What Do Americans Think About The Market Now?

Each month, Fannie Mae asks Americans how they feel about the housing market, mortgage rates, prices, and whether it’s a good time to buy or sell a home. Their monthly survey is a good gauge of what’s happening in today’s market and what’s ahead for buyers and sellers. In August, survey results were mixed. For example, the number of respondents who said it’s a good time to buy a house improved from July, rising 8 percent month-over-month. But while buying sentiment improved, it was balanced by a decline in the number of participants who said it’s a good time to sell. Survey respondents also said they think mortgage rates will fall over the next 12 months but were split over what will happen to home prices. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says the change in price expectations was significant. “The share of consumers expecting home prices to go down over the next year increased substantially in August,” Duncan said. “We also observed a large decline in consumers reporting high home prices as the primary reason for it being a good time to sell a home, suggesting that expectations of slowing or declining home prices have begun to negatively affect selling sentiment.” (source)

Buyer Activity To Rebound Despite Higher Rates

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased last week from the week before. Rates were up for 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 brought rates to their highest level since mid-June. But despite higher rates, Mike Fratantoni, MBA’s senior vice president and chief economist, says he expects buyer activity to rebound. “Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand,” Fratantoni says. “There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity.” Last week, demand for loans to buy homes fell 1 percent from the week before. The MBA’s survey has been conducted weekly since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Foot Traffic Slows As Markets Normalize

Home sales are a good way to measure how many buyers are active in the housing market. But home sales only count the buyers who’ve found a home and closed the sale. They don’t measure the buyers who are looking but haven’t yet found a home to purchase. That’s why a recent analysis of how many scheduled showings the typical listing receives is an interesting look at where the housing market is right now. Showings can provide an even more accurate snapshot of how much buyer interest exists since they also cover the buyers who looked but didn’t buy. According to the numbers, scheduled showings have fallen from last year. In fact, showing activity was down almost 17 percent in July, with only one metro area averaging double-digit showings per listing. Last year at this time, there were 40 cities with double-digit averages. The drop in demand is significant but expected. It’s further evidence that the housing market continues to normalize after years of imbalance – when the number of buyers far outpaced the number of available homes. Naturally, with inventory improving and buyer demand cooling, the market is becoming better balanced, which means less stress and competition for home buyers looking for a house to buy this fall. (source)

Time On Market Improves For 1st Time In Years

When homes are selling quickly, home buyers need to be prepared. If they aren’t, they risk losing a home they’re interested in to a better prepared buyer who got to it first. That was a common occurrence during the frenzied days of last year’s housing market. A good home for sale could be off the market in a matter of days, which meant buyers needed to be ready to act fast. Fortunately, the market has calmed down since then. In fact, according to one new analysis, the number of days homes typically spend on the market just improved for the first time in two years. The data, from the National Association of Realtors’ consumer website, shows homes for sale now typically spend five more days on market than they did last year at the same time. That’s the first improvement since June 2020. But while that’s undoubtedly good news for prospective home buyers, it doesn’t mean they can take too much time. The typical home still sells 22 days faster than it did between 2017 and 2019. (source)

Home Prices Continue To Increase

Home prices shot upward over the past two years. Driven by a historically low number of homes for sale and growing demand from buyers, prices surged. This year, though, the housing market has slowed. So, naturally, the price spikes have too. Right? Well there’s good and bad news for prospective home buyers. First off, the price surge is likely over. Higher mortgage rates have calmed demand from buyers and allowed the number of homes for sale to increase. That’s helped slow prices, which have already begun to show signs of deceleration. But according to the most recent S&P Case-Shiller Home Price Indices, price increases – while slower than before – are still pretty substantial. Craig J. Lazzara, managing director at S&P, says this year’s increases continue to outpace the typical year. “It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip,” Lazzara said. “For the first six months of 2022, in fact, the National Composite is up 10.6 percent. In the last 35 years, only four complete years have witnessed increases that large.” But while prices are still up significantly so far this year, they’re expected to continue to decelerate through the end of 2022. (source)

