In this Monthly Market Trends series, we offer you our interpretation of current trends through the eyes of our VP of Market Risk, Patrick Donoghue, and provide you with his balanced commentary so you can make the best investment decisions today for the highest returns tomorrow.
It’s been an interesting couple of weeks for data regarding residential real estate.
Mortgage Rates have dropped!
Thirty days ago, mortgage rates for most applicants were at or above 8%. Over the past couple of weeks, the 10 year treasury yield has pulled back significantly, which prompted nearly a half percent decrease in 30 year mortgage rates. This drop is a welcome relief; perhaps the 10 year yield has found its peak. Inflation metrics and labor market metrics have shown recent signs of cooling prompting this yield and rate decline.
In the chart below, the black dotted line traces the declining core inflation rate, and the blue line moving up and to the right traces U.S. Jobless Claims.
Wasn’t It Just About a Year Ago That Some Housing Experts Were Predicting a Housing Price Collapse?
Consistently in this blog I have pointed out what this housing event is - and that is a pull back in transaction volume and not widespread price decline - a case of constrained inventory tracing back to seller prudence amid a rising rate environment. Here is a long term chart of existing home transactions. Can you see the significant pullback in transaction volume?
The above shows U.S. Existing Home Sales (the blue bars) and mortgage rates (the black line).
Existing home sales peaked at around 4.6M in 2023 compared to 6.3M in 2022 and 6.6M in 2021. There has been a steady pullback in transactions since early in 2022. The reason for this pullback was the rapid expansion of interest rates (here exemplified by the 30 year mortgage rate).
Home prices grew in more than 80% of U.S. Metro areas year-over-year in Q3, according to NAR. (Link to Report).
NAR listed these key highlights:
- Single-family existing-home sales prices rose in 82% of measured metro areas – 182 of 221 – in the third quarter, up from 58% in the previous quarter. The national median single-family existing-home price grew 2.2% from one year ago to $406,900.
- The monthly mortgage payment on a typical, existing single-family home with a 20% down payment was $2,192 — up 19.2% from a year ago.
- Twenty-five markets (11%) experienced double-digit annual price appreciation (up from 5% in the prior quarter).
Q3 Price Growth Year-Over-Year in Groundfloor’s Top 5 Metros for Lending:
|
Metro |
GF Loan (Units) |
Y/Y Price Growth |
|
Atlanta-Sandy Springs, GA |
187 |
2.2% |
|
Jacksonville, FL |
150 |
-2% |
|
Chicago-Naperville, IL |
36 |
4.5% |
|
Tampa-St Petersburg, FL |
17 |
2.4% |
|
Philadelphia-Camden, PA |
19 |
5.5% |
Jacksonville has had several years of very strong growth, so I am not overly concerned that in Q3, year-over-year, there was a minor pullback. Atlanta continues to be solid while Chicago and Philadelphia have had great years. Let’s also keep our eye on this ball: In Q2, 58% of metro areas measured by NAR had overall price growth while in Q3, year-over-year, 82% had home price growth. So, an increase of 24% of measured Metro areas were added to the positive price growth side. That’s a trend. A good one at that.
I want to close out this blog with an overview of Atlanta Metro’s housing health, Groundfloor’s most active lending market.
Sellers maintain control and there really aren’t many signs this is going to change anytime soon. We understand this to be a ballast for prices. Inventory is increasing but on par with traditional seasonal trends. We do not yet see the effect lower mortgage rates will have, but we will over the next 60 days. I think buyers will be active in December as some pent-up demand finds outlets.
Atlanta-Sandy Springs-Marietta, GA
Thursday, November 16, 2023
Source: Altos Research
This week, the median list price for Atlanta-Sandy Springs-Marietta, GA is $427,650, with the market action index hovering around 46. This is less than last month's market action index of 48. Inventory has held steady at or around 13,389.
Source: Altos Research
Looking forward to posting the December Market Trends, where we can review our forecast for 2024!
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