The Commerce Department reported This Week in Real Estate that new home sales surged 9.6% in March, reaching its highest level since March 2022. Single-family starts have risen for two consecutive months and permits for future construction increased to a five-month high in March. Despite a rise in mortgage interest rates last week, demand for mortgage applications to buy a home rose 5% compared to the prior week. “Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected,” said NAR Chief Economist Lawrence Yun. “The lack of housing inventory is a major constraint to rising sales; however, multiple offers are still occurring on about a third of all listings and 28% of homes are selling above list price.” Below are a few newsworthy events from the fourth week of April that influence our business:
Mortgage Rates Fluctuate, But Market is Stabilizing. Though mortgage rates inched up this week, they remain below 6.5%, Freddie Mac reported Thursday. The 30-year fixed-rate mortgage averaged 6.43%, up from 6.39% last week. But “with the rate of inflation decelerating, rates should gently decline over the course of 2023,” says Sam Khater, Freddie Mac’s chief economist. “Incoming data suggest the housing market has stabilized from a sales and house price perspective. The prospect of lower mortgage rates for the remainder of the year should be welcome news to borrowers who are looking to purchase a home.” Buyers have shown sensitivity to movement in mortgage rates as they break their budgets to afford high home prices. But low inventory may prove an even bigger obstacle: The spring homebuying season is off to a slow start because buyers can’t find enough options, according to NAR data. Read the full story here.
U.S. New Home Sales Soar to One-Year High in March. Sales of new U.S. single-family homes jumped to a one-year high in March. New home sales surged 9.6% to a seasonally adjusted annual rate of 683,000 units last month, the highest level since March 2022, the Commerce Department said on Tuesday. Buyers have been taking advantage of any dip in mortgage rates to purchase homes. The average rate on the popular 30-year mortgage, which hit a peak of 7.03% in late 2022, was mostly lower in March, according to data from mortgage finance agency Freddie Mac. But the worst of the housing market rout is likely over. Home builder sentiment continues to creep up, though it is still depressed. Single-family housing starts have risen for two consecutive months in March and permits for future construction increased to a five-month high. Read the full story here.
Pending Home Sales Decreased 5.2% in March. Pending home sales decreased in March for the first time since November 2022, according to the National Association of Realtors. The Pending Home Sales Index (PHSI) waned by 5.2% to 78.9 in March. Year over year, pending transactions dropped by 23.2%. “The lack of housing inventory is a major constraint to rising sales,” said NAR Chief Economist Lawrence Yun. “Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally.” NAR forecasts that the economy will continue adding jobs, albeit at a slower pace, and mortgage rates will drop – with the 30-year fixed mortgage rate progressively falling to 6.0% this year and to 5.6% in 2024. Housing starts will fall from last year by 7.3% in 2023, to 1.44 million, and then increase 6.9% in 2024, to 1.54 million. “Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected,” said Yun. “Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market.” With continued job gains and improving interest rates, NAR anticipates existing-home sales will steadily improve in the upcoming months but will still come up short on an annual figure. Existing-home sales will drop from the prior year by 9.3% in 2023, to 4.56 million, before increasing by 15.4% in 2024, to 5.26 million. Newly constructed home sales will increase from last year by 4.5% in 2023, to 670,000, due to more plentiful inventory in this segment of the market, and increase by another 11.9% in 2024, to 750,000. Read the full story here.
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