After booming in the residential real estate market in the first 18 months of the Covid pandemic, it is now down. Home prices and mortgage rates soared, resulting in lower demand and lower sales.
On the price front, the median existing home sale price was $416,000 in June, up 13.4 percent from a year earlier. According to the National Association of Realtors. The June number recorded 124 consecutive months of increases over the previous year, the longest streak on record.
For mortgage rates, the average 30-year fixed-rate mortgage rate was 4.99% for the week ending August 4. According to Freddy Mac.
Sam Khater, chief economist at Freddie Mac, said in a statement that mortgage rates remained volatile due to the tug of war between inflationary pressures and an apparent slowdown in economic growth.
“Extreme uncertainty surrounding inflation And other factors are likely to cause rates to remain variable, especially as the Fed tries to navigate the current economic environment.”
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As for sales, existing home sales in June fell to their lowest level in two years, According to NAR. Sales were down 5.4% compared to May and down 14.2% from June 2021. June was the fifth consecutive month of decline.
Buying demand continues to decline as the cumulative effect of higher prices and higher housing prices increases Recession “Risk and declining consumer confidence are affecting home buyers,” Khater said in a statement.
Looking to the future, online real estate brokerage Zillow (z) – Get a Zillow Group Inc. report. Expect some weakness in the third quarter. It expects revenue from its platform that serves real estate agents (Premier Agent) to decline 21% from the previous year.
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Zillow said in a letter to shareholders that there are a number of trends that are making it difficult for clients to find work.
Decreased demand for home purchases due to recent increases in interest rates, which has made home buying less expensive.
“Recent double-digit annual decline in … mortgage applications.
“Home prices are lowering driven by declining demand and inventory levels that are growing but still lower than they were before the pandemic.”
Bottom line: “Although demand indicators stabilized in July compared to June, we expect total industrial dollar volumes to shrink in the second half of 2022 year on year,” Zillow said.
So the outlook is not pretty. If the Federal Reserve continues to raise short-term interest rates, long-term rates may resume their rise, causing mortgage rates to rise.
And if long-term interest rates do not recover, it could mean that the economy is heading into a recession. An economic downturn is sure to damage the housing market, and lead to lower demand.
If you are looking to buy a home, you may want to wait until market conditions improve. But this could take a year or two, and in the meantime, rents are rising sharply. So, in a sense, you’d be damned if you did, and damned if you didn’t.