In February: First Median Price Slide in Over a Decade, Home Sales Up 14.5%
According to a seasonally adjusted report by the National Association of Realtors, sales of previously owned homes increased 14.5% in February compared to the previous month. With that, sales were at a 4.58 million unit yearly rate. It was the most significant increase since July 2020, shortly after the Covid-19 outbreak began. It was the first monthly growth in a year.
The contracts were most likely signed at the end of December and throughout January when mortgage rates had dropped significantly, given these sales statistics are based on closings. After peaking at 7% last fall, the average rate on the well-known 30-year fixed loan stayed in the low 6% area throughout January.
Since the summer of last year, higher mortgage rates have been bringing down home values, and for the first time in 131 months in a row, or nearly 11 years, prices were lower when compared year over year. Existing homes sold in February with a median price of $363,000, a 0.2% decrease from February 2022. The decreased median price can indicate that properties at the lower end of the market are selling.
Despite Rising Interest Rates, Mortgage Demand is Once Again Rising
As a result of falling interest rates brought on by recent bank failures, mortgage demand has grown for three weeks running. However, the volume of applications may decline as rates rise once more.
According to the seasonally adjusted index from the Mortgage Bankers Association, the overall volume of mortgage applications increased by 3% last week compared to the prior week.
With points dropping to 0.66 from 0.79 (including the origination charge) for loans with a 20% down payment, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan sums ($726,200 or less) dropped from 6.71% to 6.48%. It was the lowest point in a month but still significantly higher than the same week a year prior when the rate was around 4.5%.
Over the week, there were 5% more applications to refinance a home loan. Meanwhile, mortgage applications to buy a home rose 2% over the prior week. The status of the economy may have more of an impact on today’s homebuyers than weekly changes in interest rates. The pressure has severely impacted consumer confidence in the banking industry, high housing costs, and a lack of available properties for sale.
A Quarter Point Rate Hike from The Fed Signals Increases Are About To Cease
The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, signaling the end of rate hikes and cautioning on the recent banking crisis.
The Federal Open Market Committee, which sets interest rates, stated that future rises are not guaranteed and will primarily depend on incoming data, along with its ninth increase since March 2022.
Fed Chair Jerome Powell recognized that the recent banking sector events would likely lead to tighter credit conditions, which was why the central bank’s tone had mellowed. Even so, he asserted that “rate cuts are not in our base case” for the remainder of 2023.
Powell stated during the news conference that the FOMC had discussed suspending rate increases in light of the banking crisis but that the decision to do so was ultimately unanimously agreed upon owing to intermediate data on inflation and the health of the labor market.
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.
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