This week, Chief Economist Danielle Hale discusses what small business optimism, consumer and producer inflation data, and retail sales data signal about the U.S. economy. She also highlights what these data imply for the Fed’s likely path forward.
0:10 – Business optimism trends
0:25 – Inflation trends
1:24 – Mortgage rates
1:40 – Construction trends
2:11 – Real estate listings trends
Yes, You Should Buy a House This Year
FEBRUARY 6, 2023
By Brian O’Connell
Buyers who wait for more inventory, lower interest rates or something else may never own a home. And given history, 2023 is a pretty good year to commit.
McDONOUGH, Ga. – Mortgage rates are finally falling across the fruited plains, with rates in the 5.6% range for a 30-year fixed mortgage not uncommon in early February. Couple that with declining home prices and an uptick in the residential real estate inventory, and it looks like the great American homebuyer finally has leverage after two years of home sellers calling the shots.
“2023 will be better for buyers,” said Magellan Realty LLC mortgage broker Alex Caras. “As the Federal Reserve keeps interest rates at the current levels, the buying market will start to open up more, reducing competition for existing homes.”
Construction woes brought on by the supply chain issues are also being eased, “so more new homes will be on the market,” Caras added.
Buyers getting an edge
Those are the macro reasons why U.S. homebuyers have a leg up going into the busy spring and summer real estate season. Buyers should have an edge thanks to these five realities, as well.
1. Mega-high prices are a thing of the past. “The price climbing we saw in 2020 and 2021 has hit a plateau,” said Guaranteed Rate Mortgage Senior Vice President of Lending Jennifer Beeston. “It took a good chunk of 2022 for many sellers to realize 2021 is long gone and they needed to be more realistic with the pricing and condition of their home.”
In addition, buyers see a return to a more balanced market in 2023. “Now, buyers actually can get inspections and can negotiate prices,” Beeston said. “That wasn’t the case with the drama of 2022.”
2. The Federal Reserve is hitting the brakes. The U.S. Federal Reserve is slowing down its policy of substantial interest rate increases that were prevalent in 2022.
“This means more buyers will be able to purchase a home at a lower rate,” Caras told TheStreet. “Home prices have been reduced to a more reasonable level as well, and this will continue for much of 2023 as the competition to purchase homes has lessened.”
3. The pandemic is over. Buyers will have an opportunity to negotiate again in 2023 and even more so in 2024.
“We’re likely going to see some distressed sales and sellers will need to become more realistic,” said Pulse International Realty founder Rena Kliot. “The spike in home prices is not sustainable and was in direct correlation to the pandemic. During the dark days of the pandemic, there were many desperate and emotional purchases.”
4. Changing residential market tastes. While single-family homes will continue to be popular, the U.S. condo market will return in full swing.
“Life as we knew it seems to be returning and that is drawing people back to urban dwelling – especially with condo living,” Kliot said. “Condo prices are now also more affordable or negotiable than single-family residences.”
5. Strong signals from the stock market. Across the U.S., there seems to be a general sigh of relief the worst has passed.
“Inflation has peaked, interest rates have peaked, and home prices have peaked for now,” said Elegran Real Estate managing director Jared Antin. “The stock market – notably the tech-heavy NASDAQ – has seen a significant rebound thus far in 2023, which instills a certain level of confidence in the consumer.”
The falling market through much of 2022 had the opposite effect, reducing consumer appetite for a new home with rising interest rates and inflation.
“Now, a more positive consumer base will help fuel a rebounding real estate market,” Antin noted.
One of the most important things a would-be home buyer should do right now is to stay hopeful and be prepared.
“Don’t assume that just because you’re having trouble finding a home now, or can’t afford a house at today’s rates, that you’ll never be a homeowner,” LendingTree senior economist Jacob Channel. “If you have patience and are willing to compromise on some things, like how many bathrooms your house needs to have or what specific neighborhood you require, you can make your dream of homeownership a reality.”
Additionally, being prepared financially when a good deal arises is critical right now.
“Be diligent about saving money and make all of your monthly payments on time to protect your credit,” Chanel told TheStreet. “Also, shop around and compare mortgage offers from different lenders or look into different mortgage loan programs – like FHA or USDA backed loans – so you can make the home buying experience more affordable.”
Copyright © 2023 Henry Daily Herald. All rights reserved.
NAR: 3Q Home Prices Up in 98% of Metros
By Kerry Smith -NOVEMBER 11, 2022
Home prices rose 8.6% in 3Q, with 46% of metros seeing double-digit price growth – a drop from 80% in 2Q. Of the top 10 high-price-increase metros, 7 are in Fla.
