Austin Business Journal writes, "this year's housing market, beset by high interest rates, is on track for the lowest number of homes sold in 12 years.
Fannie Mae, the government-sponsored mortgage financing organization, projects total home sales in 2023 to be about 4.8 million, the lowest since 2011, and only slightly higher in 2024 at 4.9 million. The total amount of mortgage originations for 2023 is expected to be about $1.56 trillion, down from what Fannie Mae had originally projected to be $1.6 trillion this year.
Fannie Mae sees personal spending to be at unsustainable levels relative to American incomes and it projects a "modest economic contraction" in the first half of 2024, combined with mortgage rates hovering above 7%.
And while Fannie Mae is not predicting bigger home-sale declines beyond what it originally forecast, it also doesn't see a big chance of an uptick either.
"While existing home sales are expected to remain near their lowest level since 2009, further sales declines are likely to be less pronounced in relation to current increases in the mortgage rate," Fannie Mae staff said in a recent economic and housing outlook report. "While the additional downside risk from rate movements to date is minimal, the prospects of a recovery in existing sales in the near future is unlikely, given strong mortgage rate 'lock-in' effects and stressed affordability."
A fresh report from the National Association of Realtors tracks with what Fannie Mae is seeing. Existing-home sales dropped 0.7% in August, and the inventory of unsold homes dropped to 1.1 million — a 3.3-month supply of homes at the current sales pace, the NAR found. A balanced housing market is generally considered to have 6 months' supply.
The median existing-home sale price in August was $407,100, up 3.9% from the $391,700 observed in August 2022.
"Home prices continue to march higher, despite lower home sales," said NAR Chief Economist Lawrence Yun in a statement. "Supply needs to essentially double to moderate home-price gains."
Zillow Group Inc. also projects a continued increase in home prices despite the current headwinds. The home-sales platform recently forecast a 4.9% increase in home values over the next year — although that's down from the 6.5% increase it projected in July.
The change is in part because of an influx in new listings that helped boost inventory, although overall inventory is still tight by historic standards.
Reversal in home prices
While it's a far cry from the massive double-digit home value increases seen during the height of the pandemic, the growth in housing prices reflects a reversal from earlier in 2023.
Repeated Federal Reserve rate hikes moderated home-price growth and, in fact, even drove down prices during the first half of the year.
The median sale price of a home in the United States at the end of 2022 was $479,500. That price had slipped to $416,100 by the end of the second quarter, according to Fed data.
Data from Redfin Corp. found home prices rose 3% year-over-year during the four weeks ending Sept. 17, and pending home sales were down 13% from a year ago, as homeowners choose to keep the lower mortgage rates they locked in with their previous purchases.
Those factors have combined to make it a challenging environment for homebuyers, especially first-time buyers, according to a separate NAR survey.
"Homebuyers face the most difficult affordability conditions in nearly 40 years due to limited inventory and rising mortgage interest rates," said Jessica Lautz, NAR's deputy chief economist and vice president of research, in a statement with the survey release. "The impact is exacerbated among first-time buyers who are more likely to be from underrepresented segments of the population."
The biggest reason prospective homebuyers gave for holding off on buying a home was that they are waiting for housing prices to drop. The second biggest reason was waiting for mortgage rates to decline.
Realtors surveyed offered up another reason: A limited inventory of homes means there are not enough houses in their clients' budgets."
Source: Austin Business Journal
Written by: Andy Medici
Published: September 26, 2023
Posted by Grossman & Jones Group on
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