The National Association of Realtors (NAR) Reported This Week in Real Estate that April existing-home sales dipped slightly while the median sales price was up 14.8% compared to prior year. NAR’s reforecast of annual home price growth is projected to increase by 8.4% while Freddie Mac and Fannie Mae project increases of 10.4 and 10.8%, respectively. NAR expects total home sales to remain strong at 6.3 million as Fannie Mae and Freddie Mac expect 6.4 million and 6.7 million sales, respectively. Below are a few newsworthy events from the third week of May that influence our business:
Existing-Home Sales Retract 2.4% in April. Existing-home sales recorded a third straight month of declines, slipping slightly in April, according to the National Association of Realtors. “Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.” Unsold inventory sits at a 2.2-month supply at the current sales pace, up from 1.9 months in March and down from 2.3 months in April 2021. “Housing supply has started to improve, albeit at an extremely sluggish pace,” said Yun. “The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” said Yun. The median existing-home price for all housing types in April was $391,200, up 14.8% from April 2021 ($340,700). This marks 122 consecutive months of year-over-year increases, the longest-running streak on record. Properties typically remained on the market for 17 days in April, equal to both the number of days in March 2022 and in April 2021. Eighty-eight percent of homes sold in April 2022 were on the market for less than a month.
2022 Housing Market Forecast. According to seven different economists home prices are projected to rise by an average of 9.0% this year thanks to continued low housing supply and high buyer demand. The National Association of Realtors project prices to increase by 8.4%, CoreLogic is projecting a 9.6% increase, while Freddie Mac and Fannie Mae are projecting increases of 10.4% and 10.8, respectively. “Based on the current estimate for the peak Fed Funds rate (3.25% – 4.0%), the 30-year fixed mortgage will likely peak at between 5.0% and 5.7%. There is some variability in the relationship, so we might see rates as high as the low 6% range,” said Bill McBride. Total home sales are expected to perform well as NAR forecasts 6.3 million, Fannie Mae and Freddie Mac forecast 6.4 million and 6.7 million, respectively.
The One Thing Every Homeowner Needs To Know About a Recession. A recession does not equal a housing crisis. That’s the one thing that every homeowner today needs to know. Everywhere you look, experts are warning we could be heading toward a recession, and if true, an economic slowdown doesn’t mean homes will lose value. There have been six recessions in this country over the past four decades. Looking at the recessions going all the way back to the 1980s, home prices appreciated four times and depreciated only two times. So, historically, there’s proof that when the economy slows down, it doesn’t mean home values will fall or depreciate. The recessions in 1980 and 1981 saw home prices grow by 6.1% and 3.5%, respectively. The recessions in 2001 and 2020 realized home price appreciation of 6.6% and 6.0%, respectively. The first of just two recessions when home values depreciated was in the early 1990s when home prices dropped by less than 2%. It happened again during the housing crisis in 2008 when home values declined by almost 20%. Most people vividly remember the housing crisis in 2008 and think if we were to fall into a recession that we’d repeat what happened then. But this housing market isn’t a bubble that’s about to burst. The fundamentals are very different today than they were in 2008. So, we shouldn’t assume we’re heading down the same path. We’re not in a recession in this country, but if one is coming, it doesn’t mean homes will lose value. History proves a recession doesn’t equal a housing crisis.
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