While it would be logical to think that anyone who is going to sell in 2022 would be expediting their plans due to higher mortgage rates, there still hasn’t been a big surge. We had one little pop when the weekly new-listings count hit 76, but they were back down to 59 this week – and the pendings have risen since.
As we head into the graduation season, and then into the peak vacation season, we might find that the 2022 selling season has already concluded. Maybe we’ll get a surge in July?
Mortgage Bankers Association Senior Vice President and Chief Economist Mike Fratantoni noted there are two items to watch from the Federal Open Market Committee following this month’s two-day meeting. “First, they announced a 50-basis-point increase in the federal funds target,” he said. “This change had been telegraphed clearly in recent speeches. The statement also repeated the language that the committee ‘anticipates that ongoing increases in the target range will be appropriate.’ In other words, we are far from done at this point.”
Fratantoni said the second, and perhaps most important news, was regarding the Fed’s $9 trillion balance sheet.
“As clearly signaled in the March minutes, the FOMC will move to allow $60 billion in Treasuries and $35 billion in MBS to passively roll off the balance sheet each month, gradually reducing these asset holdings from extraordinary levels,” he said. “The runoff will ramp up over the course of three months, which should allow markets to absorb this excess supply.”
Importantly, neither the statement nor the balance sheet plan repeated the goal of returning the balance sheet to all Treasuries, and there was no mention about the potential for active MBS sales. Musing about active sales has likely increased volatility in the MBS market recently, as investors do not know how to interpret the vague signals that had been given.
MBA now forecasts the fed funds target will reach 2.5%, the neutral rate, by the end of 2022.
“MBA is forecasting that mortgage rates are likely to plateau near current levels,” Fratantoni said.
“The financial markets have attempted to price in the impact of Fed actions over this cycle, and they are likely also pricing in the economic slowdown that will result. Once we are past this rate spike and associated volatility, MBA expects that potential homebuyers may be more willing to re-enter the market. Given how much higher rates will remain above the past two years, we do not expect refinance demand to increase any time soon.”
My mom is hanging in there! She is still in the retirement home in San Rafael, and is relatively healthy. We sent her flowers and chocolate-covered strawberries for Mother’s Day, and she has called me three times to thank me! I’m not sure if she forgot that she called, or is just really appreciative! Either way, I’ll take it!
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.
Less expensive cities with strong local economies climbed The Wall Street Journal/Realtor.com Emerging Housing Markets Index in the first quarter, another sign that many home buyers are giving priority to affordability.
Fast-rising housing prices have pushed buyers from expensive coastal cities into cheaper housing markets in recent years. Expanded remote-work opportunities and a search for different lifestyles during the Covid-19 pandemic have accelerated the trend.
“People are chasing affordability,” said Sam Khater, chief economist at mortgage-finance giant Freddie Mac. In response to high housing prices and increased remote-work flexibility, he said, “people are reordering where they live.”
The Wall Street Journal/Realtor.com Emerging Housing Markets Index identifies the top metro areas for home buyers seeking an appreciating housing market and lifestyle amenities.
The top-ranked markets in the first quarter had faster home sales, higher wages and shorter commute times than the market as a whole, said George Ratiu, manager of economic research at Realtor.com. News Corp, parent of the Journal, operates Realtor.com.
The Wall Street Journal/Realtor.com Emerging Housing Markets Index ranks the 300 biggest metro areas in the U.S. In addition to housing-market indicators, the index incorporates economic and lifestyle data, including real estate taxes, unemployment, wages, commute time and small-business loans.
We are still planning to host a Top Gun 2 private screening. I have two different guys attending who were stationed at Miramar NAS when the first film was shot, and their commentary promises to be worth it!
I don’t know where he gets his information, but it isn’t from the MLS:
Listings & Sales, Monthly
He says the San Diego Listing Inventory surged +31% between March and April, when it actually dropped on the MLS. Why would he say that? I don’t know, but he sells his data now so that may have something to do with it.
I don’t know how he is measuring ‘demand’, but the San Diego County sales did decline 6% between March and April. But look how close the sales count is to the listing count – we are selling practically everything that comes to market, for pete’s sake. If the listings decline, so will sales.
Is he talking about the active listings?
This is how it looks on InfoSparks. The M-o-M change is +7% (last year was +5%), and the actual count of 2,616 active listings in April is bleak compared to previous years (12,652 in April, 2019!):
None of the facts are suggesting an inventory surge in San Diego County. We would welcome one!