Mortgage News July 3, 2023
The current state of the housing market is subjective at present, and the recently published Existing Home Sales report doesn’t provide significant clarity. The National Association of Realtors (NAR) recorded a yearly rate of 4.3 million properties, which is essentially the same as last month’s figure of 4.28 million and falls within the expected range of 4.25 million.
In January, existing home sales reached their lowest point at 4.0 million units, and to find a lower figure, one would need to look back to 2010. The subsequent recovery has been somewhat lacking in urgency, which is understandable considering the consistent presence of mortgage rates around 7%.
A common observation is that the significant increase in interest rates has made homeowners hesitant to let go of the low rates they obtained between 2020 and early 2022. This reluctance has limited the housing supply and constrained sales. While the housing market has indeed managed to offer a greater inventory despite these higher rates, it takes time for homeowners to adjust to the new conditions. Additionally, it is worth noting that the rates were still generally declining from the extremely high levels experienced in the early 1980s during that time.
An analysis of sales data in relation to mortgage rates indicates that the exceptionally low rates achieved between 2020 and early 2022 played a significant role in accelerating housing demand by several years. This suggests that the favorable mortgage rates prompted prospective buyers to enter the market earlier than anticipated, thereby impacting the volume of actual sales.
However, those who express concerns about inventory being a more significant challenge in the resale market do have a valid point. The disparity in “months of supply” between the resale market and the new homes market sheds light on this issue and highlights the difference in available options.
In conclusion, it will either require a significant amount of time or a notable decrease in mortgage rates to increase the availability of discretionary inventory for existing homes.
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