Housing Supply Still at Historic Lows
Existing home sales in the US decreased from February to March, yet there is still a record-low amount of housing inventory—just 2.6 months’ worth. To return to the pre-COVID-19 sales range, the existing home sales trend would have to be between 4.72 and 5.31 million for at least 12 months, which is unlikely to occur.
The existing home sales market is anticipated to be between 4 million and 4.6 million in 2023. Demand has been consistent since Nov. 9, 2022, and the days on the market decreased once more to 29 days, the lowest number since 2011. Despite increasing year over year, the total housing inventory is still very close to all-time lows, and the monthly supply has also increased. All property types’ median existing-home prices in March fell by 0.9% to $375,700 from March 2022. Home price growth has definitely slowed down since the sharp increase in mortgage rates; that much is certain.
Real Estate Cash Deals in the US Surge as Mortgage Buyers Wait for Better Rates
The number of cash transactions in US real estate markets is rising, but not because more purchasers choose to refrain from taking out mortgages. Instead, purchasers who rely on mortgages delay their purchases until rates decrease. The proportion of cash purchases rises disproportionately as the number of buyers rises. According to the Mortgage Bankers Association, the number of applications for traditional buy mortgages has dropped by 39.2% from the previous year. Although low inventory is still an issue, the current spike in cash transactions results from mortgage purchasers waiting for lower rates.
Mortgage rates have been edging lower over the past month and a half but experienced a slight uptick this past week. For the week ending Apr. 20, the current average 30-year fixed mortgage rate was 6.39%, just above the four-week average of 6.32%. Researchers at Fannie Mae predicted that 30-year fixed mortgage rates will trend down throughout 2023 and 2024.
US Housing Market: Spring Season Sees Slight Inventory Rise Amid Mortgage Rate Hike
Spring selling season in the US housing market may have finally begun as weekly housing inventories increased slightly. However, due to a recent increase in mortgage rates, the statistics on purchase applications from last week decreased by 10%.
The number of active listings increased by 8,546, and the number of new listings showed modest growth, but the number of new listings did not recover from the spike in mortgage rates last year. Although recent data suggest a drop in data lines, new listing data is mainly seasonal.
Regarding NAR data, returning to any semblance of normality on the active listing side has been challenging since 2020. The monthly supply data reveals that the home market is experiencing no forced selling.
We must all concentrate more on purchase application data if the economy weakens later in the year and mortgage rates drop then. If mortgage rates fall below 6% this year, we can argue that the positive purchase application numbers from the previous few years will resume in the fall and winter.
Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.