Monthly Archives: October 2023

The new home market continued to climb in September, according to new numbers from the U.S. Census Bureau and the Department of Housing and Urban Development. Sales of newly built homes rose 12.3 percent from the previous month and were 33.9 percent higher than last year at the same time. The increases far exceeded economists’ expectations and put sales at the highest level since February 2022. There was also an upward revision to last month’s estimates. So what’s driving the new home market’s surge? Well, mostly the lack of older homes available to buy. The ongoing inventory shortage has led to more new home construction and more buyers turning to the new home market due to a lack of other options. Additionally, the median price of new homes fell, as more builders are offering discounts to help affordability and lure buyers. In fact, most new homes sold in September were between $150,000 and $499,000. (source)

As the end of another year approaches, it’s only natural that we begin to look ahead. After all, there’s no better time to start planning for the future than right now. That’s especially true if you’re considering making a move in 2024. So what should you expect from the housing market in the year ahead? Well, according to the latest forecast from the National Association of Realtors, there’s reason to be hopeful. That’s because the NAR sees a relatively stable market ahead, and even some slight improvement in affordability conditions. In fact, they expect mortgage rate increases to calm and the average rate to be lower than this year’s. They also expect home prices to remain relatively flat, rising less than 1 percent in 2024 from 2023. Also in the forecast, the NAR predicts the national median existing home price to be $389,500 next year and they see sales rising 13.5 percent after this year’s 17.5 percent drop. (source)

The National Association of Realtors’ Pending Home Sales Index measures the number of contracts to buy homes signed each month. Because contract signings precede closings by several weeks, the index is considered a good predictor of where future home sales numbers are headed. In September, the index found pending sales up 1.1 percent from the previous month, with gains in every region but the West. Lawrence Yun, NAR’s chief economist, says home sales are expected to bounce back early in 2024. “Sales are expected to turn positive by early next year, with affordable regions and fast job-creating markets in better positions to recover, led by the Midwest and South,” Yun said. But while the improvement is good news for the housing market, pending sales are still down from last year. In fact, contract signings in September were down 11 percent from September 2022. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased again last week. Rates were up across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, 15-year fixed-rate loans, and 5/1 ARMs. Joel Kan, MBA’s vice president and deputy chief economist, says higher rates have increased interest in adjustable-rate mortgages. “These higher mortgage rates are keeping prospective home buyers out of the market and continue to suppress refinance activity,” Kan said. “The ARM share of applications inched up to 9.5 percent, its highest since November 2022.” Still, despite higher rates, demand for mortgage applications was relatively unchanged week-over-week, with a decline of just 1 percent from the week before. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Coming up with an adequate down payment can be difficult for any home buyer. It’s especially tough, though, for first-time buyers. Without the benefit of a home to sell, first-time buyers have to come up with a down payment from scratch. That means saving money. But saving up isn’t the only way to find funds to fuel your home buying dreams. Another popular options younger buyers often use is gift funds from friends and family. According to one new analysis, 43 percent of first-time home buyers used gift money to fund, at least, part of their down payment. These days, wedding registries in particular are an increasingly popular option for hopeful buyers looking to buy their first home. In fact, the use of wedding registries to fund down payments has increased 55 percent since 2018 and now includes nearly 20 percent of all engaged couples registered on the popular wedding website The Knot. (source)

When the supply of homes for sale is low, home sellers’ benefit. Too few available homes means active listings gain extra interest from buyers who don’t have as many options. That leads to higher prices and bigger profits. There’s no better evidence of this than ATTOM Data Solutions’ third-quarter U.S. Home Sales Report, which shows profit margins on median-priced single-family home sales have increased again. In fact, the typical home seller profit rose to $129,900 in the third quarter. That’s up 5 percent from the second quarter and 3.2 percent from last year. Put simply, inventory remains low and sellers are benefiting. Rod Barber, ATTOM’s CEO, says the market continued its rebound this summer. “Prices and profits around the U.S. got another boost over the summer, as the housing market continued recovering from last year’s setbacks,” Barber said. “Things do remain uncertain heading into the market’s annual fall slowdown, especially at a time when mortgage rates are rising again, home affordability is getting tougher and the potential for a recession hangs in the air. But the latest gains fell in line with what we often see during the third quarter and showed that any predictions of an extended market fallback may have been premature.” (source)

The National Association of Realtors’ most recent measure of existing-home sales found the inventory of available homes for sale improved 2.7 percent in September from one month earlier. The increase is an encouraging sign, as too few available homes has been an ongoing issue for the market – one that has frustrated buyers, limited sales, and driven prices higher. Still, even with the last month’s improvement, total housing inventory is down 8.1 percent from where it was last year at the same time. It’s also significantly lower than it was pre-pandemic. Lawrence Yun, NAR’s chief economist, says supply and affordability are slowing sales. “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” Yun said. In September, sales of existing homes fell 2 percent month-over-month and are now 15.4 percent below last year at the same time. Sales were down in three of four regions, with only the Northeast posting a gain from August. (source)

Home builders had a good summer. With fewer existing homes for sale, the new home market was hot. But as summer faded into fall, it began to cool. That’s why new numbers from the U.S. Census Bureau and the Department of Housing and Urban Development come as a welcome surprise. The data shows the number of housing starts rose 7 percent in September, with a 3.2 percent month-over-month increase in the number of single-family homes that began construction. That’s good news for buyers, as additional for-sale inventory helps moderate home price increases. Robert Dietz, NAHB’s chief economist, says the housing market’s inventory issue continues to help builders. “Despite ongoing challenges in the market, the housing deficit of resale inventory continues to provide some market support for builders,” Dietz said. “Because of a lack of existing homes in the marketplace, 31 percent of homes available for sale in August were new construction. This compares with a historical average in the 12-14 percent range.” (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates moved higher last week for 30-year fixed-rate loans with conforming loan balances. Rates were also up for 15-year fixed-rate loans and 5/1 ARMs, though jumbo loans and loans backed by the Federal Housing Administration saw declines. It was the sixth consecutive weekly increase for the 30-year fixed rate. Joel Kan, MBA’s vice president and deputy chief economist, says higher rates slowed demand last week. “Both purchase and refinance applications declined, driven by larger drops for conventional applications,” Kan said. “Purchase applications were 21 percent lower than the same week last year, as home buying activity continues to pull back given reduced purchasing power from higher rates and the ongoing lack of available inventory.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Each month, Fannie Mae’s Economic and Strategic Research Group releases a forecast of what they believe is ahead for the housing market and overall economy. The group covers topics from economic growth to home sales and predicts what will happen in coming months. According to their October release, the group sees little change ahead for the housing market as it heads into 2024. They expect home prices to remain resilient, while sales continue to slow due to higher mortgage rates and fewer homes for sale. In other words, little change from today’s dynamic. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says activity remains dampened. “In many ways, the housing market experienced four years of business in a two-year period between mid-2020 and mid-2022,” Duncan said. “With ongoing affordability constraints and rising mortgage rates, much of that activity has essentially been given back.” (source)