Spring Is Here: What To Expect This Season

Posted on by TMN Editor

By CHUCK GREEN

As the traditional spring homebuying season begins, a lack of inventory, high interest rates, and economic uncertainty due to banking troubles have dominated the news. So what can people expect?

Rick Sharga, president and CEO of CJ Patrick Company in California, told The Mortgage Note that it’s “unlikely to be a banner period for home sales. Extremely low inventory of homes for sale coupled with poor affordability are likely to keep sales activity fairly weak, even though seasonal trends usually see sales and prices increase during the spring and summer months.”

Although the second quarter is typically the peak season for home sales, that has been disrupted in recent years, noted Sharga.

“This seasonal trend didn’t happen in 2020, when the COVID-19 pandemic was declared and the country was effectively shut down, or in 2022 when Fed policy caused mortgage rates to virtually double overnight, throwing ice water on what was a white-hot housing market,” he said.

It seems likely that 2023 will be another exception to the general rule.

“Affordability’s still poor, consumer sentiment’s weak, and inventory of homes for sale will remain low as homeowners with sub-4% mortgage rates won’t rush to take on a 6.5 to 7.0% loan on a new home,” Sharga said, predicting these homeowners will wait for market conditions to improve before listing their homes for sale.

In terms of sales volume, Sharga is forecasting existing home sales for the year to be between 4.3 and 4.4 million units, with Q2 seeing between 1 and 1.25 million home sales.

Stemming from low affordability, the housing market continues to slow down, Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors, told The Mortgage Note.

That said, data shows that the housing market will pick up in the coming months. Home sales activity jumped 15% in February — the highest month-to-month increase since July 2020, she said.

“And, if inflation eases faster than expectations, mortgage rates could decrease to the low range of 6%,” Evangelou said.

Every year, transactions and prices tend to be above-trend in the spring and summer while activity typically slows down in the winter, she said.

“Seasonality plays an important role in the housing market since it has an impact on the housing demand and supply. Specifically, two of the busiest selling months are May and June, with June typically the peak month of the year,” Evangelou said.

More than any other week in the year, the NAR expects to see the ideal balance of housing market conditions for sellers the week of April 16-22.

Ralph DiBugnara, senior vice president and retail divisional leader at Cardinal Financial Company, said he expects to see some reduction in rates with the average rate hovering around 6.5% for the 30-year fixed and 5.875% on a 15-year fixed loan.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.32%, down from 6.42% the week prior. The 15-year fixed-rate mortgage dipped from 5.68% to 5.56%.

DiBugnara predicts rates will remain about the same through the summer.

“Ultimately, I believe they’ll stay stagnant for the end of the second quarter and early third quarter, depending on how consumer spending slows down,” DiBugnara said.

Will less rate volatility bring prospective buyers to the market, turning them into homeowners?

“Buyers will be out shopping but what they will most likely find is a competitive market including some bidding wars and a short supply of homes for sale,” DiBugnara said. “Housing supply’s very limited and I don’t believe it will be corrected anytime soon.”

Buying a house became slightly more affordable in Q1 2023.

According to ATTOM Data Solution’s Q1 2023 U.S. Home Affordability Report, the recent slowdown in the U.S. housing market after 10 years of increases has flattened the national median single-family home and condo value. The median single-family home and condo value of $320,000 in the first quarter of 2023 is up just 1.3% from $316,000 in the first quarter of last year.

“The soaring housing market has finally come back down in much of the U.S., at least for now, while worker pay is growing. That’s produced some benefits for home seekers in the form of slightly better affordability, especially as lending rates have flattened out,” Rob Barber, CEO for ATTOM said in a statement.

The report says that among the 46 counties with a population of at least 1 million, the biggest year-over-year increase in median sale prices during the first quarter of 2023 were in St. Louis County, Mo. (38%); Palm Beach County, Fla. (11%); Collin County, Texas (10%); Franklin County, Ohio (7%) and Miami-Dade County, Fla. (6%).

Counties with a population of at least 1 million where median prices have dropped most from the first quarter of 2022 to the same period this year are Alameda County, Calif. (16%); Santa Clara County, Calif. (12%); Contra Costa County, Calif. (12%); Philadelphia County, Penn. (11%) and King County, Wash. (8%).

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