Yesterday, Lawrence Yun predicted that home sales will fall by 9% this year, and home prices will rise by 8%.
At the beginning of the year, his forecast was:
2022 Home Sales Forecast: -2%
2022 Home Price Forecast: +2.8%
2022 Mortgage-Rate Forecast: Rates to rise to 3.7% by the end of 2022.
His forecasts are just guesses, and subject to change!
NAR calculates purchasing a home is now 55% more expensive than a year ago. These rising mortgage rates and prices hurt affordability, and although wages are improving, Yun says they are “wiped away” due to inflation.
“Wages have risen by 6% from one year ago and that’s good news,” he continued. “But inflation is at 8.5%.”
He estimates inflation will remain elevated for the next several months and that the market will see further monetary policy tightening through a series of rate hikes. Citing a five-month decline in pending home sales, as well as a drop in newly constructed single-family sales, Yun predicts the higher mortgage rates will slow the housing market.
How can housing survive higher rates?
Lenders and realtors said the willingness of buyers to devote more of their income to mortgage payments was providing support for housing prices just as rising rates were eroding affordability.
Consumers seem more inclined to cut back travel and restaurant spending to be able to buy a home.
The average payment from new mortgage applications in March accounted for 42%of an average American’s income, compared to 34% a year before.
A BOFA report shows more than 70% of shoppers are willing to settle for homes in less-desirable neighborhoods, with less space, to get a deal done, and 56% are considering taking on a second job to earn extra income to achieve their home ownership goals. (FT)
I’m not hearing ANY company layoffs in the news. I remember last housing bubbles you’d hear Qualcomm and other big names in San Diego laying off folks. Not this time. So as long as that’s not in the news than the sky’s the limit. Actually the stars are the limit.
Where does the 30% rule come from? I could easily spend 50 -60% on housing costs without any problem.
Seen the Case Schiller index lately? Remember the name of this site. https://fred.stlouisfed.org/series/csushpinsa
I’ve been publishing the local Case-Shiller Index here since 2009 using FRED.
What’s your point?
The underwriting guideline is based on the borrower’s gross income, and is 36% officially – though they don’t mind going higher:
I had to mark a few hundred blog posts as ‘private’ from that era, but this is one that survived – with 41 comments! Interesting to note that the same towns that are leading the C-S increases every month now are the same leaders that took it down too: