TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1478106
54 | M REPORT 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 Pending Home Sales Fall 19% YoY For buyers, the early 2022 rush to lock in low mortgage rates before they rose even higher has since been replaced by the reality that sub-3% rates are a thing of the past," said George Ratiu, Senior Economist & Manager of Economic Research for Realtor.com. T he Pending Home Sales Index (PHSI), which measures housing con- tract activity, again fell in July, the second month in a row and the eighth time it has fallen this year. In addition, three out of the four major regions in the country also reported declining numbers, as one region, the West, posted a minor gain. On a year-over-year basis, all four regions reported double-digit percentage slides. All-in-all, the index slid 1.0% to a value of 89.8 on a monthly basis from June 2022. On a yearly basis, the index has fallen 19.9%. This information comes by way of the National Association of Realtors (NAR) who has been publishing this report since 2001. The index was benchmarked to 100 based on contract activity in 2001. "In terms of the current hous- ing cycle, we may be at or close to the bottom in contract sign- ings," said Lawrence Yun, NAR's Chief Economist. "This month's very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but lim- ited supply at lower price points is hindering transaction activity." This report comes at the heels of a separate report that found affordability in June fell to a level not recorded since 1989. Accounting for a 30-year fixed-rate mortgage and a 20% down pay- ment, the monthly mortgage pay- ment on a typical home jumped to $1,944, an increase of 54%, or $679, from one year ago. "Home prices are still rising by double-digit percentages year over year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023," Yun added. "With mortgage rates expected to stabi- lize near 6% alongside steady job creation, home sales should start to rise by early next year." The Northeast PHSI dipped 1.9% from last month to 79.3, down 15.4% from July 2021. The Midwest index retracted 2.7% to 91.2 in July, a 13.4% decline from a year ago. The South PHSI decreased 1.1% to 106.6 in July, a pullback of 20.0% from the previous year. The West index increased 2.2% in July to 70.0, down 30.1% from July 2021. George Ratiu, Senior Economist & Manager of Economic Research for Realtor.com, also commented on the report: "Contract signings for existing homes are highlighting that buy- ers have reached the limit of their financial wherewithal to handle the impact of high inflation, property prices, and interest rates, with a 1.0% monthly slide, to the lowest level since April 2020 at the height of the pandemic. The monthly decline was propelled by drops in all regions, except the West. At the same time, pending home sales tumbled 19.9% from July of 2021, with double-digit drops in all major regions." "Summer is historically the peak period for home buying in a given year, as we've generally seen larger homes exchange hands at top prices. This year's summer housing market definitely notched record prices. However, sales of existing homes have been on a sharp decline, accompanied by an equally significant drop in sales of new houses. Today's data point to continued weakness in home sales going into the latter half of this year." "For buyers, the early 2022 rush to lock in low mortgage rates before they rose even higher has since been replaced by the real- ity that sub-3% rates are a thing of the past. In addition, with the number of homes for sale growing with each month and accompanying price reductions gaining steam, signaling a transi- tion toward a relatively healthier market, buyers are remembering that home inspections, contingen- cies, and price negotiations are typically the norm. In turn, many home shoppers are choosing to take a wait-and-see approach as we count down the last remain- ing weeks of summer, casting a cautious eye toward the cooler seasons ahead and the potential discounts they may bring." "Importantly, current trends remind us that real estate markets move in cycles, and this one is no different. After a period in which the Federal Reserve boosted capital markets with its monetary easing, we are now in a stage of tightening, which will see bor- rowing costs continue to increase in an effort to rein in fast-paced inflation. With interest rate hikes expected to continue for several more months, we will see real estate demand remain subdued." Bright MLS Chief Economist