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Will the Real Estate Market See It’s Shadow - “Ground”Hog Edition

Will the real estate market see its shadow this spring or are we in an early spring real estate weather period? Here at Groundfloor, we not only monitor real estate trends but also monitor the news. The good news, 90% of the articles we read are pointing to any early spring in the real estate market!

If you have questions about how you can take advantage of the current release market, you can always check out our analysis here. Or you if want to want to take it a step further you can invest right now. 

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Let's dive into articles we are reading this week. 

Here is one via - Housing Wire. You can read the full article here.  

Affordability has improved in the mortgage market since December, thanks to declines in mortgage rates and a slowdown in home price appreciation. Here’s a spoiler: Industry experts believe this trend will continue for months, signaling that a good spring is ahead.

“It’s been the rise in prices [and] interest rates that have constrained affordability,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said in an interview. However, if the U.S. economy goes through a mild recession, as the economist expects, mortgage rates are likely to come down as a function of the job losses, causing home price appreciation to remain slow. “Those things will improve affordability,” Duncan said.

Regarding mortgage rates, Freddie Mac’s latest report showed on Thursday morning that the 30-year fixed mortgages dropped to 6.13% as of January 26, down two basis points from the previous week. Rates were at 3.55% one year ago. At Mortgage News Daily, rates were at 6.18%, down three basis points from the previous day.

According to industry experts, rates will continue to go down, reaching the high 5s at the end of the year.
“Mortgage rates continue to tick down and, as a result, home purchase demand is thawing from the months-long freeze that gripped the housing market,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time homebuyers.”

Regarding home prices, Holden Lewis, a home and mortgage expert at NerdWallet, said some home builders reduced prices to stimulate sales. “In December, the typical new home costs almost $50,000 less than in October. The combination of lower rates and lower prices boosted sales in December and might be doing the same in January,” Lewis said in a statement.

A good spring ahead?

Affordability deteriorated in 2022. Overall, mortgage payments increased by about 40%, or $534, according to the MBA purchase applications payment index (PAPI).

However, the national median payment applied for by purchase applicants decreased to $1,920 in December, down from $1,977 in November and $2,012 in October, the data shows.

“There was a slight improvement in homebuyer affordability last month as mortgage rates fell by 37 basis points from November,” Edward Seiler, MBA’s associate vice president for housing economics and executive director at the Research Institute for Housing America, said in a statement.

Seiler added, “With inflation cooling slightly, MBA expects both mortgage rates and home-price growth to soften, which along with cooling inflation, should help bring more prospective buyers into the market during the spring homebuying season.” 

Or this one... full article here. 

We are off and going now, as seasonality has kicked into full gear with the purchase application data. And, so far, it’s been a good start to the year.

Here’s the housing market rundown for the last week:

  • Purchase application data showed positive weekly growth again — and the bounce from the bottom is more noticeable now.
  • Housing inventory decreased by 6,468 units, a more pronounced decline from the previous week. 
  • The 10-year yield can’t break lower from the critical level I have discussed, so not much is happening with mortgage rates.

When I talk about seasonality, I am talking about the second week of January to the first week of May. Total volumes traditionally fall after May, so you can get a good sense of how spring is turning out by the end of March.

We have had back-to-back weekly growth of 25% and 3%. However, the key is that the year-over-year declines have stopped going lower, and we have risen noticeably higher from the bottom.

Remember, though, that this is always the case. We had a waterfall dive in purchase apps in 2022 — a historic dive, I would say — so there is a shallow bar to bounce off of. Does this move have more legs to run, and will we need lower mortgage rates to get more growth in this data line?

The key with purchase application data is that this data line looks out 30-90 days, so the growth we see here takes about 30-90 days at minimum to hit the sales data. As I have stressed for some time, this data line started to improve on November 9th, 2022. It will take until February or March to see it in sales data for January and February.

The most recent pending home sales data from last week went positive; this runs in line with what we saw starting in November and December. It’s low bar bounce for now, but the bleeding in housing has stopped, and we are showing some growth.

We focus on the weekly data to give us a forward-looking idea of where sales are going. Hopefully, the evidence I have shown you above, and the fact nobody else was talking about how the purchase application data internals were getting better starting from November 9th, will give you some faith in my models — kind of like the “America is back” recovery model of 2020.

How do you think the housing market will be this spring? Based on our data and news  the above, we are very excited. 

These articles found above can be found at https://www.housingwire.com/! All this info was too good not to share! 

Clinton Dugan

SR. Organic Growth Manager