This will go down as one of the most challenging years for non-owners who would like to enter the market to begin building equity. Livian’s Eric Forney offers insight and analysis as you navigate the challenges ahead.

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Weekly overview

Homebuyers have more on-market options compared to this time last year, but some of it may be the stale leftovers that they’ve swiped through for weeks. Active inventory has improved each week recently, however, sellers continue to refrain from listing at the same frequency they did last year.

Seasonal trends of slowing demand coupled with a rebalancing of buyer-seller power dynamics mean that homes are sitting on the market incrementally longer each week.

Buyers and sellers aren’t getting any help from the Federal Reserve or from the broader economic market, as last week’s labor market reported strong employment numbers and white-hot inflation data.

Forty-year highs in inflation that continue to outpace wage growth likely mean that today’s high interest rates will continue climbing even higher than 7 percent in the coming weeks; this will cause an even further strain on would-be buyer affordability in many markets.

For these reasons, 2022 will go down as one of the most challenging years for non-owners who would like to enter the market to begin building equity. The first half of the year was marked by intense competition and rapidly rising home prices while the back half of the year is plagued by the barrier of rapidly decreasing affordability.

Those would-be first-time buyers aren’t getting any breaks from the tightening credit markets nor from sellers who continue to watch from the sidelines in their high-equity homes.

Sellers and list prices

Last week, the median active list price fell by a meager $1,000. List prices continue to exceed last year’s level by double digits, marking more than 40 consecutive weeks at a double-digit pace. 

The median list price for active homes sits at $434,000 this week, while the median list price for new listings is well below that at $385,000. Sellers are continuing to increase the frequency of price reductions, as nearly 42 percent of all listings have experienced at least one price reduction.

The luxury market is seeing a dip in median home prices however homes in the lower half of the market’s price band are still seeing a slight increase nationwide — another reason it’s critical to be the local economist of choice when appropriately pricing homes in your market.

New listings — a measure of sellers putting homes up for sale — was down again last week, now hitting a level of more than 25 percent fewer new listings than normal for October. As mortgage rates near 7 percent, which is a level not seen in more than two decades, sellers who are also trying to buy a home, nearly 3 of every 4 potential sellers, have had to alter their trade-up plans. 

Buyers and inventory

Soaring mortgage rates have squashed the purchasing power for many buyers earning below $100,000. To offset the meteoric rise in interest rates, a buyer would need to earn $40,000 more than they did last year to purchase today’s median-priced home.

That’s bad news for the typical American who has seen their income increase by only $2,300 during that timeframe. For buyers earning more than $100,000, there are about 80,000 more homes available to buy than there were at the beginning of the year.

Now, let’s look at the positive news for the long-term outlook on housing by removing our blinders of recency bias. Active inventory has virtually remained the same from last week at 561,000. The inventory situation falls far short of pre-pandemic levels by more than 40 percent.

While there are 36 percent fewer homes pending today compared to last year, pendings are near levels we experienced in 2019. Days on market increased by seven additional days compared to this time last year, but buyers don’t have as much time to shop around as they may think; homes are selling more than two weeks quicker than they did in 2019.

Mortgage rates

In case you thought lenders might soften their lending standards to increase the potential pool of buyers, quite the opposite has happened. The latest Mortgage Credit Availability Index fell by 5.4 percent in September, indicating that lending standards are tightening even further on would-be buyers. Credit availability now sits at its lowest level since March 2013.

As the strength of the worldwide economy falters, lenders are increasingly more fearful we will see an increase in mortgage delinquencies — leading them to be apprehensive of borrowers with less optimal credit scores and high LTV loans.

Agent outlook

Confusion and uncertainty remain the central theme of the macro landscape and the housing market. As an agent, now is the time to be fully immersed in the skills-based economy. Consumers need you to be surgical in your ability to diagnose the cause of their symptoms and a prescription to solve their problems — a lack of offers and declining affordability.

Don’t waste your precious time trying to predict the near-term direction of markets. Instead, dedicate your time to improving your skills, improving the presentation of your listings, and applying ingenuity to this growing affordability crisis. 

Remember, the market never determines your outcome; it only determines your strategy.

To listen to the Livian Agent Outlook podcast, click here

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.

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