Mortgage Rates Increase For Second Week

According to the Mortgage Bankers Association’s Weekly Applications survey, average mortgage rates increased again last week, with rates climbing for 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. It was the second consecutive week rates moved higher. The increases played a role in slowing demand for home purchase loans. In fact, demand for loans to buy homes was down 2 percent from the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says demand is down right now but may pick back up soon. “Purchase applications have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook,” Kan said. “However, rising inventories and slower home-price growth could potentially bring some buyers back into the market later this year.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Home Buyers Regain Some Negotiating Power

There’s a reason it’s called a seller’s market. When there are too few homes for sale and plenty of buyers, home seller’s set the terms. Take last year, for example. In the frenzy of last year’s housing market, home buyers were waiving inspections and even buying homes sight unseen. Home sellers didn’t have to negotiate to get a buyer to sign a contract, they could simply wait for a better offer. This year, though, things may be changing. According to the National Association of Realtors’ consumer website, recent buyers have been having success negotiating terms with home sellers. Survey results show the number of buyers asking for repairs based on the inspection has more than doubled over the past 12 months, while the number of sellers refusing to make repairs has dropped to zero. Additionally, the share of sellers who have sold below their asking price has risen from 18 percent in February to 31 percent in July. George Ratiu, manager of economic research for the NAR’s website, says things are getting back to normal. “Our survey shows that the overheated housing market of the past two years, which predominantly favored sellers, is beginning to regain a sense of normalcy, which is welcome news for home buyers,” Ratiu said. (source)

Typical Monthly Mortgage Payment Gets Smaller

Your mortgage payment is bound to be among your biggest monthly bills. So it’s natural to want it to be as affordable as possible. Which is why the Mortgage Bankers Association’s most recent Purchase Applications Payment Index is encouraging news for prospective home buyers. The index – which tracks the typical monthly mortgage payment based on recent home purchase loan applications – found the national median payment applied for by applicants fell in July, dropping to $1,844 from $1,893 the month before. Edward Seiler, MBA’s associate vice president, housing economics, and executive director, Research Institute for Housing America, says the improvement was modest but widespread. “Affordability conditions improved modestly in most of the country in July, as slightly lower mortgage rates and a decrease in the median loan amount led to the typical home buyer’s mortgage payment falling $49 from June,” Seiler said. The improvement, though small, is a welcome change for buyers after recent increases to home prices and mortgage rates. (source)

Contract Signings Fall But Less Than Month Before

Measuring the number of contracts to buy homes signed in a given month will give you a good idea of what the following month’s home sales numbers will look like. After all, signing a contract to buy is the first step in a closing process that usually lasts a few weeks. Which means a signed contract today will be a closed home sale in about a month. It also means The National Association of Realtors’ Pending Home Sales Index can give us an early insight into what’s happening in the housing market now. The NAR’s most recent release says contract signings fell 1 percent in July. But while the decline indicates the market is still slowing, the rate of decline improved greatly from the previous month, according to the new numbers. In fact, the previous month’s index saw an 8.6 percent drop. Lawrence Yun, NAR’s chief economist, says the market should soon begin to stabilize. “Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5 percent by the end of this year and into 2023,” Yun said. “With mortgage rates expected to stabilize … alongside steady job creation, home sales should start to rise by early next year.” (source)

Housing Market Softens As Economy Shifts

Fannie Mae’s Economic and Strategic Research Group releases a forecast each month detailing their outlook for the economy and housing market in the months ahead. The group looks at things like consumer spending, GDP growth, home sales, and mortgage originations and predicts where they’re headed through the end of this year. Their August release contains few surprises for anyone thinking about buying or selling a house. In short, it says the housing market has been softening due to rapid home price increases and the recent spike in mortgage rates. Fannie Mae believes the shift in affordability conditions will cause home sales to fall 16.2 percent this year from the year before. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says the broader economy, and the Fed’s response to it, will determine how quickly things level off. “The question for many market observers is how quickly, and with home much additional tightening, the core inflation rate will come down to the Fed’s preferred target,” Duncan said. “In our view, the labor market’s continued strength suggests that the Fed is likely to maintain its aggressive posture through the end of the year.” (source)