Weekly Housing Market Update – 9/16/22 – Chief NAR Economists, Danielle Hale, not only forecasted the rate hike she also highlights her thoughts around 2:35 of the video regarding home sellers and home buyer.
Sabrina Speianu, Economic Data Manager, realtor.com®
- The national inventory of active listings increased by 26.6% over last year.
- The total inventory of unsold homes, including pending listings, increased by just 1.3% year-over-year due to a decline in pending inventory (-21.9%).
- Selling sentiment declined and listing activity followed, with newly listed homes declining by 13.4% on a year-over-year basis.
- The median list price grew by 14.3% in August, a deceleration from recent highs.
- Time on market was 42 days, 5 days more than last year but 22 days less than typical pre-pandemic levels.
- Regionally, large Western markets which saw some of the most growth last year and earlier this year are now showing the greatest signs of deceleration, with larger inventory increases, more price reductions, and more quickly decelerating price growth than other regions.
Buyers Gaining Time and Options as Housing Market Rebalances (July Market Report)
By Skylar Olsen on Aug. 18, 2022
- U.S. home values fell 0.1% from June to July, the first decline in the raw Zillow Home Value Index since 2012. Home values fell last month in 30 of the 50 largest metro areas, but are still up 16% from a year ago.
- Rising inventory is being driven by homes lingering on the market and new listings trailing pre-pandemic levels. It took 10 days for a listing to go pending in July, two days longer than in June.
- Rent appreciation is slowing, but the growth rate remains much higher than pre-pandemic levels
After two years of unprecedented growth, national home values fell slightly month-over-month for the first time since 2012, the year home values hit a trough after the housing bubble and bust of the aughts. While July’s housing market data update is big news, and could get first-time buyers’ hopes up, the future is unlikely to bring meaningful improvement to housing affordability.
Prices fall for the first time in a decade
The typical U.S. home value now stands at $357,107 after declining by 0.1% ($366) month over month in July, as measured by the raw Zillow Home Value Index (ZHVI). A more responsive, but also more volatile flavor of Zillow’s headline price index – monthly growth in the raw ZHVI – has relaxed since reaching a recent peak in April of 1.9% (a rate that would annualize to a whopping 25.1%), slowing to 1.2% growth (15.3% anualized) in May and 0.8% growth (9.7% annualized) in June.
Home values measured by raw ZHVI fell from June to July in 30 of the 50 largest metro areas, an increase from 13 metros the previous month. The largest monthly home value declines were in San Jose (-4.5%) and San Francisco (-2.8%, that’s -28.7% anualized) — the nation’s most expensive major markets — followed by Phoenix (-2.8%) and Austin (-2.7%), which saw the most extreme growth over the pandemic. Values increased the most from June in Miami (1.5%, a still aggressive 19% annualized rate), Richmond (1%, 12.1% annualized) and Memphis (0.9%, 11.2% annualized), although monthly growth is decelerating in these markets as well.
While the recent decline in prices is a notable development, the housing market is still far from a return to “normal” conditions. The current slowdown is prompted by the collision of extreme price growth during the early- and mid-pandemic with the sudden increase in mortgage rates since December – a combination that swiftly weakened would-be homebuyers’ ability to afford or qualify to purchase their next house. The nation’s typical home value is still up 16% year over year and 44.5% since July 2019, despite softer pricing in more recent months. Incorporate higher mortgage rates, and the typical mortgage payment has risen by more than 60% in just one year. While high prices plus higher mortgage rates have pushed some buyers from the market for now, those shoppers who are able to proceed suddenly face a much less competitive market, offering them more time to conduct their search and more options to consider.
Inventory increases continue as homes take longer to sell and sellers cut prices
Cooling competition among buyers has resulted in homes spending more time on the market before selling. While the typical home that goes under contract still does so in a historically short amount of time, this market velocity has slowed considerably from the rapid pace set earlier this year. Homes went pending in a median of 10 days in July – two days slower than the median pace in June. Homes lingering on the market continue to push for-sale inventory up, even as the rate of new homes entering the market slows. The number of active for-sale listings during the month increased by 5.1% in July from June. The increase was the fifth consecutive monthly uptick, with each month successively stronger (for the most part) than seasonally typical for the spring into summer shopping season. July’s monthly inventory lift at 5.1%, for example, dwarfs the 1% average for July during 2018 and 2019.
