“While some optimism appears to have crept into the housing sector, it represents an increase from very low levels of activity and is at risk of declining again if rates reverse,” At were economists Fannie Mae Their most recent report.
By early 2023 a A combination of several factors led to the slumped housing market Feel a Much warmer. First, seasonal demand is higher in the first months of the calendar year. The average 30-year fixed rate mortgage rate dropped from 7.37% in November to 5.99% in February. This was due to substantial mortgage rate discounting offered by many homebuilders.
However, we’re already starting to see the housing market backdrop sour again. The average fixed 30-year mortgage rate for 30-years has gone up from 5.99% to 6.9% over the past week. 6.88%.
This resurgence of mortgage rates already coincided with seasonally adjusted mortgage purchases falling to their lowest point since 1995 (see chart below).
The full-year 2023 Fannie Mae anticipates that both existing and new home sales volumes will fall by 5.4% and 19.2% respectively. That comes after last year’s 16.5% drop in new home sales and the 17.9% drop in existing home sales.
Two main reasons are why Fannie Mae doesn’t think housing It will rebound in 2023.
First, Fannie Mae believes that mortgage rates are going to continue being high and will keep buyers from buying.
Second, Fannie Mae economists believe home listing will be constrained because few buyers are willing to sell their fixed 3% rate mortgage. a plus 6% mortgage rate. It would be difficult for home sales to increase if there was not enough inventory.
“Ongoing affordability constraints, the “lock-in” Effect creating a financial disincentive for the majority of current homeowners with mortgages to move, and still-tight inventories are expected to continue to limit home sales… Additionally, the 10-year Treasury has increased meaningfully in recent weeks, suggesting that mortgage rates are likely to begin rising again,” wrote Fannie Mae economists in their latest report.
While Fannie Mae expects inventory levels to remain constrained, it says tight inventory alone won’t be enough to stop the home price correction.
Following the 2.5% drop in U.S. home prices in the second half of 2022, Fannie Mae predicts that the U.S. will see home prices fall by 4.2% more in 2023. Then, in 2024. Fannie Mae economists anticipate that U.S. home values will fall an additional 2.3%.
If Fannie Mae has it right. housing The national would be affected by the slump housing market Go through a mild home price correction—not a full-blown housing price crash. Even if the price drop does occur, then national home prices in 2024 would still be up 29% March 2020 price levels.
Remember, you can change your mind at any time a Like group Fannie Mae discusses U.S. home prices, it’s a The national aggregate National aggregate. a Price movements can vary depending on where you live.
Want to stay updated on the housing market correction? Follow me on Twitter at @NewsLambert.
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