According to the National Association of Realtors This Week in Real Estate pending home sales have declined five consecutive months, yet despite rising mortgage rates Realtor.com reported that for the 19th consecutive week home prices have realized double-digit year-over-year increases. The median list price was up 14.4% from the same time period last year. While questions relative to supply persist, the roughly 1.6 million homes under construction in March means there are more homes under construction than at any time in the past five decades, not far below the peak of 1.67 million in August of 1973. As one-third of the year has passed it is safe to predict, as many economists are and pending sales activity suggests, total home sales will contract compared to last year. However, keep in mind that last year was the best year for total home sales since 2006 and the estimated contraction for 2022 would deliver the second best year in total sales in the last 16 years. Below are a few newsworthy events from the fourth week of April that influence our business:
A More “Normalized” Housing Market Is On The Horizon: NAR. For the fifth consecutive month, pending home sales declined in March from February, down 1.2%, signaling a potential return to “much calmer” conditions, according to the National Association of Realtors. Lawrence Yun, chief economist for the NAR, said the dip in contract signings suggests “multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions.” He also expects higher mortgage rates to remain a key factor affecting home sales. “As it stands, the sudden large gains in mortgage rates have reduced the pool of eligible homebuyers, and that has consequently lowered buying activity,” Yun said. “The aspiration to purchase a home remains, but the financial capacity has become a major limiting factor.” Yun said: “Overall existing-home sales this year look to be down 9% from the heated pace of last year. Home prices are in no danger of decline on a nationwide basis, but the price gains will steadily decelerate such that the median home price in 2022 will likely be up 8% from last year.”
New Home Construction May Be Up, But Supply-Chain Issues Will Continue To Create Drag On The Housing Market. More homes are under construction than at any time in the past five decades. About 1.6 million homes were under construction in March, according to the U.S. Census Bureau – not far below the peak of 1.67 million in August 1973. Shortages of materials inflate the number of homes classified as under construction. If not for scarcity, builders already would have slid many homes from the “under construction” column to the “completed” column on their balance sheets. That’s what’s going on now. Builders can’t get their hands on enough supplies to finish homes, said Ali Wolf, chief economist for Zonda, a housing market research platform. Wolf said she expects an easing of shortages of material late this year and into 2023, accompanied by an uptick in homebuilding. That, in turn, could gradually increase the number of homes for sale, reducing competition among buyers. We’re not going to build our way out of this housing market that favors sellers so unfairly. Some other factor will bring buyers and sellers closer to balance. Rising mortgage rates will be that factor.
In Spite Of Rising Mortgage Rates, U.S. Home Prices Continue Double-Digit Increases. Rising interest rates appear to have had a minimal immediate effect on overheated U.S. housing markets, which continue to see double-digit year-over-year price increases. Realtor.com released a report Thursday finding that for the 19th consecutive week, U.S. home prices saw double-digit year-over-year increases, with the median listing price rising by 14.4% from the same week last year. Homes also spent six fewer days on the market during the week ending April 23 than during the same period last year, according to Realtor’s findings. New listings this week were up 4% from the previous year, a factor that may tip the balance of what has recently been a white hot seller’s market.
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