WASHINGTON – An overwhelming majority of metro markets saw home price gains in the third quarter of 2022, according to the National Association of Realtors® (NAR). That increase was in spite of rising mortgage rates that approached 7% and declining sales.
Of the 185 metros NAR tracks, 46% had double-digit price increases, though that’s down from 80% in the second quarter.
The national median single-family existing-home price climbed 8.6% year-to-year to $398,500. While still a notable price increase, it’s down from the 14.2% recorded in the previous quarter.
“Much lower buying capacity has slowed home price growth and the trend will continue until mortgage rates stop rising,” says NAR Chief Economist Lawrence Yun. “The median income needed to buy a typical home has risen to $88,300 – that’s almost $40,000 more than it was prior to the start of the pandemic back in 2019.”
Among the major U.S. regions, the South registered the largest share of single-family existing-home sales (44%) and the greatest year-over-year price appreciation (11.9%) in the third quarter. Prices were up 8.2% in the Northeast, 7.4% in the West, and 6.6% in the Midwest.
Fla. has 7 of top 10 metros for price growth
- North Port-Sarasota-Bradenton – 23.8%
- Lakeland-Winter Haven – 21.2%
- Myrtle Beach-Conway-North Myrtle Beach, S.C.-N.C. – 21.1%
- Panama City – 20.5%
- Deltona-Daytona Beach-Ormond Beach – 19.6%
- Port St. Lucie – 19.4%
- Greenville-Anderson-Mauldin, S.C. – 18.9%
- Kingsport-Bristol-Bristol, Tenn.-Va. – 18.8%
- Tampa-St. Petersburg-Clearwater – 18.8%
- Ocala (18.8%
10 most expensive markets in the U.S.
- San Jose-Sunnyvale-Santa Clara, Calif. – $1,688,000; 2.3%
- San Francisco-Oakland-Hayward, Calif. – $1,300,000; -3.7%
- Anaheim-Santa Ana-Irvine, Calif. – $1,200,000; 9.1%
- Urban Honolulu, Hawaii – $1,127,400; 7.6%
- San Diego-Carlsbad, Calif. – $900,000; 5.9%
- Los Angeles-Long Beach-Glendale, Calif. – $893,200; 3.8%
- Boulder, Colo. – $826,900; 7.5%
- Naples-Immokalee-Marco Island – $746,600; 16.7%
- Seattle-Tacoma-Bellevue, Wash. – $741,300; 4.6%
- Boston-Cambridge-Newton, Mass.-N.H. – $698,900; 6.2%
“The more expensive markets on the West Coast will likely experience some price declines following this rapid price appreciation, which is the result of many years of limited home building,” Yun says. “The Midwest, with relatively affordable home prices, will likely continue to see price gains as incomes and rents both rise.”
Higher cost for monthly payments
In the third quarter of 2022, stubbornly high home prices and increasing mortgage rates reduced housing affordability. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $1,840. That’s a marginal increase from the second quarter ($1,837) but a significant year-to-year jump of $614 – or 50%.
Families typically spent 25% of their income on mortgage payments, down from 25.3% in the prior quarter, but up from 17.2% one year ago.
“A return to a normal spread between the government borrowing rate and the home purchase borrowing rate will bring the 30-year mortgage rates down to around 6%,” Yun says. “The usual spread between the 10-year Treasury yield and the 30-year mortgage rate is between 150 to 200 basis points, rather than the current spread of 300 basis points.”
First-time buyer challenges
First-time buyers looking to purchase a typical home during the third quarter of 2022 continued to feel the impact of housing’s growing unaffordability. For a typical starter home valued at $338,700 with a 10% down payment loan, the monthly mortgage payment rose to $1,808 – nearly identical to the previous quarter ($1,807) but an increase of almost $600 (49%), from one year ago ($1,210).
First-time buyers typically spent 37.8% of their family income on mortgage payments, up from 36.8% in the previous quarter. A mortgage is considered unaffordable if the monthly payment (principal and interest) amounts to more than 25% of the family’s income.
A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 59 markets, up from 53 in the prior quarter. Yet, a family needed a qualifying income of less than $50,000 to afford a home in 17 markets, down from 23 in the previous quarter.
© 2022 Florida Realtors®
First-time Buyers Back Despite Challenges
They now make up 45% of all homebuyers, up from 37% last year, even as affordability issues persist. Repeat buyers may have pulled back due to rising interest rates.
