Housing Market’s Rebound Tied To Fed

Each month, Fannie Mae’s Economic and Strategic Research Group releases an outlook detailing what it thinks is ahead for the economy and housing market. The forecast covers the group’s expectations for economic growth, home sales, prices, mortgage rates, and other economic factors. According to the most recent release, the group sees a rebound ahead for the housing market but can’t say for sure when it’ll begin. That’s largely due to the fact that where mortgage rates go from here is dependent on the Federal Reserve. The Fed began raising interest rates in 2022 to fight inflation. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says there’s some speculation that the Fed will slow those efforts during the second half of this year. “The market sees the Federal Reserve easing in the second half of the year, which can be interpreted either as a view that the recession is forthcoming or that the slowdown in inflation will lead to a less restrictive monetary posture,” Duncan said. “If the latter occurs, the lower accompanying rates will likely set the stage for a pickup in housing activity going into 2024.” (source)

Has The Housing Market Reached A Turning Point?

The National Association of Home Builders conducts a monthly survey of builders to gauge their confidence in the current market and their expectations for the future. The index is a closely watched housing market metric because a builder’s business depends on being able to accurately read what home buyers want, and when. In January, the index saw its first improvement after 12 consecutive months of declines. It could signal a turning point for the market. Robert Dietz, NAHB’s chief economist, thinks so. “While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” Dietz said. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability.” Naturally, home builders are focused on the new home market, but rising inventory, lower rates, and improved affordability will benefit buyers of both new and existing homes. (source)

Mortgage Rates Fall To Lowest Since September 2022

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week. In fact, rates were down from the week before 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. Mike Fratantoni, MBA’s SVP and chief economist, says rates are now at their lowest level since last September. “Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall,” Fratantoni said. “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time home buyers.” As it is, lower rates spurred demand for mortgage applications, with overall demand up nearly 30 percent and demand for home purchase loans up 25 percent week-over-week. The MBA’s survey has been conducted weekly since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

The Real Reason Behind The Pandemic’s Buying Boom

A lot changed when the COVID-19 pandemic began in early 2020. But while some of those changes – like remote work or the rise of grocery delivery services – made perfect sense, others weren’t as clear. Take the housing market, for example. Home buying demand skyrocketed during the pandemic. But why? What about a global pandemic would lead Americans to become more interested in buying a home? The initial explanation offered was that the pandemic caused us to spend more time at home, which resulted in people wanting more space. But was that really it? Well, a new study from Fannie Mae looks at what drove the pandemic-era home buying boom. The study surveyed recent home buyers and asked if they accelerated their home purchase because of the pandemic. What they found was that the majority of home buyers who moved during the pandemic bought when they did because of historically low mortgage rates, not COVID. In fact, 56 percent of respondents said the pandemic neither accelerated nor slowed their home purchase timeline. (source)


Mortgage Credit Availability Unchanged In December

Lending standards aren’t fixed. That means, depending on market conditions, getting approved for a mortgage can be easier at times and more difficult at others. Because of this, the Mortgage Bankers Association tracks mortgage credit availability each month. Any increase in its Mortgage Credit Availability Index indicates that standards are loosening and potential borrowers will have an easier time obtaining a mortgage. A decline means the opposite and indicates lenders are tightening standards. In December, the index was relatively unchanged from the month before. Joel Kan, MBA’s vice president and deputy chief economist, says higher rates have been affecting access to credit. “Mortgage credit availability was mostly unchanged in December as mortgage rates remained significantly higher than the prior two years and both refinance and purchase activity slowed dramatically,” Kan said. “The doubling of mortgage rates over the past year caused credit availability to shrink 18 percent during the same period.” (source)


More Home Sellers Offer Buyers Concessions

When the housing market was at its peak, home sellers had the advantage. It wasn’t uncommon for a homeowner with an attractive listing to receive multiple offers from interested buyers. Put simply, it was a sellers’ market. These days, things have obviously changed. Higher mortgage rates and more challenging affordability conditions mean home sellers have to work a little harder to entice potential buyers. It’s leading more of them to offer buyers concessions. But what are concessions? Well, they can be a lot of things, including mortgage rate buy-downs and covering closing costs or the cost of home repairs. They’re becoming more common as the market begins to find better balance. In fact, according to one recent analysis, 42 percent of home sellers who sold a home during the final three months of 2022 gave buyers concessions. That’s a high number and further proof that the housing market is beginning to tilt back toward buyers after many years of favoring sellers. (source)

Number Of Homes For Sale Up 55% In December

Inventory has been one of the housing market’s primary problems for years now. Too few available homes for sale, combined with an elevated number of buyers, pushed home prices higher and caused affordability issues, bidding wars, and frustration for home shoppers. But new numbers from the National Association of Realtors’ consumer website show the market beginning to balance after years of imbalance. In fact, the number of active homes for sale in December was 54.7 percent higher than it was at the same time the year before. And while inventory remains low compared to pre-pandemic averages, the improvement should be welcome news for anyone hoping to buy a home in 2023. Danielle Hale, the website’s chief economist, says the gains will help moderate price growth and bring buyers back to the market. “Moderation in home price growth may encourage more buyers to return to the market in the months ahead, and may also be welcome news for sellers aiming to sell and buy at the same time,” Hale said. (source)

Mortgage Rate Drop Spurs Loan Demand

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell across all loan categories last week. Rates were down from the week before for 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 the drop led to a boost in loan demand. “Mortgage rates declined last week as markets reacted to data showing a weakening economy and slowing wage growth …” Kan said. “There was an increase in refinance activity as a result of the 16-basis-point decline in rates, as both conventional and government refinance applications increased.” Demand for loans to buy homes, on the other hand, saw a slight decline, falling 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)

What Motivates Americans To Make A Move?

Where you live is a reflection of what’s important to you. Which is to say, when making a move, you’re generally looking at areas that have, or are close to, things you value. That’s what one recent survey of movers found when asking participants what motivated their move. The survey found that the top motivation was a desire to live closer to family, with 35 percent of respondents naming it as the reason behind relocating. The second most popular answer was a new job or company transfer, which was cited by 33 percent of survey participants. Retirement rounded out the top three. Michael A. Stoll, an economist and professor at the University of California, Los Angeles, says there are a few common factors behind most moves. “Key factors like retirement, wanting to be closer to family, and lifestyle changes influenced by the pandemic, along with current housing prices, drove moving patterns in 2022,” Stoll said. He’s right. Affordability was also a main motivator, as Americans – especially remote workers – continue to seek out areas to live where they can get more bang for their buck. (source)

More Americans Say It’s A Good Time To Buy

Home buyers were feeling a little more optimistic as 2022 came to a close, according to the most recent results of Fannie Mae’s monthly Home Purchase Sentiment Index. The survey – which asks Americans whether they think now is a good time to buy or sell a home, where they think mortgage rates and home prices are headed, and how secure they feel financially – found a rising number of respondents who said they think now is a good time to buy a home. In fact, the survey found an 8 percent month-over-month net increase in participants who said it’s a good time to buy. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says Americans expect mortgage rates and prices to come down over the next year. “In December, the HPSI inched upward slightly, as consumers reported increased expectations that mortgage rates and home prices may decrease over the next year – perhaps reflecting recently observed declines in mortgage rates and average home prices,” Duncan said. (source)

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