Real Estate Market Archives

Real Estate Trends 2022: Housing Market Trends

September 23, 2022 by Marco Santarelli

Current Housing Market Trends in 2022

Mortgage rates are rising. Home sales are declining. Supply is improving. Here are the latest housing market trends as seen in June 2022. To begin with, the prices are not going to decline in 2022. The various forecasts from experts show that 2022 will remain a sellers' housing market, and home values are expected to increase on a year-over-year basis.

If mortgage rates continue to rise, although, at a slower rate than in recent months, demand will likely decrease in the fall and winter, while home prices will continue to grow, albeit at a slower rate. The real estate market has emerged as a boon for sellers and a source of worry for buyers in the middle of this epidemic. Home prices have been increasing in the mid-single digits for many years.

Recent double-digit price rises reflect the convergence of exceptional demand and chronically low supply. Home prices are increasing as a result of enough money on the sidelines and very low mortgage rates. The improving economy and the approaching peak homebuying years of millennials are driving a residential housing boom. The housing supply is now at its lowest level since the 1970s, due to millennial homeownership and other factors such as rising building prices and real estate speculators snapping up starter homes.

In August 2022, 24 percent of total sales were made in cash, the same share as in July, but up from 22% in August 2021. This indicates that around one-fourth of purchases were conducted with cash, indicating that there is a sizeable group of buyers who are not impacted by mortgage rate changes. Investors (who make up many cash sales) made up 16% of all transactions in August, up from 14% in July and 15% in August 2021. This also shows that higher interest rates have less of an influence on investors' purchases as compared to first-time buyers.

Detached single-family houses continue to be in great demand. These properties provide greater living space and separation from adjacent houses than attached properties provide. Last month there was a surprising uptick in sales of new single-family houses and many experts believed that is likely to be short-lived as home prices continue to rise and the average contract rate for a 30-year fixed-rate mortgage tops 6 percent, decreasing affordability.

The Commerce Department announced that new home sales decreased 12.6% to a seasonally adjusted annual rate of 511,000 units in July, the weakest pace in over six years. Six of the last seven months have seen a drop in new-home sales. The decline increased the inventory of new homes to the highest level since March 2008.

New home sales have been trending lower as prospective buyers see their budgets stretched thin by long construction times, mounting costs, and rising mortgage rates. The average interest rate for a 30-year, fixed-rate mortgage was above 5% for all of July, having risen more than two percentage points since January. The increase in new-home inventories is assisting in slowing the price rise. The median price for a new construction home rose to $439,400, up from $402,400 the previous month.

Mortgage applications have plummeted this year due to fast-rising mortgage rates, which are already at their highest level since the Great Recession. Therefore, sales are predicted to fall further. The Federal Reserve is raising rates this year to reduce decades-high inflation. It is increasing the cost of buying a home and crushing demand.

Residential construction was mixed in August 2022, as housing starts rose 12.2% while permits fell 10%, the Census Bureau reported recently. Housing starts were at an annual rate of 1.575 million while permits for future homes came in at an annual rate of 1.52 million. Single-family starts increased slightly, as home builders continue to moderate their production levels as the cost of construction materials remains at elevated levels and buyers react to rising mortgage rates.

Regionally, the biggest drop in permits came in the South, where markets have been among the hottest. Multi-unit starts also fell more than those for single-family homes. A slowdown in new construction is concerning because the housing market is still underbuilt in comparison to demand. With millennials continuing to enter their prime home-buying years and a lack of existing-home inventory, new home construction is critical in meeting shelter demand.

Privately owned housing completions were at a seasonally adjusted annual rate of 1,342,000 in August. This is 5.4 percent (12.1%) lower than the revised July estimate of 1,419,000, but 3.1 percent (10.5 percent) higher than the August 2021 rate of 1,302,000. Single-family housing completions in August totaled 1,017,000, up 0.4 percent (12.8%) from the revised July rate of 1,013,000. The August rate for units in buildings of five or more units was 318,000.

Housing Sales Fell in August 2022

Existing home sales declined in August, and prices also softened substantially. According to the National Association of Realtors, sales of previously owned homes decreased 0.4% in August from July to a seasonally adjusted annualized rate of 4.80 million units. This is the slowest sales rate since May 2020, when activity briefly halted due to the outbreak of Covid. Aside from that, the pace is the slowest since November 2015. Sales decreased by 19.9% compared to August 2021.

“The housing market is showing an immediate impact from the changes in monetary policy,” said Lawrence Yun, chief economist for the Realtors, noting that he will revise his annual sales forecast down further due to higher mortgage rates. “Some markets may be seeing price declines.”

The sales figures represent closings, indicating that contracts were likely signed in June and July when mortgage rates spiked and then declined. According to Mortgage News Daily, the average rate on the popular 30-year fixed mortgage began June at around 5.5% and then jumped to over 6% by the middle of the month. It then retreated slightly, remaining in the 5.7% range for the majority of July before falling to the low 5% range by the end of the month.

Home sales fell in all price ranges, but especially at the lower end. Year over year, sales of homes priced between $250,000 and $500,000 were down 14%, while sales of homes priced between $750,000 and $1 million were down only 3%. Much of this is due to a lack of supply, which is most acute at the low end of the market. Distressed sales – foreclosures and short sales – represented approximately 1% of sales in August, essentially unchanged from July 2022 and August 2021.

