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…

Will The Housing Market Recover In 2024? Probably Not.

As 2023 nears its end, with mortgage rates slowing to the mid-7%s but home prices at record highs, the question on housing analysts’ minds is: Will 2024 be any better? For the most part, experts see a mixed bag coming next year, predicting the beginning of a turnaround that won’t fully flower until 2025. Realtor.com’s 2024 Housing Forcast suggests mortgage rates will moderate and ultimately average 6.8%, hitting 6.5% at year-end, while home prices ease slightly by 1.7%. But the company also predicts worsening inventory shortages as homebuyers cling to their current homes to keep their sub-5% rates. Still, Danielle Hale, chief economist for Realtor.com, emphasizes the bright sides of softening unaffordability. “Our 2024 housing forecast reveals the green shoots…

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…

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…

Tightening Credit A New Concern For The Mortgage Market

Recent bank failures have created another problem for the housing market: lack of credit. First American’s Potential Home Sales Model– a measure of what a healthy level of home sales should be based on market fundamentals– fell by 2.5% month-over-month in March. Year-over-year, it is down 10.7%, a loss of more than 640,000 sales. The biggest contributor to the decline was tightening credit standards, First American says. At the beginning of the pandemic, lenders reduced credit due to the increased likelihood of forbearance and delinquency, but it slowly began to ease. Now, credit is tightening again thanks to banking uncertainty. “There are fears that the recent bank failures will prompt lenders to be much more conservative with their lending,” said…

Single Women Are Building Wealth Through Homeownership

Homeownership remains the most significant way single women can build wealth, and more women than ever are taking advantage. First American Financial reports that the number of single, female-headed households (including windowed, separated, or divorced) has risen by 1.4 million since 2019. Of that group, one million are homeowners. Female homeownership has helped the overall homeownership rate rebound since the Great Recession, with women-headed households surpassing 52% in 2022. That’s up from a post-Great Recession low point in 2016 of 50%. Single women’s homeownership rate has outstripped men’s by about two percentage points, FirstAm says, putting them in a better long-term financial position. Homeowners have 40 times as much household wealth compared to renters, most of which is held in…

Loan Apps Tank By 11% After Slight Increase Last Week

After ticking up 2% last week, mortgage loan application volume tanked by 11% last week, the Mortgage Bankers Association’s (MBA) weekly survey shows. The adjusted Market Composite Index, a measure of mortgage loan application volume, fell by 11%. The adjusted purchase index fell by 12%, while the unadjusted purchase index fell by 12% as well and was 15% lower YOY. The refinance index fell 10% and was down 76% YOY. Refinances made up 33% of total applications, up from 32.4%.  “Mortgage applications decreased for the first time in three weeks, as mortgage rates – despite declining last week – remained over two percentage points higher than a year ago and close to the highest levels since 2009. For borrowers looking…

Real House Prices Up 31% YOY, Fastest Growth On Record

First American Financial’s Real House Price Index increased by 30.6% YOY in February, its fastest growth in the more than 30-year history of the series, the company reported. The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state, and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability. February’s numbers show a rapid month-over-month decline in affordability. Real house prices rose by 5.6% from January, and nearly 31% YOY. Consumer house-buying power fell 3.6% between January and February, and 6.8% YOY. First American attributes the numbers to rising home…

CRE Price Growth “Has Room To Run”, FirstAm Predicts

Commercial real estate (CRE) price growth may keep outpacing CRE income growth, suggesting property values may not have reached their cyclical peak, according to First American’s Potential Capitalization Rate (CPR) Model for Q4 2021. First American’s PCR estimates capitalization rates using historical data for interest rates, rental income, occupancy rates, debt, and recent property price trends. In Q4 2021, the actual cap rate hit a record low of 5.2% while the potential cap rate sank to 4.4%. When the actual cap rate is significantly above the potential cap rate, as was the case in the fourth quarter of 2021, the model suggests that the CRE market can support a lower cap rate. The National potential cap rate was 4.4%, down…