Home prices are now posting the biggest monthly declines since January 2009, according to the latest Mortgage Monitor report from Black Knight.
Median home prices in August fell 0.98%, only slightly better than July’s 1.05% monthly decline. The average home price is down 2% ($8,800) from its June peak nationally as we enter the historically slower fall-winter homebuying season.
The housing market has not seen such a significant two-month drop in prices since shortly after the collapse of Lehman Brothers in winter of 2008, Black Knight said on Monday.
Skyrocketing mortgage rates – now in the 7% range for some buyers – and limited inventory have driven mortgage affordability to its lowest levels since the early 1980s, a reversal from the frenetic boom in buying during 2020 and 2021.
With mortgage rates at 6.7% as of Sept. 29, it takes 38.2% of the median household income to make the monthly mortgage payment on the median-priced home bought with a 30-year mortgage and 20% down, Black Knight said. That monthly payment is up $930 from August 2021, a 73% increase.
“Historically low inventory – along with record low interest rates – was one of the key drivers behind U.S. home prices seeing essentially a decade’s worth of appreciation in just two-and-a-half years,” added Ben Graboske, Black Knight’s president of Black Knight data & analytics.
Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?
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Home prices are beginning to fall from post-pandemic peaks but remain up 12.1% from Aug. 2021 due to the record growth seen in late 2021 and early 2022, Black Knight said in its report. Annual home price growth rates are poised to continue falling in coming months, though it’s unclear where the bottom is.
Much of that depends on how much inventory returns to the market. After seeing an uptick in listings from May through July, inventory levels stalled in August, growing at just 1/10th the rate of recent months. The market grew from just 1.7 months of for-sale inventory to 3.1 months before dropping down to three months in August.
“Right now, prospective sellers are not only coming to grips with falling demand and declining prices due to sharply higher interest rates, but they also have a growing disincentive to give up their own historically low-rate mortgages in this environment,” said Graboske. “Some may be waiting out the market to see if demand – and prices – return in the spring.”
While 20% of markets have seen only marginal declines (less than 1%) so far, a third have experienced drops of 3% or more – including nine where prices have fallen more than 5%, Black Knight researchers found. The sharpest correction was in San Jose (-13%, or, about $203,000), followed by San Francisco (-10.8%, or roughly $137,000) and Seattle (-9.9%, or about $83,000), but other formerly scorching-hot markets have also cooled majorly since June. Las Vegas, Austin, Minneapolis, Washington, D.C., Raleigh and Nashville have all shed 3% of home value in recent months.
“Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987,” said Sam Khater, Freddie Mac’s Chief Economist. “These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.”
30-year fixed-rate mortgage averaged 5.78 percent with an average 0.9 point as of June 16, 2022, up from last week when it averaged 5.23 percent. A year ago at this time, the 30-year FRM averaged 2.93 percent.
15-year fixed-rate mortgage averaged 4.81 percent with an average 0.9 point, up from last week when it averaged 4.38 percent. A year ago at this time, the 15-year FRM averaged 2.24 percent.
The PMMS is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.
The MBA Mortgage Application Index declined 8.1% last week, following the prior week’s decrease of 1.2%. The downward move came as a 14.4% drop in the Refinance Index was accompanied by a 1.5% fall for the Purchase Index. The average 30-year mortgage rate extended its climb, jumping 23 basis points (bps) to 4.50%, and is up 114 bps versus a year ago.
In other housing news, new home sales (chart) fell 2.0% month-over-month (m/m) in February to an annual rate of 772,000 units, shy of the Bloomberg consensus forecast calling for a rate of 810,000 units, and below January’s downwardly-revised 788,000-unit level. The median home price rose 10.7% y/y to $400,600. New home inventory rose to 6.3 months from January’s level of a 6.1-months supply at the current sales pace. Sales jumped m/m in the Northeast, and were higher in the Midwest, while lower in the South and West. Sales in all regions were lower y/y, except for the Northeast which gained ground. New home sales are based on contract signings, offering a timelier read on housing activity compared to the larger contributor of existing home sales, which are based on closings
Median sales prices up at least 9 percent year-over-year
November ended a five-month streak of year-over-year prices increasing by at least 10 percent
The housing market on Long Island has slowed from a year ago in terms of sales volume, but a lack of inventory is likely the culprit.