Single-family home sales decreased to a seasonally adjusted annual rate of 4.28 million in August, down 0.9% from 4.32 million in July and down 19.2% from the previous year. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 520,000 units in August, up 4.0% from July and down 24.6% from one year ago.

The South accounted for close to half of all the sales in August, accounting for 45 percent, followed by the Midwest at 24 percent and the West at 18 percent, with the Northeast accounting for only 13 percent. The highest sales were seen in the price segment of $250,000 to $500,000. This price range accounted for 43% of total home sales seen in August. The price segment in the $100,000 to $250,000 range accounted for 22% of total home sales. The price segment in the $500,000 to $750,000 range accounted for 18% of total home sales.

US House Prices Continue to Trend Upward – August 2022

With a near record-low inventory of previously owned homes, some economists believe higher borrowing costs will have a moderate impact on the new housing market. In the long run, an infusion of newly-built homes could benefit the housing market. But there won't likely be a surge in new inventories this year or even next year. Builders cannot develop new homes quickly enough to meet up with customer demand. Over a decade of underbuilding in the new home sector has increased pent-up demand, despite builders' best efforts to increase inventory.

According to the most recent housing market forecast (by realtor.com), home price rise may slow in the future, but it has remained hotter for longer than expected, leading to an upwardly revised prediction of 6.6 percent for 2022. Home sales are slowing, lowering their original 2022 growth forecast to 6.7 percent. While they now predict a significant drop from 2021, if house sales match their forecasts, 2022 sales will be the second-highest since 2007, after only 2021.

The listing price, also known as the asking price, is the amount a seller has marketed a property for, whereas the sale price is the amount it ultimately sells for. Although price growth slows, homes are still more expensive than a year ago. The latest data for August 2022 from Realtor.com shows that the national median home price for active listings decreased to $435,000 from a record high of $450,000 in June. This represents a deceleration from last month's growth rate of 16.6% to an annual growth rate of 14.3%.

In addition, the 3.1% decline in the median listing price from July to August is the largest July-to-August decline in our records (dating back to 2016). In addition, the median list price of pending listings–homes for which the seller has accepted a buyer's offer–decelerated from 12.4% in July to 11.9% in August. This is the fourth consecutive month of pending listing price slowdown, and its lower growth rate relative to the overall median listing price shows buyers are picking less expensive properties.

And, for the week ending September 3, the median listing price rose by 13.4% over that same week last year. All the critical variables show that the tables are turning in favor of homebuyers more than sellers. The typical asking price of for-sale homes was up from last year by double-digits for the 38th week, with the pace of growth slightly ahead of last week.

Weekly Real Estate Trends — Source: Realtor.com®

Housing Market Trends for August 2022 (50 Largest Metro Combined Average)

In August 2022, active listing prices in the nation’s largest metros grew by an average of 10.9% compared to last year, decelerating from 12.0% last month. Southern metros led the charge in active listing price growth, growing by 13.5% on average over the past year. The southern metros of Miami (+33.4%), and Memphis (+25.8%), posted the highest year-over-year median list price growth in August, followed by Milwaukee (+25.0%).

Western metros had the highest growth rate in April at 16.6% but are now tied for third with the Northeast at 7.9%. Western metros witnessed the most price reductions (+16.2%), followed by southern metros (+10.4%). August was the first time no western metros made our list of hottest markets. Phoenix (+30.9%), Austin (+24.8%), and Las Vegas (+24.4%) had the most price reductions compared to the previous year.

Region	Active Listing Count YoY	New Listing Count YoY	Median Listing Price YoY	Median Listing Price Per SF YoY	Median Days on Market Y-Y (Days)	Price Reduced Share Y-Y (Percentage Points)
Midwest	6.5%	-18.1%	11.3%	8.6%	+ 4 days	+4.2 pp
Northeast	-2.4%	-19.7%	7.9%	4.4%	+3 days	+2.7 pp
South	56.3%	-3.8%	13.5%	12.0%	+4 days	+10.4 pp
West	70.8%	-14.3%	7.9%	7.7%	+7 days	+16.2 pp

Housing Price Trends for August 2022 [Sales Price]

According to the National Association of Realtors®, house prices were still greater than they were a year earlier, even though increasing borrowing rates made housing less affordable. In August, the median price of an existing home that was sold was $389,500, which is 7.7% higher than it was a year ago. This marks 126 consecutive months of year-over-year increases, the longest-running streak on record.

However, it was the second month in a row that the median sales price retracted after reaching a record high of $413,800 in June, the usual seasonal trend of prices declining after peaking in the early summer. Due to seasonality, home prices tend to dip from July to August, but the reduction this year was more dramatic than typical, which suggests a considerable slowdown in the housing market.

Home prices typically fall by 2% from June to August, but they have fallen by 6% this year. However, home prices are still being supported by limited supply. At the end of August, there were 1.28 million homes for sale, the same as a year ago. At the current rate of sales, that equates to a 3.2-month supply. After five successive monthly increases, the inventory of unsold existing homes dwindled to 1.28 million by the end of August.

