TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1472906
M REPORT | 53 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA increased 16.2% over May 2021 levels. In a potential sign of soften- ing buyer demand at the national level, the median listing price of a typical pending listing decelerated in May over April, to a yearly rate of 16.2% from 17.2%. Additionally, the national share of listings that had their price reduced jumped to 10.5% in May from 7.0% in April, but the rate remains well below typical pre-COVID-19 levels. Active listing prices in the nation's largest metros grew by an average of 13.0% compared to last year in May, with the biggest gains recorded in Miami (+45.9%), Nashville (+32.5%), and Orlando, Florida (+32.4%). In May, median listing prices were down year over year in just six large markets, which were: Pittsburgh (-10.5%); Rochester, New York (-9.7%); Cincinnati (-9.6%); Cleveland (-2.3%); Detroit (-1.8%); and Buffalo, New York (-1.2%). Like norms one would expect to see in home price trends, the increase in for-sale home options combined with softening buyer demand would typically drive a deceleration in time on market. However, time on market data did not yet show this trend in May, as buyers snatched up list- ings more quickly than in any month in the Realtor.com data history going back to July 2016—a record that typically isn't hit until the summer season. For some homebuyers who have yet to be priced out of the market but can't afford to compete by making a larger down payment, acting quickly might give them an edge. In May, the typical U.S. home spent 31 days on the market, a full week less (-6 days) than last year, and down 27 days compared to typical May 2017 to 2019 timing. Across the 50 largest U.S. met- ros, the typical home spent 26 days on market, down six days year over year, with the biggest declines registered in the South (-7 days). At the market level, homes saw the greatest yearly decline in time spent on market in Miami (-28 days), followed by a three-way tie between Hartford, Connecticut, Seattle, and San Jose, California (-12 days). Home Purchase Apps Dropped Nearly 11% in April As builders continued to face rising costs, supply-chain issues, and extended completion times, the buying market cooled amid high mortgage rates and lingering affordability concerns. T he Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for April 2022 shows mortgage applications for new home purchases decreased 10.6% com- pared to a year ago. Month over month, mortgage apps decreased by 14% (this change does not in- clude any adjustment for typical seasonal patterns). MBA estimates new single-fam- ily home sales were running at a seasonally adjusted annual rate of 701,000 units in April 2022. The MBA's new home sales estimate is derived using mort- gage application information from the BAS, as well as assumptions regarding market coverage and other factors. "New home purchase activ- ity declined on a monthly and annual basis in April, as the spike in mortgage rates cooled demand, and homebuilders continued to grapple with rising costs, supply- chain issues and extended com- pletion timelines," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "With the supply of existing homes on the market still at extremely low levels, the new home market is an important source of housing supply. However, the pace of construction has slowed in recent months. MBA's estimate of new home sales declined for the fifth consecutive month to 701,000 units, the slowest sales pace since May 2020." The National Association of Home Builders (NAHB) recently reported in its Home Building Geography Index (HBGI) that the rate of year-over-year single-family construction growth in small and large metro urban, suburban, and rural regional submarkets slowed in Q1 year over year, with notable deceleration in large suburban markets. Add to that, the NAHB also reported a significant slide in builder confidence in the mar- ket for newly built single-family homes, which fell eight points to 69 in May, marking the fifth consecutive month that builder sentiment has declined reaching its lowest reading since June 2020. The MBA's BAS reported that the seasonally adjusted estimate for April is a decrease of 6.8% from March's pace of 752,000 units. On an unadjusted basis, the MBA estimates that there were 65,000 new home sales in April 2022, a decrease of 12.2% from 74,000 new home sales in March. "The average loan size in- creased to a new survey high of $436,576, and over half of ap- plications were for loan amounts greater than $400,000," Kan said. "Higher rates and sales prices and larger loan sizes are eroding hous- ing affordability and pricing some buyers out of the market." Freddie Mac reported that the 30-year fixed-rate mortgage (FRM), while sliding the past few weeks, still remains above the 5% mark, further causing affordability issues for many prospective buyers. By product type, conventional loans composed 76.7% of loan applications, while FHA loans composed 13.1%, RHS/USDA loans composed 0.2%, and VA loans comprised 10.1%. In terms of average loan size, new homes increased more than $400 month-over-month, from $436,151 in March to $436,576 in April 2022. However, Redfin reports that more sellers are feeling the pressure to sell and have re- sorted to dropping the price of their homes amid rising interest rates and growing affordability concerns. More than one in five sellers polled by Redfin dropped their price, the highest rate since October 2019. "The sudden surge in mortgage rates led to a sudden and sig- nificant cooldown in the housing market in May," Redfin Economics Research Lead Chen Zhao said. "However, mortgage rates are now stabilizing, and homes remain in short supply, so while we do expect home-price growth rates to decline, we don't expect prices to fall much at the national level. For homebuyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up." "The sudden surge in mortgage rates led to a sudden and significant cooldown in the housing market in May," —Chen Zhao, Economics Research Lead, Redfin