While the pool of inventory is increasing quickly, a more substantial increase in for-sale listings has been hindered by slowing new construction – home starts fell 9.6% in July from June – and general hesitation from would-be sellers. New for-sale listings of existing homes fell 13.6% month over month in July. A far bigger drop than is seasonally typical, the rate of new listings hitting the market has been slower than pre-pandemic norms since the beginning of the year. In July for example, 16.6% fewer new listings were put on the market than the average July from 2018 and 2019. Would-be sellers remain mindful of their ability (or lack thereof) to purchase their next home and rising mortgage rates have left many homeowners “locked in” to their existing interest rate. A massive wave of homeowners refinanced during the pandemic, either to benefit from historically low mortgage rates directly or to harvest their home’s equity with a cash out refinance. Cheap financing offered an opportunity for many to remodel their property to better meet their changing needs rather than move on. As a result, the recent increases in for-sale inventory are more reflective of reduced competition than any real increase in the overall options that buyers will have over their multi-month shopping experience. What’s more, this lack of new listing activity should continue to buoy home prices against persistent or deeper declines.
Active sellers and their agents are suddenly having to adjust to the changing market conditions. The share of for-sale listings with a price cut jumped to 18.6% in July – up 7.5 percentage points from July 2021 and more than double the share of listings that saw a price decrease in April. While the overall share of listings seeing a price reduction isn’t abnormal – in the years preceding the pandemic it wasn’t uncommon for one in five listings to adjust their price during the month to help the property sell in reasonable time – the sharp increase in this activity is a loud indicator of how sellers are shifting their pricing strategies to account for quickly changing market conditions, even if recent price reductions haven’t materialized into true bargains for home shoppers yet.
Rent growth continues to moderate
The rental market remains in a period of relative calm, continuing a trend that’s formed in recent months. The nation’s typical monthly rent in July was $2,031, up 0.6% from June and up 13.7% from a year prior. After a rapid run-up that peaked in February, and seeing higher volatility throughout the pandemic’s first year and a half, rent growth has moderated in recent months. That said, although growth is decelerating, the annual growth rate is still more than three times that of July 2019.
Among major metros, the most significant slowdowns in monthly rent growth since July of last year occurred in Las Vegas (from 3.6% to -0.2%), Phoenix (3.5% to -0.3%), Tampa (3.9% to 0.3%), and Austin (3.8% to 0.7%).
The Big Picture
The housing market is ultimately correcting for extreme pressure during the pandemic. However, challenges to new supply and strong long-run housing demand driven by massive younger generations aging into first-time home buying suggests that, as the slowdown continues to progress and competition and price pressures ease, enough buyers will be ready to move forward and turn the market back toward (hopefully healthier) positive price growth.
JULY 22, 2022
By Kerry Smith
Sales will weaken and for-sale inventory will grow, but it won’t do much to help affordability, Chief Economist Lawrence Yun said.
WASHINGTON – National Association of Realtors® (NAR) Chief Economist Lawrence Yun spoke before the U.S. Senate Committee on Banking, Housing and Urban Affairs as they dig deeper in an attempt to understand what’s happening in the U.S. housing market.
Yun told the committee that he doesn’t foresee a nationwide decline in home prices despite indications that price growth is set to slow. He testified that the potential for weaker sales should increase available for-sale inventory in some markets, but not enough to diminish persistent affordability constraints that, for many Americans, have kept homeownership out of reach for years.
“In the near term, I do not expect the situation to change appreciably,” Yun said Thursday. “Historic undersupply in the market, combined with continued demand, will likely drive ongoing issues with affordability for many Americans.
“Any short-term price adjustments, if they occur, will be less consequential compared to the immense longer-term housing affordability challenges we face as a country.”
Thursday’s hearing, Priced Out: The State of Housing in America, was recorded and can be viewed online.
The committee hearings come as the nation confronts a 6-million-unit housing shortage. The decades-in-the-making phenomenon has helped sustain year-over-year price growth for a record 124 consecutive months. A study of other circumstances influencing the market is also particularly compelling given COVID’s impact on U.S. housing and the more recent fluctuations in mortgage interest rates.
“When the Federal Reserve essentially went all-in in the early months of the pandemic … the decline in mortgage rates and the cautious reopening of the economy boosted housing demand,” said Yun. “The housing market always responds to changes in mortgage rates.”
Interest rates, which had been consistently in the 4-to-5% range in the decade preceding COVID-19, hovered near record lows of around 3% throughout much of 2020 and 2021. NAR’s most recent existing home sales report found that the average commitment rate for a 30-year, conventional, fixed-rate mortgage in June was up to 5.52%.