Much of the growth was fueled by a 12.4 percent increase in property prices in the South. All other regions experienced home price growth of between 1.5% and 7.1%. Sales continue to be more robust on the higher end of the market, where the supply is stronger.

The median existing single-family home price was $396,300 in August, up 7.6% from August 2021.
The median existing condo price was $333,700 in August, an annual increase of 7.8%.
The median price in the Northeast was $413,200, an increase of 1.5% from the previous year.
The median price in the Midwest was $287,900, up 6.6% from the previous year.
The median price in the South was $356,000, an increase of 12.4% from August 2021.
For the twelfth consecutive month, the South experienced the highest pace of price appreciation compared to the other regions.
The median price in the West was $602,900, a 7.1% increase from August 2021.

Higher Mortgage Rates Causing a Drop in Housing Prices?

Mortgage rates fell sharply early in the pandemic, reaching historic lows of less than 3% at the start of 2021. The days of sub-3 percent 30-year fixed mortgage interest rates are over. The mortgage rates are rising at the fastest pace in decades. Housing prices are still higher than the previous year despite rising mortgage rates. Mortgage rates are slowing down home prices.

Economists predicted rates to rise by the end of 2022, but the recent surge in rates has many analysts wondering what would happen next. It happened faster than many predicted, with rates on 30-year fixed loans breaking through 5 percent in April to the highest level in more than a decade.

As mortgage rates rise, competition among those who can afford to buy should continue fierce for the time being. The economic recovery, particularly inflation, has been very evident in the late epidemic phases, and we now face a backdrop of mortgage rates rising at the quickest rate in decades. More than two-thirds of mortgage experts surveyed by Bankrate believe rates will continue to rise since inflation is not slowing down quickly.

The Fed is likely to raise interest rates several times this year, and its policy has a direct impact on the interest rates on various mortgage products, specifically adjustable-rate mortgages and home equity loans. Fed policy has fewer repercussions for fixed mortgage rates, which track 10-year Treasury yields more closely. Borrowers will see an end to the historically low rates that typified the period following the 2008 and 2009 global financial crises.

Experts disagree on the direction of mortgage rates in the coming week. 64% of respondents to Bankrate's weekly poll believe that interest rates will increase, while 18% believe that they will decrease and another 18% believe that they will remain the same.

As of September 14, 2022, interest rates jumped for almost all types of loans compared to a week ago. The national average 30-year fixed-mortgage rate is 6.24 percent, up 13 basis points over the last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 5.54 percent. The average rate for a 15-year fixed mortgage is 5.53 percent, up 21 basis points since the same time last week.

At the current average rate, you’ll pay a combined $607.29 per month in principal and interest for every $100k you borrow.
That’s a decline of $7.74 compared with last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $569 per $100k borrowed.
Monthly payments on a 5/1 ARM at 4.58 percent would cost about $510 for each $100,000 borrowed over the initial five years
But with adjustable-rate mortgages, it could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.

How Mortgage Rates Have Moved:

30-year fixed mortgage rate: 6.24%, up from 6.11% last week, +0.13
15-year fixed mortgage rate: 5.53%, up from 5.32% last week, +0.21
5/1 ARM mortgage rate: 4.58%, up from 4.52% last week, +0.06
Jumbo mortgage rate: 6.24%, up from 6.10% last week, +0.14

With inflation blazing and the U.S. economy chugging along, the average 30-year mortgage rate rose to 6.24 percent this week, up from 6.11 percent the previous week, according to Bankrate's nationwide poll of large lenders. Although the Federal Reserve doesn’t influence rates on fixed mortgages, its recent move to raise the federal funds rate due to inflation — and the indication it’ll continue to raise that rate this year — does have some impact on mortgages. One of the primary challenges that investors and buyers will need to address this year is rising interest rates.

Today's rates are much higher than they have been in years, which is likely to have a few knock-on consequences in the US housing market – though they are unlikely to produce significant declines in housing prices. While quickly rising mortgage rates may dampen the strong housing demand somewhat, do not anticipate a halt to home price appreciation. A slower rate of appreciation is more likely. The impact of higher mortgage rates is not yet fully reflected in the recent sales data but it has given affordability a big hit.

Keep in mind that, despite recent increases, mortgage interest rates are still within reach when seen in historical context (back in 1981, rates topped 18 percent for a 30-year fixed-rate mortgage). If the house you're eyeing is a good fit for your family and won't put you in financial peril, go ahead and buy it. The longer you delay, the more money you'll have to spend on rising rentals and saving for the down payment you'll need to buy a house. It all depends on your financial status and the housing market in the area where you live.

Rising mortgage rates still have the potential to drive a sizable portion of buyers away from the housing market. This year has already seen a significant increase in housing prices. When combined with interest rate increases, it may become too much for many homebuyers. As a result, the first half of the year is likely to see continued high house prices. When inventory increases and mortgage rates rise, the housing market may soften in the second half of 2022 (and in 2023 as well).

Even with rising mortgage rates and higher prices, the housing market would remain a seller's market due to very low supply and increasing demand as more millennials are projected to buy houses in 2022. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country.

