According to Realtor.com This Week in Real Estate 20% of home sellers reduced their list price in August compared to 11% one year ago. Fannie Mae recently published a housing forecast projecting an average 30-year fixed mortgage rate of 4.5% in 2023. Following the strong August jobs report means the Federal Reserve will continue to aggressively raise the benchmark interest rate to fight inflation when they meet from the 20th – 21st. However, a surge in labor force participation could give the Feds the option to back off slightly from the last two rate increases of 75 basis points each. Below are a few newsworthy events from the last week of August that influence our business:
Mortgage Rates Will Fall to 4.5% in 2023? That’s The Estimate From Fannie Mae. Mortgage rates are projected to decline next year – but that doesn’t mean prospective homebuyers should necessarily delay a purchase for the prospect of lower financing costs. The rate on a 30-year fixed mortgage will fall to an average 4.5% in 2023, according to a recent housing forecast published by Fannie Mae. Average rates are expected to be 4.7% and 4.4% in the first and fourth quarters of 2023, respectively – down from 5.2% in Q2 this year, according to Fannie Mae.
1 in 5 Home Sellers Are Now Dropping Their Asking Price. One in five sellers in August dropped their asking price, according to Realtor.com. A year ago that share was just 11%. Homes in August sat on the market an average five days longer than they did a year ago – the first annual increase in time on the market in more than two years. “For many of today’s buyers, the uptick in for-sale home options is taking away the sense of urgency that they felt during the past two years, when inventory was scarce,” said Danielle Hale, chief economist at Realtor.com. “As a result of this shift, coupled with higher mortgage rates, competition continued to cool in August, with listing price trends indicating that home shoppers are tightening their purse strings.”
Solid Job Gains in August. Job growth remained solid in August, with 315,000 net job growth. However, the unemployment rate rose 0.2 percentage points to 3.7% in August, as the labor market participation rate expanded. “Softer labor market conditions” are expected in the near future as the Fed raises interest rates aggressively into 2023 to bring inflation lower. The headline job number of today’s labor market report raises the likelihood of a 75 basis point increase for the federal funds rate by the Fed in September. Construction industry employment (both residential and non-residential) totaled 7.7 million in August, exceeding its February 2020 level. Residential construction employment currently exceeds its level in February 2020. In the first eight months of 2022, more than 3.5 million jobs were created, and monthly employment growth averaged 438,000 per month. As of August 2022, total nonfarm employment is back to pre-pandemic level in February 2020, meaning U.S. labor market is fully recovered from the COVID-19 pandemic.
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