Home sales on Long Island dropped 16.9 percent year-over-year in November, according to data from OneKey MLS reported by Newsday. Home sales in Nassau County fell 19.2 percent, while Suffolk County sales decreased by 14.9 percent.ADVERTISING
As home sales dropped, so did availability of homes on the market. A 1.9-month supply of homes were for sale in Nassau last month and a 2.1-month supply of homes were available in Suffolk. The counties’ supply numbers in November 2020 were 3.3 months and 2.4 months, respectively.
Low supply could continue to hamper the market for the near future.
“We’ve had low inventory for quite a while now,” OneKey MLS CEO Jim Speer told Newsday. “I would expect it to stay at a pretty low level, hopefully not at this low a level, but I expect we wouldn’t see a great increase in the coming months.”ADVERTISEMENT
While listings are dropping and prices remain high, they aren’t soaring to the heights seen in recent months, a likely relief for homebuyers.
In Nassau, the median sale price was $655,000, a 9.3 percent increase year-over-year. But it was only an 0.8 percent, or $5,000, increase from October. November also ended a five-month streak of year-over-year prices increasing by at least 10 percent, according to Newsday, suggesting a slowing in price growth.ADVERTISEMENT
In Suffolk, the median sale price in November was $520,000, a 10.3 percent increase year-over-year, but only a 0.2 percent gain month-over-month, $1,000 in all.
The median sale prices in both counties are down from the historic highs hit during the summer, when Nassau reached $670,000, while Suffolk hit $531,000. The median pending sale in November for deals that hadn’t closed were for $650,000 and $515,000 in each county, respectively.
“I have definitely seen the market become more realistic,” Keller Williams Realty real estate agent Maria Wilbur told Newsday. “The offers coming in the last month or two have been closer to what the value of the house should be. They’re not so inflated.”
The following graph shows the benchmark Census measures of home construction, the seasonally adjusted annual rates of single-family starts and single-family home sales. Starts account for the beginning of construction of homes, whether that construction is for a home already under a sales contract, being built for-sale, being built for-rent, or undertaken for a construction contract (a custom build on an owner’s lot). New home sales are signed sales contracts for new builds, whether that home has started or completed construction (new home sales is thus a counterpart to the NAR pending sales index, rather than existing home sales, which account for closed contracts).
The reason that starts outpace sales on the chart below is because, as noted above, starts represents all home builds. Thus, while the measure of new home sales represents only the more narrow for-sale class, housing starts also include custom builds and built-for-rent construction.
The consequences of the virus-induced 2020 downturn (the Great Disruption?) is seen clearly at the end of the graph, particularly the V-shaped nature of the impact on housing. While both measures have staged impressive rebounds, the sales measure has completely closed the gap between the two series.
However, the actual effect is larger. For an apples-to-apples comparison of the rates of for-sale construction and new home sales, we need to filter the starts series to remove custom builds and built-for-rent single-family construction. Using Census quarterly data of these construction types, I interpolated the quarterly data into monthly, seasonally adjusted data and then subtracted this new series from the existing Census data series. The new data series, single-family for-sale starts, allows for a precise comparison of the pace of home building in the for-sale sector relative to sales, as graphed below.
The new series is much closer to the sales data, with just occasional periods of notable difference amid the statistical noise. The adjusted data makes clear how great the current difference is between sales (red) and starts (blue). This gap is unprecedented in the 20 years of data presented here, and there is no comparable period in the data going back to 1963. Plotting the difference between the monthly rates of for-sale starts and sales yields the following series, which peaks in the most recent data.
The degree to which current new home sales are outpacing starts is clear in the above graph. These data are consistent with Census estimates and NAHB surveys that indicate builders are selling homes that have not begun construction in greater numbers. Indeed, the count of such home sales is up 69% compared to a year ago, an incredible jump. To place the current data into context, I smoothed the data using 6-month moving averages. While this dilutes somewhat the scale of the current gap, it shows three relevant periods over the last two decades where sales and for-sale starts disconnected.