This is encouraging news for the millions of millennials who are approaching peak homebuying age. Millennials are the largest generation in history, and they are already in their mid-thirties, approaching their prime home-buying years. They were delayed in purchasing a home, but are now back in full force. Thus, we have two, four, or five years of millennial homeownership.

Sources:

https://www.realtor.com/research/
https://www.zillow.com/home-values/
https://www.bankrate.com/mortgages/todays-rates/
https://www.realtor.com/research/august-2022-data/
https://www.nar.realtor/research-and-statistics/housing-statistics/
https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
https://www.realtor.com/news/trends/housing-market-reset-in-buyer-friendly-direction/

Housing Market Predictions 2022: Real Estate Forecast

September 17, 2022 by Marco Santarelli

Home prices have continued to rise despite rising mortgage rates and housing supply. The figures reflect a robust, expensive housing market. In this blog, we provide housing market predictions for 2022 and 2023. Additionally, we'll provide an answer to a perennial favorite of prospective homebuyers and investors: Will the housing market crash in 2022?

This year's dramatic and rapid jump in mortgage rates made an already expensive housing market much less affordable. Home prices surged dramatically during the first years of the Covid epidemic because demand was extremely high, supply was historically low, and mortgage rates reached a slew of new lows.

Also Read: Existing home sales declined, and prices also softened substantially in August 2022

The current housing market trends show that it is expected to continue its upward trend in the next couple of years. Buyers remain interested, keeping the market competitive, especially for attractive, well-priced homes. But some factors could affect the pace of the market or whether it favors buyers or sellers. Despite the clear signs of a slowing housing market, it remains somewhat competitive for homebuyers, with new records set for home-selling speeds and price increases.

Higher mortgage costs and fears of a recession have cooled housing markets from their early spring highs. Most of the weakening demand appears in expensive West Coast markets that have seen price growth in the last two years. More affordable, warmer regions remain on buyers' radars. Buyers still face plenty of competition, especially for attractive properties, with multiple offers and final sales prices higher than asking prices.

The market is moving away from sellers, but the balance is far off. Pressure on home price growth will persist through the end of the year and housing prices will continue to rise due to a mismatch between supply and demand. Many experts predicted that the pandemic would cause a housing crash on par with the Great Depression. That, however, is not going to happen. The housing prices are unlikely to drop even in the second half of 2022 but they are forecasted to rise more slowly than last year.

The housing market of 2022 is in far better shape today than it was a decade ago. The housing industry has had a boom last year, with the most significant annual gain in single-family house values and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years, reaching 6.9 million for the entire year. The national home prices have increased 33 percent over the previous two years.

The market was driven by record-low borrowing rates in 2020 and 2021 and a constrained supply due to underbuilding. The tremendous demand from first-time homeowners is almost as crucial as the restricted new supply. The exceptionally favorable age demographic trends are also the driving force behind the current housing market.

Housing Market Predictions For 2022

The latest from Zillow is that it predicts that the final months of 2022 will not bring about significant increases in home values, even though it forecasts that home values will increase in the majority of markets between August 2022 and August 2023. Zillow forecasts that home values will decrease in 552 different regional markets over the course of the next three months.

As a result of rising mortgage rates, the value of homes in around two-thirds of the nation's main housing markets declined throughout this past summer. At this very moment, the economic jolt caused by rising mortgage rates is continuing to eat away at some of the gains that were earned in the spring of 2022.

Goldman Sachs analysts published a study titled “The Housing Downturn: Further to Fall” on August 30. The investment bank now predicts that activity in the US housing market will be down by the end of 2022. This year, the business predicts steep reductions in new home sales (22%), existing home sales (17%), and housing GDP (8.9%). Goldman Sachs projects further declines in 2023 in new home sales (another 8% drop), existing home sales (another 14% drop), and housing GDP (another 9.2% drop).

According to Black Knight, a mortgage software, data, and analytics firm, home prices fell 0.77% from June to July, the first monthly drop in nearly three years. While the decrease may appear minor, it is the largest single-month drop in costs since January 2011. It is also the second-worst July result since 1991, trailing only the 0.9% drop in July 2010, during the Great Recession.

Home prices were still 14.3% higher in July compared to July 2021, which is more than three times the typical annual price growth rate, but the majority of that rise occurred during the first five months of 2022, before the huge spike in mortgage interest rates. Even if employment remains high, housing sales volumes are anticipated to dip in the second half of 2022 and throughout 2023.

Historical data suggests that sales could fall by 15% or more. The high level of employment and the rising ratio of cash buyers (30%) or those using ARMs will help to minimize what might otherwise be a temporary halt in the real estate market.

Low inventories will prevent home prices from flattening or declining. Strong job growth, low inventories, and tight supply will cause unequal price movements. Lower price tiers are more susceptible to interest rate hikes, while higher price tiers are more resistant to price decreases. The mix of homes that sell may be smaller on average as the market reacts to increasing mortgage rates and decreased affordability.

According to Freddie Mac, there are currently 18 percent more persons aged 25 to 34 than there were in 2006. This represents an increase of 6.6 million prospective first-time homeowners, from 39.5 million in 2006 to 46.1 million today. In addition to the increase in first-time homebuyers, the number of high-income renters who can afford to buy and are of prime first-time homebuyer age has also been growing.