“Any increases in available inventory observed over the first half of this year have been offset by the corresponding increases in consumer costs,” Yun said on Capitol Hill, explaining that rate increases of roughly 2.5 percentage points have added about $800 per month to a median-priced house payment.
“This affordability crunch is felt most acutely as we move down the income scale and by minority households, given the current income distribution in America,” he continued. “That is why housing supply must be addressed to moderate home price and rent gains.”
© 2022 Florida Realtors®
May 19, 2022
Media Contact: Quintin Simmons 202-383-1178
- Existing-home sales fell for the third straight month to a seasonally adjusted annual rate of 5.61 million. Sales were down 2.4% from the prior month and 5.9% from one year ago.
- With slower demand, the inventory of unsold existing homes climbed to 1.03 million by the end of April, or the equivalent of 2.2 months of the monthly sales pace.
- The median existing-home sales price increased at a slower year-over-year pace of 14.8% to $391,200.
“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”
Read full NAR article
May 6, 2022 by Tim Ellis of Redfin
Homebuying is as competitive and costly as ever as soaring mortgage rates make the market less inviting for many would-be sellers.
The share of home sellers who dropped their asking price shot up to a six-month-high of 15% for the four weeks ending May 1, up from 9% a year earlier. The 5.9% increase is the largest annual gain on record in Redfin’s weekly housing data back through 2015. For homebuyers, the typical monthly mortgage payment skyrocketed a record 42% to a new high during the same period. Although a growing share of sellers are responding to the palpable drop in homebuyer demand by lowering their prices, sellers remain far outnumbered by buyers, so the typical home flies off the market at the fastest pace on record and for more than its asking price.
“Homebuyers continue to be squeezed in nearly every way possible, which is causing some to take a step back from the market,” said Redfin Chief Economist Daryl Fairweather. “Unfortunately for buyers hoping to find a deal as competition cools, sellers are pulling back even faster, which is keeping the market deep in seller’s territory. So even though price drops are becoming more common, most homes are still selling above asking price and in record time.”
Leading indicators of homebuying activity:
- Fewer people searched for “homes for sale” on Google—searches during the week ending April 30 were down 7% from a year earlier.
- The seasonally-adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—was down 1% year over year during the week ending May 1. It dropped 10% in the past four weeks, compared with a 1% decrease during the same period a year earlier.
- Touring activity from the first week of January through May 1 was 24 percentage points behind the same period in 2021, according to home tour technology company ShowingTime.
- Mortgage purchase applications were down 11% from a year earlier, while the seasonally-adjusted index increased 4% week over week during the week ending April 29.
- For the week ending May 5, 30-year mortgage rates increased to 5.27%—the highest level since August 2009.
Key housing market takeaways for 400+ U.S. metro areas:
Unless otherwise noted, the data in this report covers the four-week period ending May 1. Redfin’s housing market data goes back through 2012.
Data based on homes listed and/or sold during the period:
- The median home sale price was up 17% year over year—the biggest increase since August—to a record $396,125.
- The median asking price of newly listed homes increased 16% year over year to $408,458, a new all-time high.
- The monthly mortgage payment on the median asking price home rose to a record high of $2,404 at the current 5.27% mortgage rate. This was up 42%—an all-time high—from $1,688 a year earlier, when mortgage rates were 2.96%.
- Pending home sales were down 4% year over year, the largest decrease since mid-February.
- New listings of homes for sale were down 6% from a year earlier, and have been down from 2021 since mid-March.
- Active listings (the number of homes listed for sale at any point during the period) fell 18% year over year.
- 56% of homes that went under contract had an accepted offer within the first two weeks on the market, up from 54% a year earlier, down less than a percentage point from the record high during the four-week period ending March 27.
- 42% of homes that went under contract had an accepted offer within one week of hitting the market, up from 41% a year earlier, down less than a percentage point from the record high during the four-week period ending March 27.
- Homes that sold were on the market for a record-low median of 15.5 days, down from 21.2 days a year earlier.
- A record 56% of homes sold above list price, up from 47% a year earlier.
- On average, 3.7% of homes for sale each week had a price drop. Overall, 14.9% dropped their price in the past four weeks, up from 11.2% a month earlier and 9.1% a year ago. This was the highest share since mid-November.
- The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, rose to an all-time high of 102.8%. In other words, the average home sold for 2.8% above its asking price. This was up from 101% a year earlier.
Refer to our metrics definition page for explanations of all the metrics used in this report.
If you’re following along with the news today, you’ve likely heard about rising inflation. You’re also likely feeling the impact in your day-to-day life as prices go up for gas, groceries, and more. These rising consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile.