As seen above, the first period occurred during the housing boom when for-sale starts exceeded sales, leading to an inventory overhang that was part of the housing crisis preceding the Great Recession. The second separation occurred as single-family starts plummeted during the Great Recession and sales, helped by the three stages of the federal home buyer tax credit, reduced excess inventory (new home months’ supply peaked at 11.1 during the spring of 2008).
These two prior periods happened in an overbuilt environment. The script is flipped today. Months’ supply for new homes is down to a lean 3.3, and existing home months’ supply (per NAR data) is at a very tight 2.8. Thus, the third period of separation between for-sale starts and new home sales occurring now is a signal of the degree to which home building will need to play catch-up with current demand.
As with other economic impacts related to the virus, prior trends have been accelerated. With home building, the last decade (the Long Recovery) was characterized by underbuilding due to supply-side limitations such as labor availability and law/regulatory cost impacts. The lagging pace of construction, relative to current sales, is an intense, compressed version of these general economic trends, with builders citing lumber and material issues as delaying some, current construction projects.
Because builders do not want to contract home sales that they will not be able to deliver effectively, the current, historic gap between elevated sales volume and improving if relatively lower construction rates means that the pace of growth for new home sales will need to slow and/or the rate of home building will need to increase to balance the market. Strong levels of the NAHB/Wells Fargo HMI measure of home builder confidence are consistent with this expectation, for starts at least.
In the meantime, the current gap between for-sale starts and sales is unprecedented. Moreover, this gap is not the only historic, current data reading of the housing industry. The NAHB/Wells Fargo HMI reached a data series high in September.
And the gap between median newly-built and existing home prices, which peaked near $95,000 three years ago, has closed and inverted. According to NAR data, the median price for a resale single-family home was $315,000, higher than the Census reported median of $312,800 for newly-built homes. That inversion has only occurred one other time over the last two decades (June 2005).
In sum, low levels of existing inventory, rising resale prices relative to new construction, strong builder confidence, and sales exceeding for-sale starts point to solid levels of home construction in the months ahead.
Home building sustains jobs (approximately 2.9 per home built and 0.75 per $100,000 in remodeling), which means more residential construction employment gains in the near-term. In fact, over the next two to three months residential construction will likely post a year-over-year gain for employment, a notable sign of strength for housing in the recovering economy.
(Bloomberg Opinion) — No matter how you look at it, the economic fallout from the coronavirus is going to be brutal, with a projected 6.5% decline in real gross domestic product in 2020 and an unemployment rate of 9.3% at year-end, according to the Federal Reserve. In ordinary times, and without any policy response from government, a blow of this magnitude should weaken the housing market.Yet, what we’re starting to see is the very opposite. For various reasons, the supply of homes on the market continues to fall to record lows and home prices are, if anything, accelerating. For many homeowners stressed about the value of their biggest investment, it’s a welcome relief. But this signals one more hurdle for would-be millennial homebuyers as they age into their family-forming years.
The biggest reason we’re seeing home-price growth accelerating in the middle of a pandemic is that the disruption to the supply of housing is persisting longer than the disruption to demand — that is, would-be buyers. Wednesday’s weekly mortgage data showed that purchase applications rose for the eighth consecutive week and are approaching an 11-year high on a seasonally adjusted basis. Part of the reason for the quick rebound in demand is surely the decline in interest rates on mortgages to all-time lows, with few signs they are likely to rise for the foreseeable future.
But as is always the case in the housing market, supply doesn’t respond as quickly as demand. Single-family housing starts plunged in March and April, with the most recent report showing a 25% year-over-year tumble. Part of this decline is because construction in some states shutdown, and much more so in some regions than others. Single-family starts fell 73% in the Northeast but only 13% in the South. Even where construction continued, the pace slowed as builders adopted social distancing and other health measures to prevent the spread of the coronavirus.
Even as demand rebounds, homebuilders may be slow to acquire new construction lots and might hold back on increasing production after getting the scare they did in March and April. They may prefer to wait a while to make sure these revived levels of demand are sustainable, while they also shore up their balance sheets before beginning to build at the same pace as earlier this year.
