The Housing Market Is an Economic Bellwether The

Transcript:The Housing Market Is an Economic Bellwether The:
The Housing Market Is an Economic Bellwether The old saying was, “As goes General Motors, so goes the economy,” but the housing market is probably a better indicator of the overall economy today. New and existing home inventory has been tight, which increases prices, reducing those who can afford a home. According to Redfin data, May appears to be the month when the hot real estate market started to cool. May home sales decreased 3% from April, which historically was the only May with a decrease, except for May 2020, caused by the full force of the pandemic. May 2022 inventory was even less than May 2021, but home sellers have a bigger asset, with a substantial accumulation of home equity and homes financed at very low interest rates. Plus, the market for these home sellers will be less competitive. The Market Ahead In its updated 2022 Housing Market Forecast, Realtor.com® declared inflation and the Federal Reserve’s response with higher interest rates will have the greatest effect on the housing market during the last six months of 2022 and likely into 2023. The typical summer selling season will be very subdued, but transactions may increase during the fall after sellers and buyers have had an opportunity to assess the broader economic conditions as well as their financial and employment situations. Realtor.com® predicts mortgage rates will continue to increase, but at a slower rate. Some buyers will want to buy a home immediately for the lowest rates now, but the median-price monthly mortgage payment of $1,980 during May will cause many buyers to wait. Chasing the Mortgage Market The Mortgage Bankers Association’s (MBA) May 2022 Builder Application Survey revealed mortgage applications for new home purchases decreased 5% YOY. May’s average loan was $430,855, slightly less than April’s, which had been the largest during the last 15 months. For the first week of June 2022, the MBA reported mortgage application volume had decreased 52.7% YOY. Of those applications, those from homebuyers increased 8% during the week, but decreased 16% YOY. During May, 75.8% of mortgage loan applications were conventional loans, 13.6% were FHA loans, 10.4% were VA loans and 0/2% were RHS (Rural Development Loan)/USDA (US Department of Agriculture). Home Builders’ Update Unsurprisingly, as higher inflation and mortgage rates have suppressed home buyer traffic, the demand for new single-family homes has decreased, resulting in more builders being less confident about future market