CHARLOTTE, N.C. – First-time home buyers have returned to the housing market, and those who can afford a home are finding success after years of setbacks. The share of buyers purchasing a home for the first time has rebounded to pre-pandemic levels.
First-time buyers now represent 45% of all buyers, up from 37% of buyers surveyed last year, according to Zillow’s 2022 Consumer Housing Trends Report. If they can overcome affordability challenges, first-time buyers could be well positioned to continue increasing their share in today’s shifting market, with more options and time to decide on the right home.
The share of first-time buyers plummeted during the pandemic amid rapidly rising home values and tough competition, even with high demand coming from the large millennial generation. Zillow research found younger, likely first-time shoppers were losing out to older, repeat buyers who were able to tap the equity in their existing homes and use cash to make a stronger offer. A Zillow survey found younger buyers were more likely to report losing to an all-cash buyer at least once, as was the case for 45% of Gen Z and 38% of millennial buyers, compared to 30% of all buyers.
“First-time buyers now appear to be making relative gains as high mortgage interest rates disproportionately encourage current homeowners to stay put,” said Zillow population scientist Manny Garcia. “The flow of homes into the market is slowing, suggesting homeowners are likely comparing their current low mortgage rate to today’s rates and deciding not to move. While rising mortgage rates are hurting affordability for all buyers, first-time buyers may be less deterred by higher rates because they’re comparing a monthly mortgage payment to what they’re paying in rent.”
First-time buyers are making up a larger share of a smaller pie. Newly pending home sales were down 29% in August, compared to a year prior, as buyers struggle to keep up with higher home prices and interest rates. Home values remain 14.1% higher than last year, even after two consecutive month-over-month declines. When combined with rising mortgage interest rates, the typical monthly payment on a home is nearly 60% higher today than it was a year ago.
Recent Zillow research finds those affordability challenges have driven up demand for the lowest-priced homes in each market. While there are fewer buyers overall, first-time buyers may find more competition for starter homes.
The silver lining is that today’s much-needed market rebalancing has the potential to especially benefit first-time buyers, who have the flexibility to shop without trying to time the purchase of their new home with the sale of an existing home. Listings typically lingered 16 days on the market in August before going under contract, compared to eight days in June, meaning buyers have twice as much time to decide on a home compared to this time last year.
First-time buyers may also have more bargaining power as a growing number of sellers drop their prices. The share of listings with a price cut grew to roughly 28% in August, according to Zillow’s latest monthly market report.
As the market changes, aspiring first-time buyers may need to change their approach. These five tips are a good starting point:
- Understand what’s affordable. As mortgage interest rates fluctuate, aspiring buyers can start with a mortgage calculator to understand what they can realistically afford on a monthly basis. Take into account some of the hidden costs of homeownership, such as property tax, insurance and HOA dues, which can add up to more than $750 per month. But it’s always best to leave some wiggle room in the budget for unexpected maintenance projects and emergency repairs. First-time shoppers should also explore down payment assistance programs they may qualify for.
- Finance first. First-time buyers can gain a competitive edge by getting pre-approved for a mortgage. A Zillow survey finds 86% of sellers prefer a buyer who has been pre-approved, as opposed to pre-qualified, for a mortgage. This financial check gives sellers more certainty that a buyer will close on time, and it allows buyers to make a stronger, faster offer the minute the right home hits the market. Buyers can start the pre-approval process online. Don’t hesitate to try, try, try again. Nearly half of all first-time buyers (47%) are denied a mortgage at least once before ultimately getting approved.
- Hire the right agent. An experienced agent will have a finger on the pulse of their local market and know all the changes happening in it, and they can help buyers make strategic decisions to win. They’ll know when to come in with an offer under list price or when to expect a bidding war. Buyers should plan on interviewing their top candidates and asking the right questions.
- Shop smarter with tech. New real estate technology can help first-time buyers make faster, smarter decisions. Virtual 3D Home tours and interactive floor plans give shoppers a more authentic experience of a home, allowing them to quickly narrow down their options and tour fewer homes in person.
- Keep the contingencies. With less competition, first-time buyers should have the leverage to include important contingencies in their offers that could potentially save them a lot of money in the long run. An inspection contingency can identify major structural, mechanical or safety issues that could be extremely costly to repair and cause buyer’s remorse. A financing or appraisal contingency will ensure a buyer can walk away with their earnest money if a home fails to be appraised for the offer price or if their financing falls through.
