Fannie Mae released its Q3 2023 Home Price Index This Week in Real Estate showing home price growth of 5.3 percent from Q3 2022 to Q3 2023. That is up from the Q2 2023 revised annual growth rate of 2.9 percent over Q2 2022. On a quarterly basis, home prices rose 2.0 percent in Q3 2023, a deceleration from 2.1 percent growth in the second quarter. Mortgage rates rose for the fifth week in a row amid concerns over whether the U.S. Federal Reserve will hike interest rates at the end of the month following a pause in September. Below are a few newsworthy events from the second week of October that influence our business: Home Prices Remain Resilient, Rise Further in Third Quarter. Single-family home prices increased 5.3 percent from Q3 2022 to Q3 2023, up from the previous quarter’s revised annual growth rate of 2.9 percent, according to Fannie Mae’s latest Home Price Index. On a quarterly basis, home prices rose a seasonally adjusted 2.0 percent in Q3 2023, a deceleration from 2.1 percent growth in the second quarter. “Slightly slowing house price growth may reflect in part the affordability impact of the higher mortgage rate environment – even though prices were still solidly higher this past quarter than a year earlier,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “We’re now in the fourth quarter, when house price appreciation typically slows, and with interest rates both higher and more volatile, it would be reasonable to expect some additional slowing in price appreciation, but the ongoing supply problems continue to drive the larger affordability challenge.” Read the full story here. The Latest Expert Forecasts For Home Prices in 2023. Prices aren’t in a downward spiral and will actually finish the year strong. Even though you may have heard talk that prices would drop 5, 10, or even 20% this year, that hasn’t happened. The big reason why is the supply of homes for sale is too low. There are just more buyers looking to buy than homes available, and that’s kept prices from falling. The latest 2023 year-end forecasts from six different organizations: AEI (+6%), Zillow (+5.5%), Fannie Mae (+3.9%), HPES (+3.3%), MBA (+1.5%), and NAR (-0.4%). If you average all six forecasts together, the expectation is that prices will net somewhere around 3.3% positive growth for the year. If these 6 organizations aren’t enough to convince you that prices won’t come tumbling down, here’s something else to consider. One of the six forecasts represented in the graph is the Home Price Expectation Survey from Pulsenomics. It combines survey results from over 100 economists, investment strategists, and housing market analysts. The HPES found that the average from all 100 of those experts is 3.3% price growth for the year. While individual forecasts may vary, both the HPES survey and the average of these forecasts provide the same projection. And 3.3% appreciation is a completely different story than prices falling. If you’re worried about home prices falling this year, let the experts reassure you. Based on the average of the latest forecasts, home prices will actually show positive growth this year. Read the full story here. Housing Groups Tell Fed to Stop Raising Rates. The National Association of Realtors joined the National Association of Home Builders and the Mortgage Bankers Association to issue a letter this week to Fed Chairman Jerome Powell, saying that uncertainty around the Fed’s rate path is contributing to recent hikes in mortgage rates and market volatility. The groups say that this has “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume.” The groups also note in the letter that such market challenges are occurring in the midst of an historic shortage of affordable housing inventory, further hammering would-be home buyers. Mortgage rates tend to follow 10-year Treasury yields. However, the spread between rates and 10-year yields are at historical highs as markets await the Fed’s next move. The Fed, which has raised interest rates 11 times in the last year to fight inflation, voted to pause rate hikes at its September meeting but signaled another one was likely before the end of the year. The real estate market accounts for nearly 16% of the U.S. economy, so it’s necessary for the Fed to be more transparent in communicating its rate path to avoid a “hard landing” for housing, the groups argue. The CPI continues to show high shelter costs, which many blame for keeping inflation elevated. In July, shelter inflation was attributed to 90% of the gain in consumer prices. “The most effective approach to tame shelter costs, and assist on the broader inflation fight, is to facilitate the construction of attainable, affordable housing,” the housing groups’ letter to Powell states. “Sustained wide spreads or further increases in interest rates make this economic goal more challenging by limiting lot development and home construction, exacerbating housing supply and pricing out millions of households from the goal of homeownership.” Read the full story here.
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