ATTOM reported This Week in Real Estate that homeowners enjoy a record $27 trillion in equity. The second quarter of 2022 experienced the largest quarterly profit margin gain, $123,869, since at least 2008; a record 55.5 percent return on investment. In other news, the Federal Reserve raised its benchmark rate by three-quarters of a percentage point on Wednesday, however, the average 30-year fixed mortgage rate moved in the opposite direction. Many experts believe the Fed’s most recent action, which was all but a foregone conclusion leading up to their meeting, will unlikely influence the mortgage market because those increases were already baked into pricing. Below are a few newsworthy events from the fourth week of July that influence our business:
Profits For Home Sellers Surge Again Across U.S. Amid New Round of Price Spikes in Second Quarter of 2022. ATTOM released its second-quarter 2022 U.S. Home Sales Report on Thursday, which shows that profit margins on median-priced single-family home and condo sales across the United States hit another new record of 55.5 percent following the largest quarterly gain in a decade. The latest typical profit margin was up from 48.3 percent in the first quarter of 2022 and 42.9 percent in the second quarter of 2021. It was more than 20 points above the 32 percent figure from the second quarter of 2020. “Home sellers in the second quarter continued to benefit from the rapid growth in home price appreciation the country has experienced over the past few years,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While price growth may slow down as higher mortgage rates dampen demand from prospective homebuyers, home sellers should continue to profit from the record $27 trillion in homeowner equity in today’s market.” While profit margins routinely go up during the Spring home-buying season, the latest spike of more than seven percentage points marked the largest quarterly gain since at least 2008. The year-over-year gain of 13 points in the typical return on investment was one of the largest in the past decade. Gross profits also hit new highs in the second quarter of 2002, after dipping slightly in the early months of the year. The typical single-family home and condo sale across the country generated a gross second-quarter profit of $123,869, up 19 percent from $103,750 in the first quarter of 2022 and up 38 percent from $90,000 a year earlier. The second quarter profit figures showed how strong the nation’s housing market prices remained despite rising economic uncertainty and home-mortgage rates that have surged this year.
2nd Historic Fed Rate Hike Unlikely to ‘Further Damage’ Mortgage Borrowers. The Federal Reserve made another aggressive move Wednesday, raising its benchmark rate by three-quarters of a percentage point for the second time this year to try and tame the economy. However, higher mortgage rates may not necessarily be on the horizon as a result, says Lawrence Yun, chief economist for the National Association of REALTORS. “This is unlikely to do any further damage to mortgage rates,” Yun says. “The long-term bond market on which mortgage rates are generally priced has mostly priced in all future actions by the Fed and may have already peaked with the 10-year Treasury shooting up 3.5% in mid-June.” “It is possible that the 30-year fixed-rate mortgage may settle down at 5.5% to 6% for the remainder of the year,” Yun says. If mortgage rates could stabilize near current levels, future home sales would likely then be dependent on jobs and consumer confidence, Yun notes. “Therefore, home sales could soon stabilize within a few months and then steadily turn upwards from early next year,” Yun says.
Pending Home Sales Fell 8.6% in June. The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, dipped 8.6% in June. Year-over-year, transactions shrank 20.0%. “Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” said NAR Chief Economist Lawrence Yun. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.” “Home sales will be down by 13% in 2022, according to our latest projection,” Yun added. “With mortgage rates expected to stabilize near 6% and steady job creation, home sales should start to rise by early 2023.”
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