In 2006, lending criteria were significantly loosened, and little examination was done to determine whether or not a borrower could repay their loan. These days, the requirements are more stringent, which lowers the risk for both the lenders and the borrowers. Consistent with a more challenging housing market for buyers, the share of buyers that faced at least one mortgage denial before getting approved grew from 22% in 2020 to 34% in 2021.

The government and jumbo segments had the most significant tightening in the previous month. These two housing markets couldn't be more different from one another, and the current situation is in no way comparable to that of the past. The Mortgage Credit Availability Index (MCAI) is an index that is released regularly throughout the year by the Mortgage Bankers Association (MBA). This index is used to measure how simple it is to get a mortgage.

The higher the index is, the more options there are for obtaining mortgage finance. In 2004, the index was hovering around the 400 mark. As the housing market heated up, mortgage loans became more available, and then in 2006, the index surpassed 850. The mortgage credit availability index (MCAI) fell as a result of the fall in the real estate market since it became nearly hard to get mortgage financing.

Since then, thankfully, the conditions for lending have been relaxed a little bit, although the index is still rather low. The index had a reading of 120.0 in May, which is around one-seventh of what it had been in 2006. It remains more than 30 percent below pre-pandemic levels. Because there aren't as many options on the housing market, a lot of people in the United States are having a hard time finding the house of their dreams.

Communities all around the country are struggling because of low inventories. Over the past decade, chronic underbuilding and the influx of millions of millennials into the homebuying market have resulted in a major mismatch in housing supply and demand. Even though mortgage rates are skyrocketing, the housing market is not going to crash any time soon.

The result will be a much slower rate of appreciation than in the past two years. We are predicting the housing market for the next 5 years and to recognize patterns that may influence real estate values and rentals beyond a year.

CoreLogic HPI™ is designed to provide an early indication of home price trends. Home price growth slowed for the second consecutive month, indicating a broader housing market slowdown. Home prices increased by 18.3% from June 2021 to June 2022, marking the 125th consecutive month of year-over-year growth. Though annual growth remained strong, it slowed from the previous month for the second consecutive month, reflecting lower buyer demand caused in part by higher mortgage rates and concerns about a slowing economy.

On a month-over-month basis, home prices increased by 0.6% in June 2022 compared with May 2022. The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.6% from June 2022 to July 2022 and on a year-over-year basis by 4.3% from June 2022 to June 2023.

Nationally, home prices increased 18.3% year over year in June 2022. No states posted an annual decline in home prices. The states with the highest increases year over year were Florida (31.8%), Tennessee (25.8%), and Arizona (24.9%). Large cities continued to experience price increases in June, with Phoenix on top at 26.1% followed by Las Vegas at 24.3% year over year.

The US CoreLogic S&P Case-Shiller Index posted a 19.7% increase, down from a 20.6% gain in April, confirming a tipping point after strong reacceleration in home price growth in the early months of 2022. A further indication of slowing price growth is seen in the deceleration of the non-seasonally adjusted month-to-month index, which slowed to 1.5% in May from a 2.6% increase in March and a 2.3% gain in April.

May’s increase was the second strongest in the data series following a 2.3% gain last May. Between 2015 and 2020, the monthly index changes from April to May averaged about 0.9%. Higher mortgage rates and recession fears are hurting buyer demand, but overall sales activity through May was steady compared to 2021.

June appeared to be a turning point, with a significant drop in buyer interest. Next month's data will reflect this. Highly unaffordable markets and those that led with price acceleration over the last two years, such as California's coastal markets and Phoenix, are hallmarks of a slowdown, according to the CoreLogic S&P Case-Shiller Index.

Even though the housing market is cooling, it's not balanced. After two record years, the housing market remains difficult for buyers, who face competition and pay premiums for attractive properties. The 10- and 20-city composite indexes also showed signs of losing speed, up by 19% and 20.5% year over year, respectively, compared with 19.6% and 21.2% in April. The overall tendency for more price increases in smaller markets continues to drive the 20-city index growth higher, as buyers flock to smaller and more affordable areas, particularly those in the Southeast and Florida.

Freddie Mac's own regression research indicates that a 1 percent rise in mortgage rates reduces home price increases by around four percentage points (for example, moving from 11 percent home price growth a year to 7 percent ). In contrast, analysts at J.P. Morgan expect a greater impact of around six percentage points lower home price increase.

Since home values are so high, the housing market may be more susceptible to rate increases than in the past; therefore, the greater estimate appears realistic. While it seems apparent that rising interest rates will reduce housing demand by reducing affordability, the actual past is a significantly less reliable indicator of what will occur because of a huge balancing impact – interest rates often rise when the economy is expanding.

The government-sponsored enterprise forecasts that for every one percentage point increase in mortgage rates, house sales would decrease by around five percent, and price growth will slow by four to six percentage points. If mortgage rates stabilize at current levels, and all other factors remain constant, their analysis predicts a much slower, but still positive house price rise with a wide regional range depending on migration trends.

As work-from-home becomes increasingly popular, it is anticipated that the housing market will continue to be undersupplied and that migration to lower-cost areas will continue to rise. This is significant since most booming cities have a major housing shortage due to a previous inflow of population.

