Real Estate News in Brief
Things are definitely looking up! The steep fall in mortgage rates has helped existing home sales improve for the first time in 5 months, and both homebuilder and Realtor confidence also moved up.
The National Association of Homebuilders’ confidence index rose 3 points in December to 37. We all know why: the recent drop in mortgage rates, which helped buyer traffic improve and boosted builder optimism. The index was at 31 last December. [NAHB]
Housing starts for November jumped 15% MoM to a seasonally-adjusted, annualized (SAAR) rate of 1.56 million units, 73% of which were single-family (SFH) homes. While 59% of the units currently under construction are multifamily units (MF = more than 5 units per property), the MF building boom is clearly fading, with MF representing just 30% of new permits in Nov. [Census Bureau]
Existing home sales broke a 5-month losing streak in November, rising nearly 1% month-over-month to an annualized rate of 3.82 million units. These sales only partially reflect the big drop in mortgage rates in the last two months, so we can expect even stronger numbers in the months to come. The median sales price in November was $388K, up 4% year-over-year. [NAR]
Redfin’s new Home Price Index (which they market as being just like Case-Shiller but more current) saw national home prices rise 0.6% MoM in November, a slowdown from +0.7% in October and +0.8% in September. Keep in mind: 0.6% X 12 months = 7.2% growth if simply annualized. These are still big numbers. [Redfin]
The NAR always releases its Realtors Confidence Index the same day as existing home sales. For November, the most notable change was the increased confidence that buyer and seller activity will increase from here. Competition levels eased somewhat (lower % of homes sold above their listing price and lower % of homes sold in less than a month). That said, the median number of offers per home sold actually edged up to 2.6 from 2.5. [NAR]
Source: NAR
Source: NAR
More on Existing Home Sales
Around this time last year, we had a big move down in mortgage rates. Between late October 2022 and early February 2023, average 30-yr mortgage rates moved down by about 1.3% (130 bps). That played a major role in the 14% MoM improvement in existing home sales in February 2023.
Well, the decrease in mortgage rates that we’ve seen this year has been both larger (1.5% = 150 bps) and faster (2 months) than last year. Matthew Graham of Mortgage News Daily called it “the biggest drop in a 45 day window that we’ve ever measured.”
All this suggests to me that transaction volumes for existing homes have already bottomed, and that December and January will look even better. And I’m not alone:
“The latest weakness in existing home sales still reflects the buyer bidding process in most of October when mortgage rates were at a two-decade high before the actual closings in November. A marked turn [upward] can be expected as mortgage rates have plunged in recent weeks.” — Lawrence Yun, NAR’s Chief Economist.
What he means is that the majority of the home sales that closed in November went under contract in October, when rates were much higher. (It generally takes 1.0–1.5 months for a deal to close.)
Mortgage Market
In the week since the Fed’s unofficial pivot towards (possibly maybe) thinking about rate cuts, several Fed members have done their best to curb the market’s enthusiasm. But they haven’t been successful. After all, if the majority of Fed members expect the Fed Funds Rate to be 75–100 bps lower by the end of 2024, that obviously means that they expect rate cuts to get there!
Average 30-year mortgage rates were fairly steady this week at around 6.6%. [Mortgage News Daily] The next Fed meeting will be on January 31, with the Fed futures market implying an 87% probability of no action, and a 13% probability of the first, 25 bps cut. [CME]
They Said It
“With mortgage rates down roughly 50 basis points over the past month, builders are reporting an uptick in traffic as some prospective buyers who previously felt priced out of the market are taking a second look. With the nation facing a considerable housing shortage, boosting new home production is the best way to ease the affordability crisis, expand housing inventory and lower inflation.” — Alicia Huey, NAHB Chairman