An aerial view from a drone on January 26, 2021 in Miramar, Florida shows homes in a neighborhood. Current home prices have reached a 6-year high, according to two different indices.
Joe Rydle | Getty Images
US housing market cooled off Quite dramatically last year after mortgage rates more than doubled from historic lows. However, home prices have remained sticky.
Prices started falling last June, but are still higher than a year ago. Now due to the mild demand, the market is seeing a return of demand. falling mortgage ratesPrices are pushing back.
In December, read the latest, US home prices were 6.9% higher Year over year according to CoreLogic. This was the lowest annual growth rate since late summer of 2020. Last April, the annual price increase reached a high of 20%.
falling home prices were reflecting weak housing demand, as inflation, job cuts and uncertainty in the economy piled on the curb imposed by high mortgage rates. But mortgage rates began declining in December and prices quickly reacted. The coolness continued, but not as much as in the earlier months.
“Prices continued to decline through November, but the rate of decline was less than that seen in the summer and still only a 3% cumulative decline in prices,” said Selma Hepp, chief economist at CoreLogic.
Heap noted that some outdoor areas that became popular during the first years of the pandemic and saw rapid increases in prices are now seeing major improvements. But he doesn’t expect it to last long.
“While price declines will persist until the spring of 2023, when the market will see some year-over-year declines, the recent reduction in mortgage rates has stimulated buyer demand and resulted in higher than many expected May be an optimistic homebuying season.” Hepp said.
a monthly home buying sentiment survey Fannie Mae saw a third straight month of growth in January. Consumers surveyed said they still expect prices to fall or be flat next year, but the share of those who think it’s a good time to sell a home rose from 51% to 59%.
Early spring market boom?
More inventory on the market will help bring more buyers back into the market. Anecdotally, real estate agents are reporting an earlier-than-usual boom in the spring market, with open houses seeing more foot traffic in the past few weeks. Some even reported the return of bidding wars.
Homebuilders of the nation are also reporting increased demand. Homebuilder sentiment rose in January first time in 12 months, said the National Association of Home Builders. Builders reported an increase in existing sales, buyer traffic and sales expectations over the next six months. Low mortgage rates are driving new demand.
“With mortgage rates expected to lower later this year, affordability conditions are expected to improve, and that will drive demand and bring back more buyers,” said Robert Dietz, NAHB chief economist.
The NAHB’s home affordability index started this year at the lowest level since it began tracking the metric a decade ago. But low rates are starting to turn that way.
If home prices continue to decline at an average rate over the past six months, annual home price growth could turn negative sometime within the next three months, according to a new Black Knight report. It now takes about $600 (+41%) more to make the monthly mortgage payment on a median-priced home using a 30-year mortgage at a rate 20% lower than the same time last year.
Mortgage applications to buy homes, the most current indicator of demand, rose throughout January and the first week of February, although it is still lower than the same period a year ago, when rates were about half of what they are now.
“We can see definite signs of an uptick in purchase loans in January at lower rates and somewhat lower home prices,” said Ben Graboske, president of Black Knight Data & Analytics. “But affordability still dominates the majority of the market.”
