What’s up everyone?
Just last week, Fed Reserve Chairman Jerome Powell continued to battle inflation by raising its key interest rate by a quarter-point to the highest level in 16 years. BUT- the Fed also hinted at a possible pause to its streak of 10 rate hikes which leads many experts to believe the rate hikes may be over.
It’s not surprising Powell may step back and reassess after all of the turbulence in the banking sector because he probably wants to wait and see which other banks may be affected and how they will respond.
If the end game is to slow the economy and curb inflation, the banks themselves may be the ones to do this if they tighten their lending to avoid a similar outcome as the failed banks.
James Knightley, chief international economist at ING, suggested that “with lending conditions rapidly tightening in the wake of recent bank stresses, we think this will mark the peak for interest rates.”
So what does this mean for the housing market?
We’re already starting to see a lot of the markets across the country rebound and recover. Some markets are even hotter than ever.
Corelogic & Zillow both recently revised their housing market forecast and Black Knight’s research shows that 93 of the nation’s 100 largest housing markets saw a month-over-month home price increase.
Is the Housing correction over?
Money is still expensive and the affordability crisis is at an all time high so what does this mean for our country?
Today, we’ll take a look at Zillow and Corelogic’s latest forecast as well as the latest data published by the Black Knight Home Price Index in Lance Lamberts article in Fortune title “93 major housing markets saw home price gains in March while 7 declined, says Black Knight” to see where our housing market and our country is heading.
Let’s dive right in
“While a pause in Fed rate hikes doesn’t mean a significant drop in mortgage rates is coming, it does at least alleviate one layer of uncertainty in the housing market,” said Redfin Economics Research Lead Chen Zhao. “Unexpectedly bad inflation data, more banking turmoil or failure to raise the U.S. debt ceiling could throw a wrench in the Fed’s plans, but homebuyers and sellers can feel a little more confident that mortgage rates won’t skyrocket again.”
According to Redfin’s latest housing market update, the average 30 year fixed mortgage rate was 6.39% for the week ending May 4. This is still double what it was last March but it doesn’t seem to stop buyer’s from getting into the market.
With more buyers bidding and still very little inventory, good houses, and by good I mean those that show well and are priced right, are getting multiple offers and selling above asking with very little to no contingencies. This is right now in May 2023.
As such, prices are going up again.
Even with these high interest rates.
And if rates go down…well, you can only imagine what will happen.
“A modest bump in homebuyer demand [this spring] ran headlong into falling for-sale supply, leading to the third consecutive monthly increase in home prices after they’d been pulling back from recent peaks through the tail end of 2022, essentially nationwide,” wrote Andy Walden, VP of enterprise research strategy at Black Knight, in a statement.
Black Knight reported that Only 7 of the 100 largest markets saw a month over month home price decrease.
According to Lambert, just five months ago, prices were declining on a seasonally adjusted month-over-month basis in 92 of the nation’s 100 largest housing markets.
The biggest one-month gains were found in Midwestern and East Coast markets such as Columbus, Ohio (+1.08%), Hartford, Conn. (+1.04%), and Worcester, Mass. (+1.04%). While the sharpest one-month declines could be found in Western and Southwestern markets like Austin, Texas (–0.72%), and Provo, Utah (–0.24%).
And like I said at the beginning, both Corelogic & Zillow revised their housing price forecast.
The Corelogic HPI Forecast indicates that home prices will increase on a year-over-year basis by 4.6% from March 2023 to March 2024.
“While housing markets across the country continue to send mixed signals, prices in many large metros appeared to have turned the corner. The monthly rebound in home prices underscores the lack of inventory in this housing cycle. In addition, while the lack of affordability generally weighs on home price growth, mobility resulting from remote working conditions appears to be a current driver of home prices in some areas of the country.”
– Selma Hepp, Chief Economist for CoreLogic
They do cite several markets at a very high risk of a home price decline over the next 12 months which include Provo-Orem, UT, Boise City, ID; Lakeland-Winter Haven, FL; Salt Lake City, UT and Ogden-Clearfield, UT.
Zillow revised their home value forecast to reflect a price increase of .6% over the next 12 months. Mind you, Zillow’s having some issues so we may not want to double down on their forecast.
