Existing-Home Sales Stifled By Lack Of Inventory, Unaffordability

Existing-home sales continue to be stifled by “twin” market dynamics, and First American expects them to slow through the month. The company’s Existing-Home Sales Outlook “nowcasts” sales based on the historical relationship between sales, demographic trends, house-buying power, and the prevailing financial and economic conditions. For May, the company expects to see sales down YOY and even with April. “For the remainder of 2024, existing-home sales may increase slightly over last year, especially if mortgage rates fall and inventory continues to rise. However, without a boost in affordability and more existing-home inventory any sales momentum is likely to stall,” deputy chief economist Odeta Kushi wrote in the report. “Double-edged” rates are now keeping the cost of homeownership high, and elevated…

“Higher For Longer” Rates Keeping Buyers Sidelined Even As Inventory Rises

Just as inventory is picking up, “higher for longer” decisions by the Feds are keeping buyers sidelined with 7% interest rates. That’s according to First American, which has released its April 2024 Home Price Index report. The data suggests that a recent uptick in inventory will boost sales activity as the spring buying season peaks but won’t result in a full turn-around of demand. Homebuyers and sellers are often the same – sellers have to buy a new home in order to move – and have a financial disincentive to do either. Nearly 90% of mortgaged homes have a rate below 6%.  At the same time, home prices are up 53% compared to pre-pandemic levels and keep rising month-over-month. Some…

Starts, Permits Plummet As Rates Stabilize Near 7%

Residential construction reversed gains in March, clocking its biggest dip since August 2023 as builders watch rising rates. Starts and permits both slipped in March, according to data from the U.S. Census Bureau. Starts tumbled by a stunning 14.7% month-over-month to a seasonally adjusted annual rate of 1,321,000. This is below all estimates in a Bloomberg survey of economists. Permits were down 4.3% to an adjusted rate of 1,458,000. Both single- and multi-family projects were impacted, with multi-family construction slipping to their lowest point since the beginning of the pandemic. This is a reversal from the month prior’s boost, the result of a wave of construction resuming after winter weather restrained builders at the beginning of 2024. With milder weather,…

Rates Near 7% Send Applications Tumbling

Mortgage applications are yo-yoing as affordability-minded buyers respond to fluctuating rates. The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — decreased by 1.6%, following the week prior’s 7.1% bump. Adjusted purchase applications slipped by 1%, while the unadjusted index was down 1% and 14% lower YOY.  Rates drove the downturn, as they jumped to 6.97% after three weeks of decreases. Too-hot inflation data is moving rates around, though they have mostly stayed in the mid- to high-6’s. “Mortgage applications continued to show sensitivity to rate movements, and both purchase and refinance activity decreased over the week. With housing supply low and prices high, the average loan size…

Cooling Rates Spark “Cautious Optimism” In Housing Pros

Cooling interest rates have opened a path for potential buyers heading into 2024, sparking “cautious optimism” for housing professionals. First American’s Potential Home Sales Model for November 2023 saw its biggest monthly increase since December 2022, up 1.3%. That translates to 5.30 million potential existing home sales at a seasonally adjusted annualized rate. The Potential Home Sales Model measures what the healthy level of home sales should be based on economic, demographic, and housing market fundamentals. First American Chief Economist Mark Fleming says mortgage rate declines in November fueled the data. Mortgage rates dipped below 7% for the first time since August last week after the Federal Reserve set the stage for rate cuts in the coming year. That decline,…

Affordability FIopped In 2023, But Redfin Predicts A Brighter New Year

This year was one of the worst on record for affordability. But with the market at an all-time low, the only move now is up, according to a new analysis by Redfin. A homebuyer with the median U.S. income needed to spend 41% of their earnings on monthly home costs in 2023, a record high in Redfin’s data (dating to 2012) and fully 10% more than just two years ago.  In some hot markets, like California’s Anaheim and San Francisco, that number jumps to more than 80%. But Redfin expects mortgage rates and home prices to both cool in 2024, paving the way for more Americans to buy their dream home. “A perfect storm of inflation, high prices, soaring mortgage…

Housing Market “Rhymes” Wild 1980s Market

Today’s housing market proves that history does, in fact, recycle its best hits. But it’s not 2008 getting a re-do. That’s according to First American Financial’s Chief Economist Mark Fleming, who notes that the market of today is closer to that of the 1980s– not an exact comparison, but close enough to glean insights. “Today’s housing market isn’t anything like the housing market of the mid-2000s – the housing market today is not overbuilt, nor is it driven by loose lending standards, sub-prime mortgages, or homeowners who are highly leveraged,” he said. “However, the current housing market is similar to the market of the 1980s. History doesn’t repeat itself, but it often rhymes.” First American’s Potential Home Sales Model slipped…

Affordability Hits Lowest Point In Three Decades

As home prices spike and interest rates stay elevated, affordability has fallen to its lowest point in more than three decades. First American Financial’s Real House Price Index soared by 16.9% YOY in July, the latest available data, and was up 2% from the month prior. But consumer buying power sank, down 1% month-over-month and 11% YOY. The RHPI is controlled for house-buying power, measuring the impact of income and interest rate changes, and therefore acts as a measure of housing affordability as well as price changes. The increase was driven by house prices and the 30-year fixed-rate mortgage rate rising 4% and 1.4% YOY, respectively. The median existing-home sale price was $345,000, while the median house-buying power was just…

Rates Drop By 10+ BPS As Prices Surge

Mortgage rates retreated last week, dropping more than ten basis points in a one-week period. Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.78%, down from 6.96% the week prior. A year ago at this time, the 30-year FRM averaged 5.54%. The 15-year fixed-rate mortgage reversed course as well, down a whopping 24 bps from 6.30% to 6.06%. A year ago, it averaged 4.75%. “As inflation slows, mortgage rates decreased this week,” said Sam Khater, Freddie Mac’s Chief Economist. “Still, the ongoing shortage of previously owned homes for sale has been a detriment to homebuyers looking to take advantage of declining rates.” Existing-home sales saw their most sluggish levels in 14 years in June. At the…

Jody Mulkey Joins FirstAm As CTO

Jody Mulkey has been named chief technology officer at First American Financial Corporation, the company announced in a press release. Mulkey will oversee FirstAm’s corporate product development team, which will build and enhance enterprise products for customers across the spectrum. “It is an honor to join such an incredible company with its unique combination of financial strength and stability built over more than 130 years, innovative technology assets, and unmatched data capabilities. Grateful to be part of the team that is leading the digital transformation of the industry,” Mulkey said in a LinkedIn post. He noted that First American is at the “forefront of real estate innovation.” “I’m looking forward to accelerating the company’s product development efforts in ways that…