If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.
Homeownership Offers Stability and Security
Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.
Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. If you get a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”
So even if other prices rise, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.
Use Home Price Appreciation to Your Benefit
While it’s true rising mortgage rates and home prices mean buying a house today costs more than it did a year ago, you still have an opportunity to set yourself up for a long-term win. Buying now lets you lock in at today’s rates and prices before both climb higher.
In inflationary times, it’s especially important to invest your money in an asset that traditionally holds or grows in value. The graph below shows how home price appreciation outperformed inflation in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):
So, what does that mean for you? Today, experts say home prices will only go up from here thanks to the ongoing imbalance in supply and demand. Once you buy a house, any home price appreciation that does occur will be good for your equity and your net worth. And since homes are typically assets that grow in value (even in inflationary times), you have peace of mind that history shows your investment is a strong one.
If you’re ready to buy a home, it may make sense to move forward with your plans despite rising inflation. If you want expert advice on your specific situation and how to time your purchase, let’s connect.
- If you’re planning to buy or sell a home today, it’s important to be aware of common misconceptions.
- Whether it’s timing your purchase as a buyer based on home prices and mortgage rates or knowing what to upgrade or repair before listing your house as a seller, it takes a professional to guide you through those decisions.
- Let’s connect so you have an expert to help separate fact from fiction in today’s housing market.
Many consumers are wondering what will happen with home values over the next few years. Some are concerned that the recent run-up in home prices will lead to a situation similar to the housing crash 15 years ago.
However, experts say the market is totally different today. For example, Odeta Kushi, Deputy Chief Economist at First American, tweeted just last week on this issue:
“. . . We do need price appreciation to slow today (it’s not sustainable over the long run) but high price growth today is supported by fundamentals- short supply, lower rates & demographic demand. And we are in a much different & safer space: better credit quality, low DTI [Debt-To-Income] & tons of equity. Hence, a crash in prices is very unlikely.”
Price appreciation will slow from the double-digit levels the market has seen over the last two years. However, experts believe home values will not depreciate (where a home would lose value).
To this point, Pulsenomics just released the latest Home Price Expectation Survey – a survey of a national panel of over 100 economists, real estate experts, and investment and market strategists. It forecasts home prices will continue appreciating over the next five years. Below are the expected year-over-year rates of home price appreciation based on the average of all 100+ projections:
- 2022: 9%
- 2023: 4.74%
- 2024: 3.67%
- 2025: 3.41%
- 2026: 3.57%
Those responding to the survey believe home price appreciation will still be relatively high this year (though half of what it was last year), and then return to more normal levels over the next four years.
What Does This Mean for You as a Buyer?
With a limited supply of homes available for sale and both prices and mortgage rates increasing, it can be a challenging market to navigate as a buyer. But buying a home sooner rather than later does have its benefits. If you wait to buy, you’ll pay more in the future. However, if you buy now, you’ll actually be in the position to make future price increases work for you. Once you buy, those rising home prices will help you build your home’s value, and by extension, your own household wealth through home equity.
As an example, let’s assume you purchased a $360,000 home in January of this year (the median price according to the National Association of Realtors rounded up to the nearest $10K). If you factor in the forecast for appreciation from the Home Price Expectation Survey, you could accumulate over $96,000 in household wealth over the next five years (see graph below):
If you’re trying to decide whether to buy now or wait, the key is knowing what’s expected to happen with home prices. Experts say prices will continue to climb in the years ahead, just at a slower pace. So, if you’re ready to buy, doing so now may be your best bet for your wallet. It’ll also give you the chance to use the future home price appreciation to build your own net worth through rising equity. If you want to get started, let’s connect today.
March 23, 2022
- Millennials now make up 43% of home buyers – the most of any generation – an increase from 37% last year.
- Generation X bought the most expensive homes at a median price of $320,000.
- The largest share of buyers purchased in suburban areas and small towns.
- Eighty-seven percent of all buyers purchased their home through an agent.
WASHINGTON (March 23, 2022) – The share of millennial home buyers increased significantly over the past year. They are also the most likely generation to use the internet to find the home they ultimately purchase and most likely to use a real estate agent.
This is according to the latest study from the National Association of Realtors®, the 2022 Home Buyer and Seller Generational Trends report, which examines the similarities and differences of recent home buyers and sellers across generations.1 The NAR report found that the combined share of younger millennial (23 to 31 years old) and older millennial buyers (32 to 41 years old) rose to 43% in 2021, up from 37% the year prior. Almost two out of three younger millennials – 65% – found the home they ultimately purchased on the internet, a number that gradually decreases with older generations. Eighty-seven percent of all buyers purchased their home through an agent. This number was highest with younger millennials (92%) and older millennials (88%).