Just last week, they reported a loss of $22 million between January and March. But I digress… https://www.inman.com/2023/05/03/zillow-begins-critical-year-with-lower-q1-revenue-and-rising-losses/?utm_source=dailyheadlines&utm_medium=email&utm_campaign=localnewsletter&utm_content=973218_textlink_1_20230504&message_id=31369016.5102
Remember, these housing price forecasts are national and as I always say, real estate is localized.
Among the 100 largest markets tracked by Black Knight, 53 housing markets ended March at a price that remains below their 2022 peak price.
Meanwhile 47 markets are back—or above—their 2022 peak. However, even that metric marks an improvement from February, when 75 major housing markets were below their 2022 peak price and just 25 markets were back—or above—their 2022 peak.
The markets where home prices are down the most since the peak includes places like Austin (–13.3%); San Jose (–11.4%); San Francisco (–11.2%); Seattle (–10.9%); Phoenix (–10%); Las Vegas (–9.4%); Boise (–9.4%); Stockton, Calif. (–9.4%); Sacramento (–8.7%); and Salt Lake City (–8%).
Nationally, home prices are still down 1.7% from the 2022 peak, according to the Black Knight Home Price Index.
But what about affordability?
Black Knight’s Walden pointed out that “despite shifting market trends, we’re not necessarily out of the woods yet when it comes to [falling] home prices…Affordability, despite modest improvement, remains roughly where it was at the peak of the market in 2006 nationally, requiring approximately one-third of the median household income to afford the mortgage payment on the median-priced home purchase at today’s income and interest rate levels.”
And Ryan Sweet, the chief economist at Oxford Economics commented that if inflation were to accelerate, the Fed “won’t hesitate to resume hiking interstate rates because they’re determined to break inflation’s back. As such, there is a risk that the pause is temporary.”
So, it seems like we’re in a no win situation when it comes to affordability. Money is still expensive and may go up more if inflation gets worse and home prices are on the way back up and will go up even more if rates come down.
What do you guys think? Do you think the market will continue to escalate? Are you seeing price reductions where you are or are you seeing multiple offers like I am here in the DC area. Comment below.
Let’s take a quick look at Redfin’s latest housing market update to see what is happening in the current market and the trends moving forward.
New listings of homes for sale fell 22.9% year over year, the second-biggest decline since May 2020 (the biggest was during the four weeks ending April 9, which included the Easter holiday). They rose 9.2% on a month-over-month basis—typical for this time of year.
Active listings (the number of homes listed for sale at any point during the period) were up 5.9% from a year earlier, the smallest increase since summer. Active listings fell 2% from a month earlier; typically, they post month-over-month increases at this time of year.
This means that homes are getting snatched up which tells me that sellers are most likely pricing better and homes are most likely showing better than they were.
Pending home sales were down 16.8% year over year. They rose 3% on a month-over-month basis—typical for this time of year.
Pending home sales fell in all metros Redfin analyzed. They declined most in Seattle (-35.5% YoY), San Francisco (-33.2%), Oakland (-32.9%), Portland, OR ( -32.6%) and New York (-31%).
Homes that sold were on the market for a median of 33 days, the shortest span since October. That’s up from 19 days a year earlier, which was close to the record low.
On average, 4.8% of homes for sale each week had a price drop, up from 2.8% a year earlier.
Months of supply—a measure of the balance between supply and demand, calculated by the number of months it would take for the current inventory to sell at the current sales pace—was 2.7 months, up from 1.9 months a year earlier. Four to five months of supply is considered balanced, with a lower number indicating seller’s market conditions
This week Inman came out with an article about Opendoor’s CEO Carrie Wheeler and how she’s very optimistic about the future of Opendoor. https://www.inman.com/2023/05/05/opendoor-ceo-carrie-wheeler-on-q1-earnings-and-the-ibuyers-future/?utm_source=inbriefselect&utm_medium=email&utm_campaign=inbrief&utm_content=973585_textlink_0_20230505&message_id=31391431.84402
I’m not sure I believe her…did you all see the video I did on Opendoor last week? If not, check it out. I think she may protest too much…
Thanks for watching. Bye