TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1488302
M R EP O RT | 21 COVER STORY professional, she has represented clients that included the Mortgage Insurance Companies of America, the Federal Home Loan Bank of San Francisco, and the National Community Reinvestment Coalition. Tim Rood Head of Government and Industry Relations, SitusAMC Tim Rood serves as Head of Government & Industry Relations for SitusAMC, where he interfaces with policymakers and influenc- ers on matters related to residen- tial, multifamily, and commercial industries. Rood also manages SitusAMC's Advisory Group, where he is a trusted advisor to senior executives of banks and independent mortgage bankers. Prior to joining SitusAMC, Rood served as Chairman of The Collingwood Group, which he co-founded in 2008. Rood brings nearly 30 years of mortgage indus- try and entrepreneurial experience to SitusAMC, and is a regular contributor to various national media outlets, including CNBC, Bloomberg Television, FOX Business News, YahooFinance TV, the Washington Post, the New York Times, the Wall Street Journal, and American Banker. Where do you see the direction of the housing market heading over the next 12 months? Blomquist: Local real estate investors who buy on Auction. com are signaling a continued downshift in the housing market through at least the end of 2022, and likely into the first quarter of 2023. Back in March, those same investors signaled the current market downshift when they started building a bigger discount cushion into their winning bids at foreclosure auction. If sellers finally get the memo and reset their pricing expectations, home sales could bottom out in the first quarter and then start rebounding during the spring selling season in 2023. The tradeoff to that rebound in home sales would likely be negative home price appreciation, particularly in markets that ex- perienced the biggest price gains during the pandemic housing boom. I would expect home price declines to stay in the single digits in most local markets, absent any additional shocks or surprises. Dr. Deitz: Single-family construc- tion will decline in 2023, after posting a drop in 2022, the first time this occurred in 11 years. Multifamily construction will begin a decline in 2023 as well, as demand weakens with a rise in unemployment and a large amount of new supply coming online. Home remodeling should perform the best of the three sectors, as people move with less frequency. Hale: The housing market, as a whole, will face ongoing chal- lenges in the next 12 months, as it resets to a higher interest rate en- vironment that may stick around for longer than many initially expected. As such, we expect home sales to remain relatively weak. As buyer purchasing power is diminished from higher rates, fewer home shoppers can keep up their search. This has the benefit for those who can navigate higher rates and prices of reducing com- petition in the housing market. For sellers, however, lower buyer competition means they can expect selling to take longer than it has in the recent past. While home prices are expected to remain high, even increasing on a year-over-year basis, buyers will have more negotiating power, so sellers will have to make more concessions than they have over the last two years. Kushi: We are looking at house prices, and what that path will be for house prices. We are already tracking some markets that are experiencing price declines from their peak. I do expect that market list to grow or markets to experience declines from peak. You cannot sustain double-digit house price growth alongside 7% mortgage rates. The affordabil- ity picture has worsened, so I expect that to continue into next year, particularly as the Fed is not really tapping the brakes on quantitative tightening. Dr. Lautz: Given the rise in in- terest rates and the continued rise in home prices, NAR's forecast is that home sales will be down 7% year over year in 2023. However, the expectation is that home prices will continue to rise on a year-over-year basis but at a more moderate pace due to the lack of inventory. Rood: The trajectory of home price appreciation (HPA) has been slipping most of the year due to affordability challenges given the Fed's aggressive rate increases. However, HPA is still positive for the year in most markets due to supply and demand imbalanc- es. The markets with the most downside risk over the next 12 months are ones that attracted the most migration during the pan- demic, and medium to high-end markets that are disproportionate- ly impacted by higher rates. Sharga: It is hard to see the housing market pick up much momentum until mortgage rates fall and inventory improves, so it is likely that 2022 home sales will end the year about 15% below 2021 numbers and then decline slightly again in 2023. Prices on a national basis will probably fall by about 5% from 2022 peaks to the "If sellers finally get the memo and reset their pricing expectations, home sales could bottom out in the first quarter and then start rebounding during the spring selling season in 2023." —Daren Blomquist, VP of Market Economics, Auction.com