“Some young adults have used the pandemic to their financial advantage by paying down debt and cutting the cost of rent by moving in with family. They are now jumping headfirst into homeownership,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “While young buyers use new tech tools, they also use real estate agents at higher rates than other buyers to help find the right home and negotiate the terms of the transaction.”
Buyers from all generations agreed about the top reasons for using an agent: they wanted help finding the right home to purchase, negotiating the terms of sale and negotiating the price. The silent generation – those between the ages of 76 and 96 – as well as younger millennials were also more likely to want their agent to help with paperwork.
Those between the ages of 42 and 56 – Generation X – had the highest median household income at $125,000. They bought the most expensive and second-largest homes at a median price of $320,000 and size of 2,300 square feet, respectively. Older millennials purchased the largest homes at 2,400 square feet, and the silent generation bought the smallest at 1,800 square feet. Across all generations, the largest share of buyers purchased in suburban areas (51%) and small towns (20%).
“Not surprisingly, younger generations typically upgraded in size and price while older generations purchased more affordable properties,” Lautz said. “The majority of all generations bought single-family homes at higher shares than other housing types, and younger buyers dispelled the myth that they are flocking to city centers. When it comes to location, the suburbs and small towns are the places to buy.”
Three out of five of recent buyers – 60% – were married couples, 19% were single females, 9% were single males and 9% were unmarried couples. The highest share of unmarried couples were younger millennials at 21%. Single-female buyers significantly outnumbered single-male buyers across all generations. The highest percentage of single-female buyers was in the silent generation at 27%.
The study also found that first-time home buying among younger generations is on the rise, with over 4 out of 5 younger millennial home buyers – 81% – purchasing for the first time. Just under half – 48% – of older millennial buyers were first-time buyers.
“While the pandemic allowed many potential buyers to save for a down payment, demographics played a key role,” Lautz said. “There is a wave of millennial buyers who are aging into the traditional first-time buyer age range.” Boomers made up the largest share of home sellers at 42%, although the percentage of millennial sellers is on the rise, increasing from 22% to 26% over the past year. Lautz noted that for the first time it is now more likely for an older millennial to be a first-time seller than a first-time buyer.
“Many factors can contribute to the decision to buy or sell a home,” Lautz continued. “For all home buyers under the age of 57, the main driver was the desire to own a home of their own. Among those 57 and older, the desire to be closer to friends and family was the top reason, followed by the desire for a smaller home.”
Younger generations tended to move shorter distances when relocating. Among all ages, there was a median of 15 miles from the homes where recent buyers previously resided and the homes that they purchased. That distance was lowest among younger millennials (10 miles) and highest among older boomers (35 miles).
Overall, buyers expected to live in their homes for 12 years, down from 15 years last year. For younger millennials and the silent generation, the expected duration was only 10 years, compared to 20 years for younger boomers.
Debt continues to be a significant barrier for many when attempting to buy a home. Both Generation X and younger boomers delayed purchasing a home for five years due to debt, the longest of all age groups. Younger millennials had the highest share of student debt at 45%, with a median amount of $28,000. Twenty-seven percent of younger millennials cited that saving for a down payment was the most challenging step in the home buying process, compared to just 1% for older boomers. Nearly one in three – 29% – of younger millennials received down payment help in the form of a gift or loan from a friend or relative and 24% lived with friends or family, directly saving on rental costs.
Despite this hurdle, a vast majority of buyers have a positive outlook on homeownership. Eighty-six percent of all buyers reported they viewed a home purchase as a good investment, and roughly nine out of 10 people – 89% – said that they would recommend their agent for future services.
“A truth across all generations is that homeownership is seen as a cornerstone of the American dream,” said NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “From building personal wealth and fostering communities, to strengthening social stability and driving the national economy, the value of homeownership is indisputable. Home buyers continue to turn to Realtors® as a trusted resource for helping find the right home and successfully navigating this increasingly complex process.”
The National Association of Realtors® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.
# # #1 Survey generational breakdowns: Generation Z: (ages 18-22); younger Generation Y/millennials (ages 23-31); older Generation Y/millennials (ages 32-41); Generation X (ages 42-56); younger boomers (ages 57-66); older boomers (ages 67-75); and the silent generation (ages 76-96).