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However, as buyers and sellers pull back from a housing market and economy in transition, we anticipate house sales to be significantly lower, down 14.1% compared to 2022. The rate of home sales in late 2022 is a good indicator of what the annual total for 2023 would look like. "Even the September home price data may not be capturing what is going on in the fast-changing housing market," Sturtevant said. "Sellers are having to reset their price expectations because buyers' purchasing power has been seriously eroded as a result of the quickly rising mortgage rates." The inventory of homes on the market declined for the fourth consecutive month.
Sellers were holding out hope that the situation may improve, Ali Wolf, chief economist at Zonda Research, a housing market-research platform, told MarketWatch in an interview on the Barron’s Live podcast. The real-estate market is taking a beating, with mortgage rates surpassing 7%. Now, many of those same real estate markets seem to be on shaky ground, where home prices are concerned. The nationwide decline of 0.1% mentioned above might not seem like much.
housing
Certainly will be overbuilding, perhaps exacerbated by REO inventory. But we’ve yet to see the shoddy financing that makes things go sideways fast, which tells me we are still a few years out, as crazy as that sounds. Wokkawokka7 saying the market would crash in 2018 and that s/he just got his/her MBA from Anderson lol. So even if you purchased a home recently and spent more than you would have liked, it could very well look cheap relative to prices a few years down the line.
“Risk among earlier purchases is essentially nonexistent given the large equity cushions these mortgage holders are sitting on,” Black Knight Data & Analytics President Ben Graboske said in a news release. If you end up underwater on your mortgage and need to sell your home, you’ll be forced to take a loss — something that was all-too-common during the 2008 financial crisis and housing collapse. However, people still have to live somewhere, and unless you're moving in with someone for free or moving out on the street, your only other option is to rent. From 2005 to 2008, for example, sales of single-family homes dropped by 30%. 23% of homeowners are likely to refinance in the next six months.
Individual Markets May Vary
Despite a sluggish market and waning buyer enthusiasm, we anticipate that home demand will continue to outstrip available inventory. However, as the number of available homes increases, the demand for housing should decrease owing to affordability concerns. The current rate of home price growth is unsustainable, and higher mortgage rates combined with increased inventory will result in slower home price growth but unlikely any big price decline. The real estate group expects 5.1 million existing homes to be sold in the calendar year 2022 – a 16% decrease compared to 2021. High mortgage rates and major affordability challenges are predicted to drive weaker sales in 2023. As mortgage rates reached 20-year highs in October, it is making monthly payments unaffordable for new buyers.
Housing inventory is up slightly from 3.1 months in September and 2.4 months a year ago, according to NAR. Buyers’ agent commissions will rise slightly as fewer agents broker fewer deals at lower prices. Rising disaster insurance costs will make extremely climate-risky homes even more expensive. Home prices will post their first year-over-year decline in a decade, but the U.S. will avoid a wave of foreclosures. Home sales will fall to their lowest level since 2011, with a slow recovery in the second half of the year. Of the nine census divisions, the South Atlantic division recorded the strongest four-quarter appreciation, posting a 17.0 percent gain between the third quarters of 2021 and 2022.
What about inventory?
However, when the Fed began raising its rates, mortgage interest rates also went up, making it significantly more expensive for buyers to afford housing. With mortgage rates, well above 5 percent, refinancing activity, which was brisk during the epidemic when rates were at an all-time low, has dwindled by more than 70 percent compared to last year. Home sales activity kicked out 2022 stronger than anticipated, but rising costs have led to altering their forecast downward. They anticipate the greatest year-over-year decline in house sales at the customary peak of the summer selling season. Home sales on par with these predictions would mean that 2022 sales are the 2nd highest tally since 2007, trailing only 2021.
A flurry of inventory coming on the market too, and so late into the summer is unusual and most likely a sign that sellers want to get out while they still can. Those who locked in lower mortgage rates will be reluctant to give those up to buy a new home as they could wind up paying a lot more for a lot less. The market was driven by record-low borrowing rates in 2020 and 2021, as well as a supply constraint due to underbuilding.
Home prices, like a lot of things, are driven by supply and demand. During the pandemic, demand for homes shot up, pushing prices higher. Median sale prices have been rising quickly in the last eight years. And while rising rates are affecting sales volume and prices, there are still neighborhoods where prices are up by more than 8%. According to the National Association of Realtors®, first-time buyers comprised 28% of nationwide sales in October, down from 29% in September 2022 and October 2021. In addition, properties typically remained on the market for 21 days in October, up from 18 days in October 2021.
Just be aware of the risk and prepare to refinance if rates drop significantly again. Real estate markets like Boise could use a “reality check” right about now. Home prices in that metro area (and many others across the U.S.) rose so fast over the past 24 months that it created affordability issues for many residents. So, from a social and economic standpoint, a cooling trend would actually be beneficial. This is what a lot of home buyers, homeowners, and real estate professionals want to know, as we approach the fall of 2022. Now that the market has cooled, most sellers are no longer receiving 15 offers, all above the asking price, half in cash with no contingencies within hours of putting their homes on the market.
“Many homebuyers are adjusting to the new realities of higher mortgage rates, and have reduced their buying budgets as a result. Since home values are so high, the housing market may be more susceptible to rate increases than in the past; therefore, the greater estimate appears realistic. This year, mortgage rates have more than doubled from where they were in early January. Furthermore, the increasing expenses of purchasing a home have altered many prospective purchasers' calculations. As a result, year-over-year house sales have fallen in recent months. A record 79 percent of respondents in a Fannie Mae study on homebuyer sentiment indicated it's a poor time to buy a home.
Housing sales will decline by 6.8% compared to 2022 (5.13 million) and the median home price will reach $385,800 – an increase of just 0.3% from this year ($384,500). In 2023, the NAR's top 10 housing markets will include Atlanta, Raleigh, Dallas, Fayetteville, Ark., and Greenville, S.C., in addition to five new metropolitan regions. Half of the country may witness minor price increases, while the other half may see minor price decreases.
Very few people have ARMs or unaffordable mortgages, nor do they have better options if they move/lose their current homes. I agree the market will peak in 2 years with the decline starting in 2020. So if you don’t attempt to time the market you can profit handsomely over the long term, assuming you can afford the underlying mortgage.
A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The Conventional MCAI decreased by 1.0 percent, while the Government MCAI remained unchanged. Compared with the 2006 peak, the 10-city composite price index is now 44% higher, while the 20-city composite is up by 53%. Adjusted for inflation, which continues to remain concerningly elevated, the 10-city index is now up by 1%, while the 20-city index is up by 7% compared with the 2006 peak. Goldman Sachs is expecting home prices to fall 5% to 10% from the peak. They’re saying “It’s not just a couple months, this may be a prolonged slowdown in the housing market,” Wolf said.
The supply of available homes is down, due to fewer people choosing to move out of existing homes and the underbuilding of new houses in the past decade. “We have not been keeping pace with the demand for homeownership for a decade now,” says Clare Losey, assistant research economist with the Texas Real Estate Research Center at Texas A&M University. The median sales price for an existing home in May was $407,600, up 14.8% from a year earlier, according to data from the National Association of Realtors . Home prices are rising dramatically, but the pace has slowed a little bit in recent months. Sales prices were around 20% higher year-over-year earlier in the year. Experts say it’s unlikely prices will drop in any significant way nationwide anytime soon.
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