The summer selling season nears as inventory grows while the pace of sales return to pre-COVID conditions. According to Realtor.com This Week in Real Estate the supply of homes for sale jumped 9% last week compared to the same time period a year ago. Below are a few newsworthy events from the fourth week of May that influence our business:
Home Listings Suddenly Jump As Sellers Worry They May Miss Out On The Red-Hot Housing Market. Sharply higher mortgage rates have caused a sudden pullback in home sales, and now sellers are rushing to get in before the red-hot market cools off dramatically. The supply of homes for sale jumped 9% last week compared with the same period a year ago, according to Realtor.com. That is the biggest annual gain the company has recorded since it began tracking the metric in 2017. Sellers clearly see the market softening. Pending home sales, a measure of signed contracts on existing homes, dropped nearly 4% in April from March. They were down just over 9% from April 2021, according to the National Association of Realtors. This index measures signed contracts on existing homes, not closings, so it is perhaps the most timely indicator of how buyers are reacting to higher mortgage rates. Sales are slowing because mortgage rates have risen sharply since the start of the year, with the biggest gains in April and early May. The average rate on the 30-year fixed mortgage started the year close to 3% and is now well over 5%.
Lowest Rates In More Than A Month. Mortgage rates have generally been moving lower for more than 2 weeks now. Today’s gains were enough to bring them to their best levels in just over a month. We’ve been saying this for many weeks: the higher rates go, the more momentum builds in the other direction and the closer we are to finding a ceiling. Whether or not we’ve found a ceiling remains to be seen. The biggest issue for rates has been and will continue to be inflation. It has to level off and cool down in order for rates to truly confirm their ceiling. It will take time for inflation data to allay the market’s fears. Until then, even though rates have had a great couple of weeks, it’s easier to argue for a volatile range that looks more sideways than lower in the big picture.
Good News For Home Buyers? Fannie Mae Chief Economist Says The U.S. Housing Market Has Finally Turned A Corner. The inventory shortage, high prices and rising interest rates have finally bitten. Mortgage rates have risen 200 basis points since the end of 2021, putting pressure on existing home sales, mortgage applications, and homebuilder confidence, he said. “The sales pace in April was similar in level to the slowdown that occurred the last time the Federal Reserve engaged in a tightening regimen in 2018,” he added. A separate report released Tuesday by Realtor.com suggested that people are prepared to buy and sell homes at ”more approachable price points.” George Ratiu, senior economist and manager of economic research at Realtor.com, said the report “offers hope” for seller-buyers.
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