Real Estate Beat: Mortgage Rates Are Falling, Inventory is Growing, and Who Still Wants a Vacation Home?

The U.S. real estate market ended June with falling mortgage rates, an increase in pending home sales, a growing number of properties available for sale and evaporating enthusiasm for vacation homes.

On the Mortgage Front: Freddie Mac FMCC reported that the 30-year fixed rate mortgage averaged 5.70% as of June 30, 2022, down from last week when it averaged 5.81%. The 15-year fixed rate mortgage averaged 4.83%, down from last week when it averaged 4.92%. And the 5-year Treasury-indexed hybrid variable rate mortgage averaged 4.50%, up from last week when it averaged 4.41%.

“The rapid rise in mortgage rates has finally come to a halt, largely due to the countervailing forces of high inflation and the growing possibility of an economic recession,” he said. Sam Khater, chief economist at Freddie Mac. “This pause in rate activity should help the housing market rebalance itself from breakneck growth in the seller’s market to a more normal pace of home price appreciation.”

While mortgage rates have fallen slightly, the volume of mortgage applications has increased. The Mortgage Bankers Association (MBA) The Composite Market Index, a measure of the volume of mortgage applications, rose 0.7% for the week ending June 24 from the previous week. The buy index rose 0.1% and the rollover index rose 2% from the previous week.

Joel Can, MBA’s associate vice president of economic and industry forecasts, said that “lower mortgage rates have led to an uptick in refinancing, led by a rise in conventional lending. However, refinances are still 80% lower than a year ago and more than 60% lower than the historical average. Overall buying activity has weakened in recent months due to rapidly rising mortgage rates, high house prices and growing economic uncertainty.

Kan added that the average purchase loan amount fell to $413,500, down from its all-time high of $460,000 in March.

See also: Manhattan’s six-building multi-family portfolio sells for $1.75 billion, a record post-COVID-19 pandemic

On the home buying front: At the start of the week, the National Association of Realtors (NAR) reported that pending home sales were up in May, a reversal from the six-month streak of consecutive declines. The NAR’s pending home sales index rose 0.7% in May from April to 99.9 – an index of 100 equals the level of contract activity in 2001 – although year-on-year, transactions fell 13.6%.

“Despite the small gain in pending sales from the previous month, the housing market is clearly undergoing a transition,” said the NAR’s chief economist. Lawrence Yun. “Contract signings are down significantly from a year ago due to much higher mortgage rates. Trying to balance the housing market by stifling demand through higher mortgage rates hurts consumers and the economy. The best way to balance the market is to increase supply, which also helps the economy at large.

More accommodation appears to be being made available, according to a separate data report from real estate agent.comwhich is operated by press company NWSNWSA subsidiary company Move, Inc.

Realtor.com reported that the number of homes available to buyers climbed at its fastest annual rate ever this month with an 18.7% increase. In June, homes of at least 1,750 square feet accounted for more new listings (54.3%, compared to 52.7% in 2021) than relatively smaller homes (45.7%, compared to 47.3% in 2021).

“Our June data shows that the inventory recovery has accelerated, posting the second consecutive month of active listing growth in nearly three years,” said Danielle Hale, chief economist for Realtor.com. “We expect these improvements to continue, as predicted in our recently updated 2022 guidance.”

Still, Hale predicted that while rising inventory “will eventually slow the feverish pace of competition, the typical buyer has yet to see significant relief from rapid home sales and record asking prices.”

“However, a deeper dive into June’s inventory gains in square footage reveals potential opportunities for move-out buyers as newly listed homes are larger. In other words, this first wave of home improvements the offer may be particularly timely for summer sellers looking to upgrade from their starter homes, which could mean more equity to devote to buying a larger property.

The National Association of Home Builders (NAHB) argues that housing inventory expansion could be even greater, but that is being thwarted by US tariffs on Canadian lumber.

“The NAHB is extremely disappointed that the Biden administration is turning a blind eye to the housing affordability crisis in the United States by refusing to eliminate tariffs on Canadian lumber as it plans to reverse tariffs on a wide range of Chinese products to curb inflation,” said Jerry Konter, president of NAHB and a builder and developer from Savannah, Georgia. “The tariffs act as a tax on American consumers and the lumber tariff is particularly onerous, given that it has contributed to unprecedented volatility in lumber prices which has sharply increased the cost of housing at a time when housing affordability is already more than 10 years away. down.

“Timber tariffs affect millions of American buyers and homeowners,” Konter added. “If the administration is really interested in relieving American citizens of high inflation by removing costly tariffs, it should ensure that Canadian lumber is among the tariffs it aims to eliminate.”

And there is one area where property is available but there aren’t many buyers. red fin RDFN reported demand for vacation homes fell below the pre-pandemic baseline for the first time in two years, with second home mortgage rate freezes down 4% from pre-pandemic levels in May. That’s down from a revised rate of 3% above pre-pandemic levels a month earlier and 70% above pre-pandemic levels a year earlier.

“Soaring monthly payments, along with higher loan fees, have driven many second home buyers out of the market,” said Redfin’s deputy chief economist. Taylor Marr. “Many potential second home buyers are also deterred by turbulent stock markets, high inflation and fears of recession, and they may be quicker to exit the market because vacation homes are not a necessity like vacation homes. main houses. The downturn in the second home market is expected to continue as long as mortgage rates are high and the stock market crashes.

Photo: Paul VanDerWerf/Flickr Creative Commons; color effects by Joshua Clancy Hall

See also: Why is Bill Gates eager to spend $170 million on a 17th century Roman palace?