On Real Estate & More – July 2022
Recent data shows home sales have slowed as higher mortgage rates and still-rising home prices have made purchasing a home no longer attainable for some buyers. All eyes are now on indicators of supply and demand to see whether those conditions will last. Several data points can help clarify where the housing market is headed next.
For buyers who haven’t yet been priced out of the housing market, the selection of homes for sale could be improving now, home-listing metrics show. Competition may have peaked, with interest rates going up as much as they have; inflation, the economic slowdown, and a stock market pullback have also helped tame bidding wars.
According to Redfin, the percentage of active listings with price cuts has jumped this year. Nationally, supply has increased, too, leading to more options for potential buyers. Data from Realtor.com shows active home listings have increased on a year-over-year basis for multiple weeks in a row. And for the first time in almost two months, median listing price growth slowed—though it remained well above the historic norm.
Similar data on listing prices from Redfin backs that up. During the month of May, sellers dropped asking prices at the greatest rate since October 2019. Those cuts reflect sellers adjusting expectations. Sellers had the mentality that if the home down the street sells for $500,000, then they should get $550,000. Now that the market is slowing down, that is not true anymore—you really do have to price more conservatively.
The rate of existing-home sales will likely continue to slow down, according to assessments of buyer activity like contract signings and mortgage applications. According to the National Association of Realtors, contract signings for existing homes fell further than expected in April. The indicator, which measures homes in contract that have not yet closed, offers an early indication on existing-home sales in the following months. That wasn’t the only measure of contract signings that declined in April. New-home sales, a government measure of new-home contract signings, declined 16.6%, a bigger drop than expected.
Applications for a mortgage to purchase a home, are another helpful measurement of buyer activity. Those have declined as mortgage rates have climbed. For the week ending June 2, the volume of applications for loans to purchase a home descended to its lowest level since October 2016.
There is no doubt that home buyers have been feeling the crunch. These results suggest to us that increased mortgage rates, high home prices, and inflation will likely continue to squeeze would-be home buyers––as well as those potential sellers with lower, locked-in mortgage rates-–-out of the market. General expectations are that home sales will slow through the rest of the year and into 2023.
The impact of higher prices and mortgage rates on home affordability is unlikely to subside soon. But for buyers still searching for a home, all of these factors could mean a little more luck—or, at least, a shorter timeline and a little more to choose from.