Spring Surprise: Home Prices Trend Upwards, Outshining the Market Expectations This Season

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The Labor Department released the April employment report This Week in Real Estate showing job growth accelerated in April causing the unemployment rate to fall back to a 53-year low of 3.4%. The Federal Reserve raised its benchmark interest rate by 25 basis points on Thursday for the 10th time since March 2022; however, it is important to remember that the Fed’s rate does not have a direct correlation to mortgage rates. Mortgage rates inched down slightly this week amid recent volatility in the banking sector and commentary from the Federal Reserve on its policy outlook, signaling it may pause its fastest monetary policy tightening campaign since the 1980s. ATTOM Data Solutions analysis of more than 51 million single-family home and condo sales over the last 11 years shows the months of May and June realize the greatest seller premiums. Below are a few newsworthy events from the first week of May that influence our business: 

Home Prices Are Back on the Rise as the Spring Market Proves More Competitive Than Expected. After cooling for the better part of last year, home prices are on the rise again. A sharp drop in new listings, adding to an already meager supply of homes for sale, is leading to renewed bidding wars and more homes selling for above asking price. “A modest bump in homebuyer demand ran headlong into falling for-sale supply,” said Andy Walden, Black Knight’s vice president of enterprise research. “Just five months ago, prices were declining on a seasonally adjusted month-over-month basis in 92% of all major U.S. markets. Fast forward to March, and the situation has done a literal 180, with prices now rising in 92% of markets from February.” Competition among buyers is not only pushing prices higher but also accelerating the market again. Nearly half of the homes on the market are selling within two weeks, the highest share in nearly a year. Buyers are clearly getting used to the higher-rate environment, as sales have strengthened for the past few months. Homebuilders have recently reported strong quarterly earnings, as they use incentives like mortgage rate buydowns to pull in sales. Builders also have far more supply and are clearly benefitting from the lack of existing homes for sale. A separate report released Tuesday from CoreLogic focuses on home price comparisons from a year ago but also shows prices gaining month to month. Prices in March were just over 3% higher than last year nationally. “The monthly rebound in home prices underscores the lack of inventory in this housing cycle,” wrote Selma Hepp, CoreLogic’s chief economist in a release.  Read the full story here.

The Optimal Time of the Year to Sell a Home Proves to be Spring and Summer. ATTOM released its annual analysis of the best days of the year to sell a home on Wednesday, which shows that based on home sales over the past 12 years, the months of May, June and April offer seller premiums of 10 percent or more above market value – with the top 16 best days to sell in the month of May alone. A recent analysis of over 51 million single-family home and condo sales from 2011 to 2022 suggests that waiting for the weather to warm up before selling a property can result in higher seller premiums. The data indicates that the spring and summer months are the most active for home buying, making it an ideal time for sellers to list their homes if they are considering selling soon. Therefore, now may be the perfect time to put your home on the market. The months realizing the greatest seller premiums were as follows: May (12.8 percent); June (10.7 percent); April (10.3 percent); March (9.7 percent); July (9.6 percent); February (8.7 percent); August (8.2 percent); September (8.0 percent); January (7.5 percent); October (6.8 percent); December (6.8 percent), and November (6.3 percent). Read the full story here.

Mortgage Rates Aren’t Home Buyers’ Problem This Spring. At 6.39% this week, the average for the 30-year fixed-rate mortgage has been settling in below the 6.5% range for some time now and is only one percentage point higher than a year ago, Freddie Mac reported Thursday. The number of homes on the market remains tight – still below pre-pandemic levels. Newly listed homes have plunged about 21% compared to a year ago, realtor.com reported this week. “Spring is typically the busiest season for the residential housing market, and despite rates hovering in the mid-6% range, this year is no different,” says Sam Khater, Freddie Mac’s chief economist. “Interested home buyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability.” Despite the Federal Reserve raising its benchmark rate for the tenth time – a move National Association of REALTORS Chief Economist Lawrence Yun called “unnecessary and harmful” – mortgage rates still fell this week. So, don’t assume the Fed’s monetary policy will lead to higher mortgage rates, says Nadia Evangelou, senior economist and director of real estate research at NAR. The Fed’s rate does not have a direct correlation to mortgage rates. “If inflation keeps slowing down, then mortgage rates will move lower,” Evangelou says. NAR has predicted 30-year rates to drop to 6% by the end of the year and to 5.6% in 2024. Mortgage rates are no longer double what they were a year ago: The 30-year loan averaged 5.27% at that time. “The gap between current and last year’s affordability is narrowing,” Evangelou says. Read the full story here.

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