The U.S. is seeing shifts in the housing market as mortgage rates increase. Pending home sales have fallen for four straight months, according to NAR. But what happens from here may remain to be seen.
The hot market has yet to show signs of cooling in Florida as Tampa and Miami joined Phoenix with the highest annual gains at 30.8%, 28.1%, and 32.6% respectively in the year ending in January 2022.
Most predictions, however, support a significant downshift, fueled by mortgage rate hikes and record-high home prices, resulting in reduced demand.
The Federal Reserve says a housing bubble is brewing, although not as bad as 2008. That’s a headline we have seen frequently in the past two years, but this time concerns are based on the fact that “house prices appear increasingly out of step with fundamentals,” reports the Dallas Fed. Interestingly, one factor they attribute to high home prices is a “fear of missing out” mentality among home shoppers. FOMO home buying, they say, was a key ingredient in the last housing bubble.
The Mortgage Bankers Association is offering a welcome prediction that U.S. existing home prices will jump by “only” 4.8%, a far cry from the current 19.2%, and provide a path to a normalized historic rate of growth. Zillow is less optimistic, predicting that by February 2023, year-over-year home price growth will be at 17.8%.
As with other times of change, we see adaptation and innovation.
Some mortgage companies are renewing their focus on servicing rights to recoup lost revenue from fewer borrowers. MSR’s can rise in value and generate income, and they also can be sold to raise cash. As The Wall Street Journal reports, digging into the details can pay off.
Startups are finding space in a tight market by mining opportunities in off-market listings. Greg Burns, co-founder and CEO of the tech startup DropOffer, connects agents with off-market properties, through an app. Inman reports this new class of startups collects data and leverages their own private marketplaces to either connect buyers with reluctant sellers, or lure homeowners to list with the promise of fewer headaches and more reliable terms.
COVID-19 is still putting pressure on the economy as China locks down half of Shanghai amid an outbreak of the virus. Shanghai contributes 3.8% to the country’s gross domestic product as a major manufacturing center for semi-conductors, autos, including Tesla, and other goods. While some companies are operating in “bubble” conditions, warehouses are closed, and trucking services limited.
Meanwhile, the Omicron subvariant known as BA.2 is spreading across some part of the U.S. The CDC estimates that BA.2 accounted for 35% of COVID-19 cases in the U.S. last week, up from 22% the prior week.
Your team at GTR is watching these trends and more to ensure we are prepared to address your needs.