This week’s report focuses on the ups and downs, often in extremes that we are currently experiencing.
Home prices remain at record highs as a result of ultra tight inventories, but we are seeing significant decreases in mortgage applications as mortgage rates increase.
This trend in mortgages is likely to continue if the Federal Reserve follows through on raising interest rates by a half a percentage point next month as part of an aggressive approach to reduce inflation. While the shorter-term implications of the Fed move will be difficult, consumer prices are significantly eating into monthly home budgets. Core prices, which exclude food and energy, climbed 5.4%, the highest in around four decades.
The Mortgage Bankers Association reported Wednesday that mortgage applications decreased 6.3% from just a week ago. Applications for refinancing fell even further, dropping to 38.8% of all applications, down from 51% a year ago. Also, Wednesday, the mortgage rates topped 5%, surprising even the MBA, which as of late March, forecasted mortgage rates would end the year around 4.5 percent and remain in that range through 2024.
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, told Inman that while he expects the forecast to be adjusted higher, the same uncertainty that sped markets to reach 5% territory could also drive rates back down again at a moment’s notice.
In other mortgage news, South Carolina-based Movement Mortgage laid off 170 employees, joining other lenders, including digital giant Better, in reducing workforce.
At the same time, Redfin has acquired Bay Equity Homes Loans for $137.8 million in its effort to provide customers with a one-stop shop for home buying, selling and renting.
Interestingly, activity in the home market is being driven largely by millennials, who currently form 43% of home buyers. They also are likely to place significantly among first-time home sellers this year as younger generations grow out of their starter homes and want to upgrade while their equity can provide a good down payment and before mortgage interest rates grow higher.
The challenge for those sellers might be a new crop of first-time home buyers who simply feel priced out of the market right now. Even prior to Wednesday’s news from the Federal Reserve, the National Association of REALTORS® had already placed home affordability at its lowest point since 2018.
Related, this week a survey by Fannie Mae indicated that only 24% percent of Americans think now is a good time to buy a home, an all time low. Despite the gloomy predictions offered by Fannie Mae economists, we aren’t seeing a decrease in buyer demand yet and other predications don’t point to a crash like we saw in 2007-08, largely because Americans have more equity than before and delinquent mortgages aren’t at the levels they were then.
We often consider the impact of innovation and technology as we look to innovation within our industry. While drones are now an everyday part of real estate photography and even home inspections, they are making a lifesaving difference in some places. Zipline has logged 20 million miles of flights across 275,000 commercial deliveries, mostly of blood, vaccines and medical products in Rwanda and Ghana. Closer to home, drones increasingly find a place in delivering medicine, food and smaller retail items.
Finally, work-from-home has revealed new workforce personalities from double-duty professionals, balancing home responsibilities such as schooling and care giving with work, to the “desperate to connect” wanting more time in the office, and even the “disoriented new hire.” Understanding these new personalities might help us better navigate the post-pandemic workplace.