This was sent to me and I thought it contained some great information for all of you to read.
(YoY =Year over Year, MoM = month over month)
It was a rough week for would-be buyers and real estate professionals: 30-yr mortgage
rates approached 7.5%, existing home sales dropped to 4.07 million units SAAR, and new
purchase mortgage applications fell to 1995 levels. But keep your head up, because Life
Happens and Rates Happen too!
Average 30-year mortgage rates hit a new, two-decade high of 7.49% on August 22,
surpassing the previous peak of 7.37% on October 20, 2022. The last time rates were this
high was April 2002! (And 21 years ago, median home prices were 60% lower than they
are today.) [Mortgage News Daily / S&P Global Case-Shiller Index]
Higher rates hit mortgage demand. According to the Mortgage Bankers Association,
the number of applications for new purchase mortgages last week fell 7% week-over-
week, and 30% year-over-year. That’s bad enough, but it’s also the lowest level of new
purchase applications since 1995.
July existing home sales fell 2.2% MoM (and 17% YoY) to a seasonally-adjusted,
annualized rate of 4.07 million units. That was both below expectations, and very similar
to the (weak) figures achieved in December 2022 (4.03 million) and January 2023 (4.00
million). As a reminder, the last time we had annual existing home sales of ~4 million
was 2008. [NAR]
The median sales price for existing homes in July rose 0.7% YoY to $406,700. While
that was down 0.8% MoM, price declines are pretty normal for this time of year.
Inventory rose 3.7% MoM to 1.11 million, but a large share of that were homes that have
already gone under contract . [NAR]
In contrast, July new home sales rose 4.4% MoM (and 32% YoY) to a seasonally-
adjusted, annualized rate of 714,000 units — the highest figure in 17 months. It’s also the
8th-straight month that the 3-month moving average of new home sales has climbed.
[Census Bureau] A lack of existing home inventory is sending would-be buyers to show
homes, and the greater financial flexibility of builders (rate buydowns, incentives) is
helping to close the deal.
The median sales price for new homes in July rose 5.1% MoM (but fell 8.7% YoY) to
$436,700. That’s actually the first MoM increase since February 2023. However, this
number is heavily influenced by the “mix” of homes sold. Over the last year, builders
have been redrawing plans to market smaller/more affordable homes (skewing ASPs
lower). But more recently, there has been a recovery in the West region ($$$$$) new
home sales (skewing ASPs higher). [Census Bureau]
The Realtor’s Confidence Index for July was mixed: the outlook for buyer/seller
traffic declined for the 3rd-straight month, but competition levels remained very high:
74% of homes sold in <1 month, 35% sold above the listing price and there was an
average of 3 bids per home sold. [NAR]
Rental rates dropped for the 3rd-straight month. Rents are only down 1% YoY (vs.
+25% over the last 4 years), but with supply (+27% YoY increase in multifamily units)
and vacancy rates (6.3%) rising, it’s likely that rental rates will continue to drift lower
over the remainder of 2023. Miami, FL came out as the “least affordable” rental market;
Oklahoma City, OK as the “most affordable”. [Realtor.com]
Zillow revised up its home price growth forecast. The portal now expects +5.8% YoY
median home price growth for 2023 (up from +5.5% YoY previously), and +6.5% price
growth over the next 12 months (July 2023 to July 2024). “Tight inventory conditions
continue to place upward pressure on home prices, despite persistent affordability
challenges.” The portal sees existing home sales falling 17% YoY to 4.2 million units in
2023. [Zillow]
New vs. old. Consistent with comments from the National Association of Homebuilders,
Redfin’s research team said that new homes currently represent 31% (nearly one-third) of
available homes for sale. Pre-pandemic, that figure was ~17% in the second quarter. In El
Paso, TX, newly built homes were 52% of inventory; in Honolulu, HI and San Diego,
CA, just 3%. [Redfin]
Small-scale property investors are having a big impact. According to data from
CoreLogic, investors purchased 27% of the homes sold in 2Q 2023 (up from 15–20%
pre-pandemic). But we’re not talking about Blackrock, here. Small investors (3–9
properties), represented 47% of all investor purchases — the highest level seen since
2011. [CoreLogic]
Realtors are Losing Confidence; but Still a Seller’s Market!
The Realtor’s Confidence Index for July revealed a housing market that is slowing (in
terms of transactions and outlook), but that remains very competitive for what’s
available:
o Only 11% of respondents expect an increase in seller traffic over the next 3
months.
o Homes that sold in July were on the market for ~20 days (vs. 18 in June)
o 74% of the homes sold in July found a buyer in <1 month (was 76% in June).
o The average number of bids per home sold fell from 3.5 in June to (a still high) 3.0
in July. In July 2022, the figure was 2.8.
o And 35% of homes sold in July were transacted above the listing price (up from
33% in June) — see graph below. Keep in mind that the 40–60% figures for 2021
and early 2022 were unusually high.
o 26% of buyers waived the inspection contingency. That’s the highest figure since
July 2022.
They Said It
“Applications for home purchase mortgages dropped to their lowest level since April
1995, as homebuyers withdrew from the market due to the elevated rate environment and
the erosion of purchasing power. Low housing supply is also keeping home prices high in
many markets, adding to the affordability hurdles buyers are facing.” — Joel Kan, MBA’s
Deputy Chief Economist
“Two factors are driving current sales activity — inventory availability and mortgage
rates. Unfortunately, both have been unfavorable to buyers.” — Lawrence Yun, NAR’s
Chief Economist
I hope this gives you a view of the current real estate market and can help you look at
what you may want to do. You can always give me a call or send me an email and I will
help guide you as well.
Mary Cockburn
505-639-2090
MaryCockburn.Realtor@gmail.com
