Housing market faces mixed results as pending home sales fall sharply from 2021
U.S. pending home sales in May edged up, ending a six-month streak of back-to-back declines, with a slight 0.7% increase from April, according to the National Association of Realtors June 27.
Regional month-over-month results were mixed with a slight recovery on average, and the Northeast and Southern states saw an increase in sales, while the Midwest and West saw a decline .
Pending sales in the North East rose 15.4% in May, the largest monthly increase among the four major regions.
The West was the hardest hit with a 5% reduction in future contracts in May, down 19.8% from May 2021.
“The biggest decline in contract activity was seen in the Western region, where homes are the most expensive,” said NAR chief economist Lawrence Yun.
This contrasts with last year, when the Northeast, South and West saw double-digit declines in pending sales, while sales in the Midwest fell 8.8%.
NARs Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, rose 0.7% to 99.9 in May.
An index level of 100 is equal to the level of contractual activity in 2001.
However, the index’s year-over-year data trades saw pending sales contracts fall dramatically across the country by 13.6% instead of the 9.8% expected by analysts. .
“Despite the small gain in pending sales from the previous month, the housing market is clearly in transition,” Yun said.
“Deal signings are down significantly from a year ago due to much higher mortgage rates.”
For an average single-family home with a 10% down payment, the monthly mortgage payment has increased by about $800 since the start of 2022, as mortgage rates have risen 2.5 percentage points since January.
There were 1,030,000 homes available in inventory in May, according at NRA.
“Trying to balance the housing market by stifling demand through higher mortgage rates is detrimental to consumers and the economy,” Yun added.
“The best way to balance the market is to increase supply, which also helps the wider economy.”
As the housing market across the country continues to suffer from demand vastly outpacing supply, local variations in home prices and affordability have become a factor in regional differences in sales activity in Classes.
“It further indicates the growing need to increase supply to rein in house price growth and improve homeownership chances for potential buyers,” Yun concluded.
Meanwhile, the housing sector has recently taken a hit, after the Federal Reserve recently hiked interest rates to tame inflation to a 40-year high, causing interest rates to soar. loan.
First-time home buyers have been hit hard by rising mortgage rates and there has been a toll on sales of previously owned homes, while the new rates have made purchases unattractive for existing homeowners to refinance.
Mortgage lenders have seen business evaporate in recent weeks as mortgage rates hit levels not seen since the Great Recession as the fallout begins to affect the entire sector.
In June, Wells Fargo announced that profits from its mortgage business could see a significant decline in the second quarter and began reassigning and laying off employees from its mortgage lending division.
Rival JPMorgan Chase followed with a similar move in its home loan department.
Real estate brokers like Compass and Redfin also made public plans to make double-digit headcount reductions in early June.
The report did not include everyone in housing-related roles in other sectors, such as finance and lending.
The industry appears to have learned from the housing crisis of 2007-2008, with analysts noting that it is better suited to cyclical changes in the economy this time around.
The 2020 pandemic had caused a large wave of Americans moving to other parts of the country and, combined with historically low mortgage rates at the time, had spurred strong housing demand and a new refinancing boom.
The two-year housing boom sent home prices soaring and saw mortgage lenders hit new records, while owners of existing homes saw massive gains in their home equity.
Now the market is headed the other way due to rising mortgage rates, but a slowdown in market growth could eliminate excessive competition in the home loan market and a chance to replenish new housing stock.
Meanwhile, construction job openings hit a record high in April as homebuilders sought more workers to meet strong demand in the first quarter of the year, according to the Bureau of Labor Statistics. the United States.