Copyright © 2022 BridgeTower Media and © 2022, The Mecklenburg Times (Charlotte, NC). All rights reserved.
Weekly Market Report: Week Ending Oct. 16
Access this weekly report for real-time data on residential market activity across the Bright MLS footprint.
October 17, 2022 Lisa Sturtevant, PhD
Here are the highlights for the week ending October 16, 2022:
- Inventory continues to increase throughout the Bright footprint. The average number of active listings during the week ending October 16 was up 17.5% compared to the same week a year ago. Active listings edged up 0.9% compared to last week, which is the second weekly increase in a row. Despite these increases, overall supply across the region remains very low.
- Market activity is still below 2019 levels as buyers and sellers continue to remain on the sidelines. On the buyer side, both closed sales and new purchase contracts were down significantly compared to last year at this time and were even lower than before the pandemic. Closed sales this week were about 14% lower than the same week during 2019, while the number of new purchase contracts tracked 22% lower than during the same week in 2019.
- There was a slight uptick in both new purchase activity and new listings compared to a week ago. Typically, both the number of new purchase contracts and new listings decline during the second week of October. This year, however, there were slight increases, with new purchase contracts 2.1% higher than a week ago and new listings up 3.0% week-to-week. These weekly increases could indicate some buyers and sellers are starting to act in anticipation of higher mortgage rates later this fall.
- Homes are still selling relatively quickly. The median days on market was 15 during the week ending October 16, which is up four days compared to last year and is one day longer than a week ago. The median days on market is still much lower than 2019, when homes typically took 25 days to sell.
As the Federal Reserve raised its key interest rate Wednesday, what does it mean for home sellers and buyers?
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.
Fed Fights Inflation: Boosts Interest Rates 1/4 Point
By Christopher Rugaber
The expected interest-rate increase will raise short-term borrowing costs for things like credit cards, and it often has an indirect impact on mortgage rates.
WASHINGTON (AP) – The Federal Reserve launched a high-risk effort Wednesday to tame the worst inflation since the 1970s, raising its benchmark short-term interest rate and signaling potentially up to seven rate hikes this year.
The Fed’s quarter-point hike in its key rate, which it had pinned near zero since the pandemic recession struck two years ago, marks the start of its effort to curb the high inflation that has followed the recovery from the recession. The rate hikes will eventually mean higher loan rates for many consumers and businesses.
The central bank’s policymakers expect inflation to remain elevated and to end 2022 at 4.3%, according to updated quarterly projections they released Wednesday. That’s far above the Fed’s 2% annual target. The officials also now forecast much slower economic growth this year: 2.8%, down from its 4% estimate in December.
Chair Jerome Powell is steering the Fed into a sharp U-turn. Officials had kept rates ultra-low to support growth and hiring during the recession and its aftermath. As recently as December, Fed officials had expected to raise rates just three times this year. Now, its projected seven hikes would raise its short-term rate to 1.875% at the end of 2022. It could increase rates by a half-point at future meetings.
Fed officials also forecast four additional hikes in 2023, boosting its benchmark rate to 2.8%. That would be the highest level since March 2008. Borrowing costs for mortgage loans, credit cards and auto loans will likely rise as a result.
Powell is hoping that the rate hikes will achieve a difficult and narrow objective: Raising borrowing costs enough to slow growth and tame high inflation, yet not so much as to topple the economy into recession.
Yet many economists worry that with inflation already so high – it reached 7.9% in February, the worst in four decades – and with Russia’s invasion of Ukraine driving up gas prices, the Fed may have to raise rates even higher than it now expects and potentially tip the economy into recession.
By its own admission, the central bank underestimated the breadth and persistence of high inflation after the pandemic struck. Many economists say the Fed made its task riskier by waiting too long to begin raising rates.
Since its last meeting in January, the challenges and uncertainties for the Fed have escalated. Russia’s invasion has magnified the cost of oil, gas, wheat and other commodities. China has closed ports and factories again to try to contain a new outbreak of COVID, which will worsen supply chain disruptions and likely further fuel price pressures.
In the meantime, the sharp rise in average gas prices since the invasion, up more than 60 cents to $4.31 a gallon nationally, will send inflation higher while also probably slowing growth – two conflicting trends that are notoriously difficult for the Fed to manage simultaneously.
The economy’s steady expansion does provide some cushion against higher rates and more expensive gas. Consumers are spending at a healthy pace, and employers keep rapidly hiring. There are still a near-record 11.3 million job openings, far outnumbering the number of unemployed.
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.