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Forecast Sees Low Rates, Slower Prices In 2022

Predictions aren’t easy, but Fannie Mae’s Economic and Strategic Research Group makes them on a monthly basis. The group’s forecasts cover what they see ahead for the housing market and general economy. And, according to their October outlook, they expect inflation and consumer spending concerns to cause monetary policy to tighten in the months ahead. But what does that mean to the average home buyer or seller? Well, Fannie Mae says they should expect mortgage rates to rise slightly but remain low throughout 2022. The ESR Group also expects home price growth to decelerate somewhat from the double-digit spikes seen this year. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says overall, we shouldn’t expect major changes. “Even a modest tightening of monetary policy would of course impact housing, but we expect the effects to be largely muted given current market conditions,” Duncan said. “Mortgage rates may rise in response to the tighter environment, but we expect the severe shortage of homes for sale to remain the primary driver of strong house price appreciation through at least 2022, limiting interest rate effects on home sales and home prices.” (source)

Buyer Demographics Show A Surprising Shift

First-time home buyers used to make up a larger share of the homes sold in any given year. Typically, they’d account for around 40 percent of annual home sales. But younger home buyers, for a multitude of reasons, have been less active in the housing market in recent years. According to one new analysis, for example, the share of buyers between the ages of 18 and 39 fell 13 percent between 2009 and 2019. That wasn’t the only demographic shift during those years, though. In fact, while the share of younger buyers was dropping another demographic was becoming far more active than they’d previously been. The analysis found that buyers 60 years or older grew 47 percent during the same time period. That’s a significant increase, and one that’s pushed the median age of recent home buyers to 44. Another consequence of this surprising demographic shift is that younger home shoppers are facing more competition from older, more financially settled, buyers – which could make a difference in a hot market where bidding wars are common. (source)

Mortgage Rates, Purchase Activity Both Rise

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased last week across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. But while rates moved to their highest level in months, mortgage application demand was relatively unaffected, increasing 0.2 percent week over week. Joel Kan, MBA’s vice president of economic and industry forecasting, says purchase activity helped balance decreasing refinance demand last week. “An increase in home purchase applications offset a slight decline in refinances,” Kan said. “The increase in purchase applications was welcome news, but was primarily driven by a 2 percent gain in conventional purchase applications, which kept the average loan size elevated.” Demand for loans to buy homes is now 10 percent lower than it was last year at the same time. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Affordability Improves For 2nd Straight Month

Owning a home is a dream for a lot of Americans. But no one wants to own a home they struggle to afford. That’s why there’s so much focus on housing affordability right now. Put simply, there’s a shortage of homes for sale and it’s made finding an affordable home more challenging for today’s buyer. New numbers from the National Association of Realtors offer some encouragement, though – especially for Americans who want to buy but worry homeownership may now be out of their financial reach. The numbers, from the NAR’s most recent Housing Affordability Index, show that affordability conditions have actually improved now for the second-consecutive month. In fact, the typical monthly mortgage payment dropped 1.1 percent in August from the month before. The index – which compares median incomes to the income needed to comfortably qualify for a mortgage – found that the Midwest was the country’s most affordable region, with median incomes around $30,000 more than the amount needed to qualify. But, even in the West, where buying is most expensive, the median income is still roughly $12,000 more than what’s needed to qualify for a mortgage. (source)

Buyers Remain Optimistic Despite Challenges

Market conditions have been difficult for home buyers this year. Rising prices and competition for available listings have made things challenging. But despite those challenges, buyer demand has remained strong, even through the hot spring and summer markets. And now, heading into the fall and winter, it still shows few signs of slowing down. For example, one recent survey found a majority of participants were optimistic about the housing market and agreed that the next three months would be a good time to buy a home. In fact, the results show 52 percent of respondents said they agree or strongly agree that now’s a good time to buy – with an additional 17.8 percent remaining neutral. That leaves just 29.6 percent who feel it’s not the right time to buy. That’s a pretty good sign that buyers will continue to be active in the market in the weeks and months ahead. Regionally, prospective buyers in California, Texas, and Florida were the most optimistic, with home-buying confidence scores surpassing the national average in all three states. (source)

When Do Home Buyers Get The Best Deals?