Beyond the impact on construction, a little discussed factor leading to fewer homes on the market is mortgage forbearance programs put in place by banks, states and Fannie Mae and Freddie Mac. From a policy standpoint it’s great that banks and governments are helping to prevent a deluge of foreclosure as millions of people lose their livelihoods because of the pandemic. But a consequence of that policy change is that it deprives the housing market of the supply of foreclosed properties that occurs even in strong economies and solid job markets; this amounted to almost 500,000 houses in 2019.
Some homeowners may also be delaying the listing of their homes for sale because they’re sheltering-in-place, or have lost their jobs and can no longer provide income verification to buy a different home. They may also not be comfortable having potential buyers, who could be carrying the virus, walking into their homes for sales showings.
Put it all together and housing supply continues to fall. Mike Simonsen of Altos Research, who tracks real-time housing data, notes that there are only 700,000 single-family homes for sale in U.S. compared to more than 900,000 at this time last year. Normally at this time of year the housing supply has been rising for a few months amid the traditional spring buying season, only to fall later in the year as activity slows. But that’s not what we’ve seen during the past few months, as supply continues to contract. As a result, the percentage of homes for sale with price reductions is the lowest he’s seen in his database, a leading indicator suggesting faster home-price growth in coming months.
Presumably, at some point the coronavirus crisis will pass, foreclosures will move forward again and all participants in the housing market from would-be buyers, sellers and homebuilders resume normal behavior. To the extent home prices rose too high because of supply distortions, we should see home prices leveling off or even declining. But it’s not clear that this will be a 2020 story. And in the meantime, steadily rising home prices may join steadily rising stock-market prices in the middle of a pandemic as a phenomenon that continues to flummox everyone.
The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 58 in the fourth quarter of 2019, up three points from the previous quarter (Figure 1). The RMI has been consistently above 50—indicating that more remodelers report market activity is higher compared to the prior quarter than report it is lower—since the second quarter of 2013. The overall RMI averages current remodeling activity and future indicators.
Current market conditions increased two points to 56 in the fourth quarter of 2019 (Figure 2). Among its three major components, major additions and alterations gained four points to 56, minor additions and alterations increased by one point to 54 and the home maintenance and repair component rose one point to 58.
The future market indicators gained three points to 60 in the fourth quarter (Figure 3). Calls for bids increased by three to 58, amount of work committed for the next three months gained three points to 57, the backlog of remodeling jobs jumped five points 64 and appointments for proposals increased by two points to 62.
The fourth quarter RMI reading reflects solid demand for remodeling, supported by a strong overall economy and low interest rates. Remodelers still face challenges in the market, including skilled labor shortages, making it harder to work off a backlog quickly.
Contracts for new, single-family home sales inched down 0.7% in September to a 701,000 seasonally adjusted annual rate according to estimates from the joint release of HUD and the Census Bureau. The decline came off a downwardly revised August estimate, which was decreased from an initial reading of 713,000 to a new estimate of 706,000. Year-over-year, the September estimate is 15.5% higher. Sales in September continue strength supported by lower mortgage rates. Are you looking for an Online conveyancing quote? then try My conveyancing specialist, because moving home can be a very exciting experience. It can however, also be a stressful and expensive.
Total sales for the first nine months of 2019 (527,000) were 7.2% higher than the comparable total for 2018 (491,000). We expect sales volume to continue to trend up slightly in the coming months as more new homes are built.
For the first nine months of 2019 (and relative to the first nine months of 2018), new home sales were up 12.8% in the South, 7.3% in the West, and down 10.3% in the Northeast and 10.6% in the Midwest, due to some tax reform related effects and affordability.
Compared to last month, inventory of new homes for sale declined 0.6% to 321,000 in September. It is the fourth straight decline since June 2019. The current months’ supply stands at a balanced level of 5.5.
Median new home sales price (price of a home in the middle of the distribution) dropped 7.9% in September to $299,400 compared to August ($325,200) and 8.8% lower than a year ago ($328,300). Median new home sales price dipped below $300,000 for the first time since May 2016.
