Weekly market update
National home values are still technically increasing on a double-digit basis when compared to last year, although that annualized price growth is happening at a slower pace than it was this spring.
Affordability constraints have set in motion a controlled demolition of the power dynamics within the housing market, although sellers remain less eager to sell than last year. Homes are selling less quickly than last year as new listing count and price growth stalls.
The real estate market is not getting any help from recent Fed meetings, nor mortgage rates. Last week the 30-year fixed cracked 7 percent for the first time all year. The latest news from the Fed meeting indicated that it’s unlikely interest rates will see any near-term relief as the Fed plans to increase rates even further as high inflation persists.
It’s not all bad news, however – when we zoom out to pre-pandemic days, homes are still selling faster than at any other time in recent history, and year-over-year price appreciation remains in double-digits.
Home list prices
In spite of softening buyer demand, the median list price of homes sits at $435,000, an increase of more than 13 percent from this time last year. While 13 percent is strong annualized appreciation, list prices are showing signs of weakening demand as price growth has decelerated nationally from the peak high of $459,000 in June — a 5 percent decline in just 90 days from their all-time high.
Listing prices in Miami, Memphis, and Milwaukee grew the most of the major metros seeing prices increase by as much as +27.0 percent. It’s a much different story for Western metros as they experience the largest increase in the frequency of price reductions (+15 percent), followed by the South with +10.7 percent.
The increase in price reductions is greatest in Phoenix (+32.3 percent), Austin, TX +27.4 percent, and Las Vegas (+27.4 percent). Despite the weakening market on the West coast, inventory of homes actually declined by 6 percent in major Northeastern metro areas, while the Midwest has seen a modest +5 percent more listings.
Those single-digit inventory changes are vastly different from the Western region, which has seen active listings grow by +64 percent YOY.
List prices aren’t getting any help from the erratic mortgage rate market. Last week turned out to be even more volatile than the week prior as interest rates climbed above 7 percent for the first time in nearly two decades.
Today’s mortgage rate is more than double the rate of last year, which significantly impacts the willingness of would-be sellers to trade up. Today, a median home buyer can expect to pay $865 more each month than last year’s buyer.
While the rapid increase in interest rates is creating challenges for buyers, it’s creating hell for the mortgage industry. Nearly 30 percent fewer purchase applications are being made today than this time last year. Even more anemic is the refinance application market.
Today, homeowner refinance applications are down nearly 85 percent. It’s hard to imagine that getting much worse; however, if the forecast for further rising rates occurs, the refinance market won’t get any better any time soon.
In case there was any confusion before, today we’re all being reminded that the strength of housing is an interest rate-sensitive sector and that not all regions experience the same trends and bold headlines equally. Every week we experience significant regional and market variations, which is why it is more important than ever for agents to be the local economist of choice.
Even though most economic headlines today are bold and negative, I remain confident that the long-term outlook for housing and agents is as positive as ever. As soon as the economy stabilizes and rates stabilize, sidelined buyers and sellers will return to the housing market.
The combination of demographic trends, stalled-out housing starts, and a structural shortage of existing homes all point to elevated demand for homeownership for years to come.
As an agent, be the voice of calm and expertise in your market.
Control what’s controllable, and remember it’s never as good or as bad as it seems. Even in the worst times, people you know still buy and sell homes with a real estate agent. Will you be in a relationship with them, and will you add enough value to earn that buyer or seller this week? Remember, the market never determines your outcome; it only determines your strategy.
Editor’s note: Altos Research is credited for most of the statistical data provided in this outlook series.
Eric Forney is the Director of Industry for Livian. For more information, visit livian.com.