Finally, favorable demographics suggest that the robust demand for first-time homebuyers will persist. This is due to the fact that there are still a substantial number of younger renters with sufficient income to sustain homeownership, and they should continue to be a formidable force for the foreseeable future. As the economy faces various headwinds in the next months and years, these variables should continue to exert a substantial influence on the housing market.

The quarterly housing outlook pulse poll conducted by Freddie Mac assesses public attitudes on housing-related problems. Since the beginning of the epidemic, market confidence has reached its lowest point in the second quarter of 2022. In addition, as a result of the impact of growing inflation on the cost of living, they found an increase in housing payment difficulties, particularly among renters.

51% are confident the housing market will remain strong over the next year.
This is down 7 percentage points from last quarter.
56% of renters and 24% of homeowners spend more than 30% of their monthly income on housing.
51% are concerned about making housing payments, up 4 percentage points from last quarter.
This is true for 68% of renters (a 10-percentage point increase from last quarter) and 38% of homeowners (a 3-percentage point decrease from last quarter).
24% are likely to buy a house in six months.
17% of homeowners are likely to sell in the next six months.
23% of homeowners are likely to refinance in the next six months.

Housing Market Outlook — Source: Freddie Mac

Housing Market Forecast for the Second Half of 2022

The new housing market forecast for 2022 by Realtor.com® has been released as a mid-year update. After more than a year of skyrocketing demand, and skyrocketing home prices, the housing market appears to be cooling off. The housing market is not collapsing, but it is heading towards more balanced conditions from an unsustainable peak of last year.

This year, mortgage rates have risen by more than two and a half percentage points. Furthermore, the increasing expenses of purchasing a home have altered many prospective purchasers' calculations. As a result, year-over-year house sales have fallen in recent months. A record 79 percent of respondents in a Fannie Mae study on homebuyer sentiment indicated it's a poor time to buy a home.

Home sales activity kicked out 2022 stronger than anticipated, but rising costs have led to alter their forecast downward. Realtor.com now forecasts a 6.7% decline in house sales in 2022. They anticipate the greatest year-over-year decline in house sales at the customary peak of the summer selling season. Home sales on par with these predictions would mean that 2022 sales are the 2nd highest tally since 2007, trailing only 2021.

In the second half of 2022, house price growth will moderate, although it has been hotter for longer than anticipated, resulting in an upwardly revised forecast of a 6.6% home price rise for 2022. That's an increase from their previous forecast of 2.2% growth in home prices. More than a decade of chronic underbuilding, coupled with millions of millennials entering the homebuying stage of life, has resulted in a major mismatch in housing supply and demand in the United States.

The median sales price appreciation prediction for existing homes has increased from 2.9% to 6.6% for 2022.
The prediction for existing home sales has shifted from positive growth of 6.6% to an annual fall of 6.7%.
Mortgage rates have been revised upward to reflect the major shift in monetary policy and financial conditions over the last 6 months.
In the second half of 2022, housing finance rates are predicted to climb at a more modest pace, which means that rates may hit 5.5% by year-end.
As mortgage rates have increased, prospective homeowners have submitted fewer loan applications.
According to the Mortgage Bankers Association, mortgage purchase applications decreased by 16 percent (in the week ending June 10) compared to the same week last year.
With mortgage rates, well above 5 percent, refinancing activity, which was brisk during the epidemic when rates were at an all-time low, has dwindled by more than 70 percent compared to last year.

Therefore, don't forecast a halt in the home price rise even though mortgage rates are rising significantly. While housing costs remain high, forcing homebuyers to make difficult decisions, it is predicted that the number of properties for sale will continue to increase, building on the reversal that began in May 2022. That is a sign of relief for first-time home buyers.

Increasing housing inventory is excellent news for buyers. Homebuyers will have additional options as a greater number of homeowners want to adapt their living situations to changing personal demands and take advantage of favorable market circumstances to access the substantial wealth they have accrued.

Homeowners continue to be in a favorable position, particularly those who have owned for extended periods of time and amassed substantial wealth. This is forecasted to attract additional sellers looking to capitalize on favorable market circumstances, resulting in increased competition and a rebalancing of the housing market away from its previous seller-friendly bias. This bodes well for seller-buyers who have been disappointed by the scarcity of purchasing possibilities.

The median national home price for active listings declined slightly to $449,000 in July 2022, down from an all-time high of $450,000 in June and mirroring the seasonal trends seen in 2018 and 2019 when the price peaked in June and eased in July. This represents an annual growth rate of 16.6%, a slight deceleration from last month’s growth rate of 16.9%.

In addition, the median list price of listings in pending status–those homes for which the seller has already accepted a buyer’s offer to purchase–decelerated, from a year-over-year rate of 13.9% in June to a growth rate of 12.4% in July. This is the third consecutive month of pending listing price deceleration and indicates that the homes which buyers are choosing to buy are becoming increasingly less expensive than the typical listed home.

Housing Market Crash Predictions For Next Years

The overarching concern is whether or not the housing market will crash, and if so, when. The simple answer is that it will not crash anytime soon and we certainly don't see a housing market crash coming in 2022. Rising rates are cooling the market as some expected but the prices are still rising at a slower rate. The current trends and the forecast for the next 12 to 24 months clearly show that most likely the housing market is expected to see a positive home price appreciation.

