of declining mortgage application demand. Purchase and refinance activity both fell from the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says home buyers are feeling cautious. “Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand,” Kan said. “The decline in recent purchase applications aligns with slower home building activity due to reduced buyer traffic and ongoing building material shortages and higher costs.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

The housing market is in transition. For years, there’s been a shortage of homes for sale and an abundance of buyers. But elevated buyer demand – fueled, in part, by historically low mortgage rates – slowed this spring when mortgage rates increased and caused some buyers to hit pause on their buying plans. Affordability conditions have become more challenging. That much is true. But, in some other ways, the market’s gotten better for buyers. In fact, summer home shoppers may actually be able to benefit from the market’s recent changes. How so? Well, for one, options. The inventory of homes for sale is improving. That not only provides buyers with more homes to choose from but also means there will likely be less competition and fewer bidding wars. Time on market has also improved. Buyers will find they have a little more time to make decisions, since there are fewer buyers competing for the same homes. With homes for sale lingering longer on the market, buyers will finally get some relief from the stressful pace of the past few years. Put simply, the housing market is rebalancing but changing conditions don’t necessarily mean bad news for buyers. (source)

Home builders have a unique perspective. Their business depends on being able to anticipate where and when home buyers are looking to make a move. Which means, they have to be able to read the market if they hope to be successful. That ability is why the National Association of Home Builders conducts a monthly survey tracking builders’ perception of the market for new homes. The NAHB’s Housing Market Index scores builders’ responses on a scale where any number above 50 indicates more builders see conditions as good than poor. In July, the index fell to 55. Jerry Konter, NAHB’s chairman, says survey responses indicate the market is beginning to soften. “Production bottlenecks, rising home building costs, and high inflation are causing many builders to halt construction because the cost of land, construction, and financing exceeds the market value of the home,” Konter said. “In another sign of a softening market, 13 percent of builders in the HMI survey reported reducing home prices in the past month to bolster sales and/or limit cancellations.” Despite a challenging market, though, the index component measuring current sales conditions was still largely positive, scoring a 64 in July. (source)

In a competitive market, homes for sale don’t last long. A listing can appear mid-week and have multiple offers by the weekend. Because of this, recent home buyers have had to move quickly. There’s no time to linger or deliberate when there are other buyers ready to make a move. That can be challenging. But fortunately for summer home shoppers, the housing market’s frantic pace may be slowing. In fact, new numbers show homes for sale are starting to spend more time on market. The improvement is small but the trend is moving in the right direction. According to the data, during the last week of June, homes were selling three days faster than they were last year at the same time. That improved to two days during the first week of July and, by the week ending July 9, it was just one day. In other words, homes are spending a little more time on market than they were even a few weeks ago. Still, buyers need to be prepared. While the trend is positive, homes continue to sell quickly, especially good ones. (source)