These days, it isn’t easy to find a deal. In most markets, there are more home buyers than there are available homes for sale. That puts upward pressure on prices, causes bidding wars, and means fewer bargains for buyers. So what can a budget-minded home shopper do? Well, new numbers from ATTOM Data Solutions offer a clue. Their analysis looked at every calendar day over the past eight years with at least 10,000 home sales and calculated the premium or discount buyers paid on that day. The results help zero in on the days and months when home buyers can expect to get the best deal on a house. For example, the analysis determined that buyers who closed in October paid the smallest premium of any month, at 2.9 percent. And while that’s still above market value, it isn’t the 11.5 percent May buyers pay or the 9 percent premium buyers pay in June. In other words, October is the best month for getting a good deal. The best individual days to buy, on the other hand, were mostly found in December. Overall, however, buyers who closed in October, November, December or January did better than those who waited until spring. (source)

Americans Say Now’s A Good Time To Sell

Each month, Fannie Mae conducts a survey to gauge how Americans feel about the housing market. The survey asks participants whether they think now is a good time to buy or sell a home, whether they think home prices and mortgage rates will rise or fall, and whether or not they feel secure in their job and finances. In September, the Home Purchase Sentiment Index remained fairly steady. Americans continue to be optimistic about selling a home in today’s market, with 74 percent of respondents saying now is a good time to sell. Buying sentiment, however, fell from the month before. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says home prices are the reason. “The survey’s story is also largely unchanged: Consumers feel it’s a bad time to buy a home but a good time to sell – and they continue to cite high home prices as the primary reason,” Duncan said. (source)

Mortgage Rates Move Higher In Latest Survey

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates moved up last week from the week before. 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, and 15-year fixed-rate loans. The increases pushed rates to their highest level since July and led to an almost 10 percent drop in refinance activity. Purchase applications also fell, sliding 2 percent week over week. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says the average loan balance is increasing. “Government purchase applications were up over 1 percent, but that was still not enough to bring down the average loan balance of $410,000,” Kan said. “With home-price appreciation and sales prices remaining very elevated, applications for higher balance, conventional loans still dominate the mix of activity.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Scheduled Showing Activity Drops In August

If you want to know how likely a listing is to end up in a bidding war, try to find out how many buyers have scheduled showings to see it. A lot of showings means a lot of interested buyers. It also means the home is likely to get multiple offers and an amount over the seller’s asking price. The same concept applies when looking at the overall housing market. After all, showings, for obvious reasons, are a good gauge of buyer interest. So you can get a good feel for where the market might be headed by looking at the number of showings scheduled during any given time period. For example, according to one recent analysis, showing activity fell in August, dropping 10.7 percent year over year. The decline was led by an 18 percent drop in the Northeast and a 9.2 percent drop in the West. Of course, the market typically slows down as the summer market ends, but a drop in showings is also an indication that hopeful fall home buyers can expect to see less competition and fewer bidding wars when out shopping for a house to buy. (source)

Number Of Homes For Sale Hits 2021 High

When compared to pre-pandemic levels, the number of homes for sale is about 50 percent lower than normal. That’s why prices have been increasing and homes have been selling so quickly. Simply put, there isn’t enough inventory to satisfy the number of buyers out there. The good news is, though, things are getting better. In fact, according to new numbers from the National Association of Realtors’ consumer website, there were 646,053 available homes for sale in September. That’s the highest it’s been all year. Danielle Hale, the site’s chief economist, says the news is encouraging, but the market remains competitive. “This September, buyers had more options than they’ve had all year and while that’s typical of early fall, that’s not what happened in 2020,” Hale said. “Still, it’s important to remember that while buyers may have an easier time this fall than they did in the spring, the market remains more competitive than it has been historically at this time of year.” (source)