In recent years, the price of homes has climbed dramatically. Many prospective buyers, especially those with limited financial resources, are eager to hear whether and when home prices will become more accessible. Here is when housing market prices are going to crash. While this may appear to be an oversimplification, this is how markets operate.

When demand is satisfied, prices fall. In many housing markets, there is an extreme demand for properties at the moment, and there simply aren't enough homes to sell to prospective buyers. Home construction has been increasing in recent years, but they are so far behind to catch up. Thus, to see significant declines in home prices, we would need to see significant declines in buyer demand.

Demand declines primarily as a result of rising interest rates or a slowing economy in general. Ultimately, for rising interest rates to destroy home values, we'd need substantially less demand and far more housing supply than we presently have. Even if price growth moderates this year, it is extremely improbable that home prices will crash. Thus, there will be no crash in home prices in 2022; rather, there will be a pullback, which is normal for any asset class. The home price growth in the United States is forecasted to just “moderate” or slow down in 2022 and 2023.

Affordability will be a concern for many, as home prices will continue to rise, if at a slower pace than the previous year. With 10 years having now passed since the Great Recession, the U.S. has been on the longest period of continued economic expansion on record. The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy.

However, hot economies eventually cool and with that, hot housing markets move more towards balance. Housing market forecasts are essentially informed guesses based on existing patterns. While the real estate pace of last year appears to be reverting to seasonality as we approach 2022, demand is not waning.

Increasing interest rates will almost certainly have a greater impact on the national housing market in 2022 than any other factor. While sellers remain in an advantageous position, price stability and the continuation of competitive interest rates may provide some much-needed relief to buyers this year. Housing supply is and will likely remain a challenge for some time as labor and material shortages, as well as general supply chain issues, delay new construction.

The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply. Economic activities are ramping up in all sectors, mortgage rates are rising, and jobs are also recovering. The housing market remains largely a seller's market due to demand still outpacing supply. The inventory of available houses continues to be a constraint on both buyers and sellers.

Forecasting home price appreciation is a challenging task. While inventory has increased slightly, it remains significantly below pre-pandemic levels and is simply unable to meet current demand. Tight supply following years of underbuilding, combined with increased demand due to remote work, and US demographics — will continue to be a factor in 2022 & 2023. It will continue to be a seller's real estate market in 2022. Expect to see bidding wars on hot properties for sale, especially in this summer home-buying season.

References

https://www.realtor.com/research/
https://www.realtor.com/research/blog/
https://www.bankrate.com/mortgages/mortgage-rates/
https://www.blackknightinc.com/
https://www.freddiemac.com/research/forecast
https://www.realtor.com/research/2022-national-housing-forecast-midyear-update/
https://www.nar.realtor/research-and-statistics/housing-statistics/
https://www.corelogic.com/intelligence/u-s-home-price-insights/
https://www.realtor.com/research/top-housing-markets-2022/
https://www.zillow.com/research/home-value-sales-forecast-july-2022-31240/
https://www.zillow.com/research/daily-market-pulse-26666/
https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx
https://www.realtor.com/research/2021-national-housing-forecast/
http://www.freddiemac.com/research/forecast/20210715_quarterly_economic_forecast.page
https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
https://www.investopedia.com/personal-finance/how-millennials-are-changing-housing-market
https://www.freddiemac.com/research/consumer-research/20220617-housing-sentiment-second-quarter-2022
https://www.mba.org/news-and-research/research-and-economics/single-family-research/mortgage-credit-availability-index-x241340

Is It a Buyers’ or Sellers’ Market in 2022?

August 9, 2022 by Marco Santarelli

Buyers and sellers are bewildered by inconsistent housing market predictions, news, and statistics. Positives include record monthly price rises and never-before-seen low inventories, which bodes well for future values. Existing-home sales, while down from early-year highs is nonetheless solid. Housing metrics are still good. In the minus column, the 40% run-up in prices since the pandemic's inception and a rapid, near-doubling of mortgage rates from last autumn to near 6 percent as of now are increasing worries that house ownership has become so expensive for a big section of America that demand may collapse.

If increasing prices and rates cause purchasers to flee in droves, only a drastic price drop may bring them back. The superhot appreciation we've witnessed through May is expected to cool drastically for the remainder of the year. This move represents a significant departure from a trend of year-over-year growth that grew larger by the month. However, a pause in increases does not imply a reduction in prices. On the contrary, the fundamentals indicate that prices will continue to rise through the end of 2022 and into the next year.

The fundamentals predict values will rise until 2023. As usual, the outlook is uneven. In many metros, appreciation by 2022 will be behind what promises to be stubbornly high inflation, meaning high-priced homeowners will see their first “real” decreases in a decade or more. Ed Pinto, director of the American Enterprise Institute's Housing Center, predicts a shift from a booming to a modest sellers' market. Pinto offers a caveat. A further rise in mortgage rates or a protracted recession that boosts unemployment might lower dollar pricing.