About 15% of newly built home sales are priced under $200,000 in September, compared to 10% last month and 9% one year ago. While more affordable entry-level homes were sold in September, the number of new homes priced above $400,000 decreased.
The U.S. inventory of homes for sale was flat in the first quarter, compared with a year earlier, the first time since 2016 there wasn’t a decline, according to a Truliareport.
Inventory increased in 50 of the nation’s 100 largest metro areas, up from just 19 areas one year ago. Starter-home supply rose 3.5% year-over-year – the fastest annual growth rate observed in more than 6 years – while the number of luxury homes on the market fell 4.5%, the report said.
The increase likely is being driven by homes lingering on the market as high prices put them beyond the reach of first-time buyers, according to the report. About 54% of homes for sale were in the starter- or trade-up-home segments – in other words, the first few rungs of the housing ladder.
“The markets with the greatest growth in inventory are also markets where prices have rapidly risen to notoriously high levels and supply has been severely constrained over the past few years,” the report said. “This rapid appreciation has caused affordability to deteriorate more quickly in these areas, and the nascent rise in inventory may actually reflect an exhaustion of demand in these communities, more than it reflects a greater number of sellers listing their homes.”
The 10 markets with the largest gains in inventory are also among the nation’s most-expensive housing markets, including the San Francisco Bay Area, Seattle, Los Angeles and San Diego.
“Even in these markets, dramatic increases in inventory – especially among starter homes – have yet to stem the tide of declining affordability,” the report said.
Nationally, there were 273,282 newly-listed homes on the market during the first quarter, down 6.9% from the 293,481 in the year-earlier period. In other words, inventory growth was driven by homes that were listed in prior quarters.
“Inventory growth seems to be driven more by ebbing demand rather than an infusion of new supply,” the report concluded.
The first quarter data may be representing the tail-end of a housing slump caused by November’s eight-year high in mortgage rates that since then have fallen.
At the end of March, the U.S. average rate for a 30-year fixed mortgage had the largest one-week decline in more than 10 years, dropping to 4.06%, according to Freddie Mac. Since then, it has bounced around in a narrow band, and this week averaged 4.1%.
In March, pending home sales increased 3.8% as the cheaper financing costs brought more buyers into the market, according to the National Association of Realtors.
Last week, an index measuring mortgage home-purchase applications rose 5% from a week earlier and was 5% higher than the year-ago week, according to the Mortgage Bankers Association.
“We saw a good week for the spring home buying season,” MBA’s Joel Kan said in the report released on Wednesday.
Freddie Mac November Forecast: Expect Modest Housing Market Growth in 2019
According to Freddie Mac’s November Forecast, the biggest unknown about the housing market next year is whether current negative trends, such as lack of housing supply, will persist or the market will adjust to the shock of higher mortgage rates and resume modest growth.
Sam Khater, Freddie Mac’s chief economist, says, “Almost all the trends in the U.S. housing market have been negative in recent months as housing market activity continues to adjust to higher mortgage rates.”Khater added, “If new home sales are to resume growth in 2019, builders may have to shift their focus to more modestly priced homes and smaller sized homes to help offset housing affordability concerns. But with cost pressures pinching profitability, this will be a significant challenge.”
Expect GDP growth to average 3 percent in 2018 before slowing to 2.4 percent in 2019 and 1.8 percent in 2020.
Expect total home sales to decrease 1.6 percent to 6.02 million in 2018 before slowly regaining momentum and increasing 1 percent to 6.08 million in 2019 and 2 percent to 6.20 million in 2020.
Expect home prices to increase 5.1 percent in 2018 with the rate of growth moderating to 4.3 percent in 2019 and 2.9 percent in 2020.
Expect single-family mortgage originations to decline 9.9 percent year-over-year to $1.63 trillion in 2018, falling slightly to $1.62 trillion in 2019 and dropping once more to $1.60 trillion in 2020. This is the result of shrinking refinance activity.Adjusted for inflation in 2017 dollars, an estimated $14.2 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages in the third quarter of 2018, down from $18.3 billion a year earlier and substantially less than the peak cash-out refinance volume of $102 billion during the second quarter of 2006.