This Week in Real Estate
Good Morning!
The Federal Reserve escalated its battle against inflation This
Week in Real Estate, announcing the largest interest rate hike in 28
years. Will the Feds response to inflation impact home values, ending the 122
consecutive months of home price appreciation? Despite the raise of the Feds
benchmark interest rate experts are forecasting ongoing home price
appreciation, just at a decelerated pace, largely due to demand continuing to
outpace supply. According to Freddie Mac the U.S. housing market needs more
than 3 million homes to meet buyer demand. As a result, expect deceleration,
not depreciation. Below are a few newsworthy events from the third
week of June that influence our business:
* Home Price
Deceleration Doesn’t Mean Home Price Depreciation. For starters, you’ve probably heard home prices have
skyrocketed over the past two years, but homes were actually appreciating long
before that. You might be surprised to learn that home prices have climbed for
122 consecutive months. Houses have gained value
consistently over the past 10 consecutive years. But since 2020, the increase
has been more dramatic as home price growth accelerated. Experts are forecasting
ongoing appreciation, just at a decelerated
pace. In other words, prices will keep climbing, just not as fast as they have
been. “In today’s housing market, demand for homes
continues to outpace supply, which is keeping the pressure on house
prices, so don’t expect house prices to decline,” says Mark Fleming, Chief
Economist at First American. And
although housing supply is starting
to tick up, it’s not enough to make home prices decline because there’s still a
gap between the number of homes available for sale and the volume of buyers
looking to make a purchase. Experts forecast price deceleration, not
depreciation. That means home prices will continue to rise, just at a slower
pace.
* The Great
Recession Misled Millenials: It Made Them Think High Home Prices Will
Eventually Come Down. History often repeats
itself, but when it comes to the current housing market, don't hold your
breath. During the Great Recession, US home prices - which had soared during
the housing bubble of 2006 and 2007 – tanked 33%. As some of the factors that contributed to the housing crash
of 2008 reemerge, many Americans, especially millennials - the largest
homebuying cohort of the 2020s who witnessed their parents navigate the rocky
real-estate landscape of the 2000s - are expecting a similar outcome. However,
the current housing market is a vastly different beast. Although the US is
bracing for a possible recession in 2023, home prices won't be crashing anytime
soon. Instead of a hard crash this time around,
the real-estate market is bracing for a softer landing - and that means home
prices won't fall like they did in 2008. In 2022, housing volatility isn't
attributed to lax lending standards
but instead an imbalance of housing inventory. "Demand still exceeds the
supply of available homes for sale, the economy is creating jobs, and lending
standards are strict. Those factors work to keep home prices from
declining," says Holden Lewis. According to Freddie Mac the US housing
market currently needs more than 3
million homes to meet the demand of would-be homebuyers. "Normally, higher
mortgage rates cause home prices to cool," Nadia Evangelou, the senior
economist and director of forecasting at the National Association of Realtors,
told Insider. "But, I don't expect home prices to drop in 2022. We will
see slower home-price appreciation, but not a price drop." NAR expects home prices to rise 5% by the year's
end.
Full Story… https://www.businessinsider.com/home-prices-wont-come-down-millennials-cant-afford-homeownership-2022-6
* Builder Confidence
Continues to Ebb as Home Buyers Feel Price Pinch. The
National Association of Home Builders (NAHB) said on Wednesday that its Housing
Market Index (HMI) which it co-sponsors with Wells Fargo, reflected this as it
declined for the sixth straight month in June. The HMI, which measures new home
builder confidence in the market for newly built single-family homes, fell 2
points month-over-month to 67. It was the lowest reading for the index since
June 2020, at the height of the pandemic lockdown. “The entry-level market has been particularly affected by declines for
housing affordability and builders are adopting a more cautious stance as
demand softens with higher mortgage rates,” said Robert Dietz, NAHB’s chief economist. Dietz said the housing
market faces challenges on both sides of the supply/demand paradigm.
“Residential construction material costs are up 19 percent year-over-year with
cost increases for a variety of building inputs, except for lumber, which has
experienced recent declines due to a housing slowdown,” he said. “On the
demand-side of the market, the increase for mortgage rates for the first half of 2022 has priced out a
significant number of prospective home buyers, as reflected by the decline for
the traffic measure of the HMI.
Full Story…
https://www.mortgagenewsdaily.com/news/06152022-nahb-builder-confidence
Have a
productive week.
Jason
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