It’s Still a Sellers’ Market in 2022

You may be wondering what this implies for your intentions to sell your property since there is increasing chatter about the real estate market cooling off from its peak frenzy during the pandemic. If you're considering a relocation, you should be aware that the market is still far from typical. Even though the supply of homes for sale has increased this year, there is still a lack of properties on the market. As a result, current market circumstances continue to favor sellers and buyers continue to struggle with rising home prices, mortgage rates, and inflation.

Total housing inventory registered at the end of June was 1,260,000 units, an increase of 9.6% from May and a 2.4% rise from the previous year (1.23 million). Unsold inventory sits at a 3.0-month supply at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021. Months’ supply measures the speed of the market by calculating the number of months it would take for inventory to deplete at the current pace of sales.

Specifically, it is calculated as the ratio of active residential listings relative to the number of sales. The ratio is adjusted seasonally to remove variability during the year so markets can be tracked every month. A balanced market typically equates to 6-7 months of supply; while a buyer’s market equates to 7 months of supply and above, and a seller’s market equates to 6 months of supply and under.

It is a seller's market because the amount of available inventory of houses does not meet the current buyer demand. In a seller's market, real estate prices increase. The median existing-home price for all housing types in June was $416,000, up 13.4% from June 2021 ($366,900), as prices increased in all regions. This marks 124 consecutive months of year-over-year increases, the longest-running streak on record.

A buyer's market would exist only when there are more properties for sale than there are buyers in the market. When this occurs, buyers have the upper hand in negotiations since sellers are more eager to negotiate to sell their homes. That is not the market situation in 2022.

In a seller's market, the reverse is true. Too few properties are available relative to the number of buyers on the market, giving the seller all of the leverage. In this circumstance, purchasers will do everything possible to compete for the restricted quantity of available properties.
A market is neutral or balanced when the supply and demand are in equilibrium and there are sufficient properties to fulfill buyer demand at the present sales rate.

For the past two years, we’ve been in a red-hot sellers’ market because inventory has been near record lows. The blue section of this graph highlights just how far below a neutral market inventory still is today.

It is a Sellers Market in 2022 — Credits: Keeping Current Matters

According to the above inventory graph, it is still a seller's market in 2022. The US housing market has only transitioned from a very hot sellers' market to a moderate sellers' market. Even if the market is cooling, the situation is still favorable to property sellers. While buyer demand is decreasing owing to increasing mortgage rates, houses priced correctly continue to sell quickly. For sellers, this indicates that the window of opportunity to list their home for sale has not closed. In conclusion, the current housing market continues to benefit sellers.

References

https://www.nar.realtor/research-and-statistics/housing-statistics
https://www.realtor.com/research/tag/months-supply/
https://www.keepingcurrentmatters.com/2022/08/04/why-its-still-a-sellers-market/
https://www.noradarealestate.com/blog/housing-market-predictions/

Absorption Rate and Months of Inventory in Real Estate

August 5, 2022 by Marco Santarelli

Absorption rates and months of inventory in real estate. What are they, and why are they significant? This information is useful since it represents the liquidity of a market. As a real estate investor, you can help maximize your profits by knowing the liquidity of a given real estate market. By knowing the liquidity of a market, you will better understand that market and therefore be able to take advantage of the various buying strategies afforded by it.

One of the measurements frequently used to gauge the liquidity of a given market is the absorption rate. This is basically the rate at which a specific segment of a real estate market sells in a given time frame. These segments are usually categorized by price range but may also be categorized by property type. The absorption rate can assist sellers to determine the optimal price for a property. The absorption rate is useful information for buyers as well because it indicates the extent to which a seller may be willing to lower their asking price or make other concessions.

Absorption Rate Formula

The easiest way to understand absorption is to put it in more tangible terms and measure it in “Months of Inventory”. In other words, we take the number of active listings and divide it by the total number of sold transactions within the same month to give us the months of inventory.

To calculate the months of inventory for any given market:

Find the total number of active listings on the market last month.
Find the total number of sold transactions for last month.
Divide the number of active listings by the number of sales to determine the number of months of inventory remaining.

As a general rule, 5 to 6 months of inventory is considered to be a normal or balanced market. Over 6 months of inventory and we have a buyer’s market. If it is less than 5 months and we have a seller’s market. The smaller the available inventory, the tighter the market is. Keep in mind that these are simply guidelines and will differ from market to market.

For example, let’s say there were 8,000 active listings last month and 1,000 closed transactions. That leaves us 8 months of inventory remaining on the market and also tells us that we are in a buyer’s market.

If you are in the market looking to buy, calculating the months of inventory can give you an indication of how negotiable sellers might be. A large number, say 12 months or more, would mean that sellers have a high level of competition and will probably be more flexible on their sales price and terms.

On the other hand, if you are a seller trying to sell your property, the months of inventory will give you an indication of the level of competition you will face. Selling in a buyer’s market will require you to put some serious thought into your pricing strategy and any incentives you may want to offer.

National Economic Outlook (September 2013)

September 9, 2013 by Marco Santarelli

The rate of annual job growth in August, 1.7 percent, was basically the same as in previous months. We had better get used to the idea that this is the new normal, because there probably won't be much help from the lagging government and construction sectors.

Budget difficulties will prevent any meaningful increase in government spending, even though local and state revenues are now in better shape. The recession revealed the extent of unfunded pension liabilities for public employees, which will absorb any extra dollars.

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