The Mortgage Corner
The above graph says it all. With rising interest rates, housing sales are slowing a bit. Total existing-home sales, https://www.nar.realtor/existing-home-sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 2.5 percent to a seasonally adjusted annual rate of 5.46 million in April from 5.60 million in March. With last month’s decline, sales are now 1.4 percent below a year ago and have fallen year-over-year for two straight months. This is in spite of inventories climbing, and more young adults in their 30’s buying homes.
Total housing inventory at the end of April increased 9.8 percent to 1.80 million existing homes available for sale, but is still 6.3 percent lower than a year ago (1.92 million) and has fallen year-over-year for 35 consecutive months. Unsold inventory is at a 4.0-month supply at the current sales pace (4.2 months a year ago).
Interest rates aren’t rising that much. The 30-year conforming fixed rate actually dropped 1/8th percent to 4.125 percent this week from 4.25 percent for a 1 origination point fee. And so-called Jumbo or High-Balance fixed conforming rates were just 1/8th percent higher than conventional conforming fixed rates for the same fee.
This is while housing costs are still rising. The median existing-home price for all housing types in April was $257,900, up 5.3 percent from April 2017 ($245,000). March’s price increase marks the 74th straight month of year-over-year gains, according to the NAR.
This tends to make buyers hesitate. Lawrence Yun, NAR chief economist, says this spring’s staggeringly low inventory levels caused existing sales to slump in April. “The root cause of the underperforming sales activity in much of the country so far this year continues to be the utter lack of available listings on the market to meet the strong demand for buying a home,” he said. “Realtors® say the healthy economy and job market are keeping buyers in the market for now even as they face rising mortgage rates. However, inventory shortages are even worse than in recent years, and home prices keep climbing above what many home shoppers are able to afford.”
New-home sales also slowed, with April sales 15,000 short of the consensus, at a 662,000 annualized rate with revisions pulling down the prior two months by a total of 30,000. Yet compared to the prior report, when sales beat expectations by 64,000 and when upward revisions added 81,000, today’s report doesn’t reverse what is still an upward sales’ slope for new homes.
“With job growth, rising incomes and overall economic strengthening, we can expect housing demand to continue to grow, particularly among millennials (i.e., in their 30’s) and other newcomers to the market,” said NAHB Senior Economist Michael Neal. “However, builders need to manage rising construction costs as well as regulatory hurdles to keep their homes competitively priced.”
The details are mixed for new-home sales. Price discounting may be underway as the median fell a very steep 6.9 percent in the month to $312,400 for a year-on-year gain of only 0.4 percent. Relative to sales, which are up 11.6 percent year-on-year, prices look like they have room to climb, says the National Association of Homebuilders. Supply data are also a concern. New homes on the market rose only 2,000 to 300,000 with supply relative to sales also moving only marginally higher, to 5.4 months from 5.3 months.
Harlan Green © 2018
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