Real estate has been hot, with historically low rates, limited inventory and sharply rising home prices being the hallmark of the market for the last two years. Recent Fed moves on rates and market data analysis may be revealing some headwinds in this sector. Let’s take a look.
Mortgage applications are at their lowest level in 22 years, according to the latest weekly survey from the Mortgage Bankers Association, which has been conducting this survey since 1990. Rising rates have already taken a bite out of the number of refinancing applications submitted, and the survey shows that new purchase demand is also starting to slow. These trends have not hit the pricing of housing as of yet– while interest rates trend upwards and mortgage demand falls, home prices still continue to rise, partially due to constricted inventory. Add to it, the median price of existing homes rose to a record $391,200 in April, according to the National Association of Realtors. This figure is up 14.8% from April 2021 and marks 122 consecutive months of year-over-year increases.
How are all these statistics affecting home sales?
New home sales dropped 16.6% according to the latest Commerce Department data, the lowest adjusted annual rate since April 2020 and the biggest monthly decline since 2013. New home sales are tracked when contracts are signed, and are therefore a leading indicator for the housing market. Existing home sales are tracked when the purchase closes and have seen sales fall for three straight months. Even those seeking luxury housing- defined as the top 5% of the market- appear to be stepping back. Luxury home sales were down 18% over a three month period ending April 30th, the biggest drop since the start of the pandemic, although prices are holding steady– at least for now.
Will these trends affect housing prices? That remains to be seen, but it appears that headwinds are blowing.
Read more about mortgage demand and the rate of home sales below from CNBC and the Wall Street Journal. What do you see in your local real estate market? I’m interested to know!
~ Brian Kasal- The Leadership Matrix
Click here- Mortgage demand falls to the lowest level in 22 years amid rising rates and slowing home sales (CNBC)
Click here- Mortgage-Application Index Falls to Lowest Level in 22 Years (WSJ)
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