The Supply-Demand Gap Continues To Fuel An Increase In Home Prices. ATTOM released its third quarter U.S. Home Affordability Report This Week in Real Estate showing that affordability has exacerbated across the nation amid a third-quarter increase in home prices and home-mortgage rates. The nationwide median price of single-family homes and condos is up 2 percent from the second quarter and 6.5 percent from the third quarter of last year. Typical values around the country have gone up for two straight quarters. “Trying to wait for home prices to crash, that’s wishful thinking,” said Lawrence Yun, chief economist at the National Association of Realtors. Since the Great Recession, the U.S. has not built enough housing to keep pace with demand created by job and population growth. “Researchers estimate that the U.S. needs roughly 3.8 million additional homes nationally to address the supply-demand gap,” said senior fellow at Brookings Metro, Jenny Schuetz. “High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations,” said Selma Hepp, CoreLogic’s chief economist. Below are a few newsworthy events from the final week of the third quarter that influence our business:
The Return of Normal Seasonality for Home Price Appreciation. Despite what you may be hearing in the news, nationally, home prices aren’t falling. It’s just that price growth is beginning to normalize. In the housing market, there are predictable ebbs and flows that happen each year. It’s called seasonality. Spring is the peak homebuying season when the market is most active. That activity is typically still strong in the summer but begins to wane as the cooler months approach. Home prices follow along with seasonality because prices appreciate most when something is in high demand. After several unusual ‘unicorn years,’ today’s higher mortgage rates helped usher in the first signs of the return of seasonality. “High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations,” said Selma Hepp, Chief Economist at CoreLogic. The rapid pace of home price growth the market saw in recent years was unsustainable. It had to slow down at some point and that’s what we’re starting to see – deceleration of appreciation, not depreciation. It’s normal to see home price growth slow down as the year goes on. And that definitely doesn’t mean home prices are falling. They’re just rising at a more moderate pace. Read the full story here.
Will The Housing Market Crash Soon? Experts Say That’s Wishful Thinking. Intense competition for homes that are on the market, helped along by a resilient economy, may be the biggest reason there has not yet been a housing crash. As the jobs market remains strong, people have the resources to compete for a dwindling number of available homes despite higher mortgage rates and elevated home prices. “Trying to wait for home prices to crash, that’s wishful thinking,” says Lawrence Yun, chief economist at the National Association of Realtors. The median price of an existing home jumped 3.9% from August 2022 to August of this year, Yun’s group reported on Thursday. A severe shortage of homes available for sale is keeping prices elevated. There were 669,173 listings in August, but that’s a far cry from the millions of homes needed to meet demand, experts say. “Researchers estimate that the U.S. needs roughly 3.8 million additional homes nationally to address this gap,” Jenny Schuetz, a senior fellow at Brookings Metro, told lawmakers. And Yun says if mortgage rates come down, even by just a little, more prospective homeowners could enter the market, which could drive up prices even more. The median sales price for existing homes rose to $407,100 in August, according to NAR data. It was just the fifth time in the survey’s decades-long history that the median price has exceeded $400,000. “High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages,” said Selma Hepp, CoreLogic’s chief economist, in a news release. “In other words, home prices are still growing but are in line with historic seasonal expectations.” Read the full story here.
New Home Sales Weaken in August on Higher Mortgage Rates. Elevated mortgage rates and challenging affordability conditions pushed new home sales down to their weakest rate since March. Sales weakened in August with average mortgage rates above 7%. While some builders were able to offset that effect via mortgage rate buydowns, rates moved higher this month, suggesting the pace of new home sales will weaken further for September. Sales of newly built, single-family homes in August fell 8.7% to a 675,000 seasonally adjusted annual rate from an upwardly revised reading in July, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in August was up 5.8% from a year ago. Builders continue to grapple with supply-side concerns in a market with poor levels of housing affordability. Higher interest rates price out demand, as seen in August, but also increase the cost of financing for builder and developer loans, adding another hurdle for building. Builders are being more cautious about managing their inventory in this rising rate environment. A year ago, 10% of the new home inventory listed for sale consisted of homes that had not yet started construction, and that share has now risen to 17% of the total inventory. Read the full story here.
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