This month’s Consumer Sentiment Index reached its highest level in a year as reported This Week in Real Estate by the University of Michigan. And, according to the Mortgage Bankers Association purchase applications rose for the fourth straight week while volume was 26% higher than a year ago. Below are a few newsworthy events from the final full week of March that influence our business:
Homebuyer Mortgage Demand Inches Higher, But Rates Hit Highest Level Since Summer. Higher mortgage rates do not appear to be dampening demand for home purchases but are crimping refinance volume. Mortgage applications to purchase a home rose 3% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. That is the fourth straight week of gains. Volume was 26% higher than a year ago. “Purchase applications were strong over the week, driven both by households seeking more living space and younger households looking to enter homeownership,” said Joel Kan, an MBA economist. “The average purchase loan balance increased again, both by quickening home-price growth and a rise in higher-balance conventional applications.”
Consumer Sentiment Improves in March. Consumer Sentiment rose in March to 89.1 according to the University of Michigan Consumer Sentiment Index. March’s figure is its highest level in a year and was 10.7 points higher than the February reading. The Current Economic Conditions Index climbed 7.9 points from the previous month to 93.0. The Consumer Expectations Index increased 12.7 points to 79.7. “Consumer sentiment continued to rise in late March, reaching its highest level in a year due to the third disbursement of relief checks and better than anticipated vaccination progress. As prospects for obtaining vaccination have grown, so too has people’s impatience with isolation, as those concerns were voiced by nearly one-third of consumers in March, the highest level in the past year. The majority of consumers reported hearing of recent gains in the national economy, mainly net job gains.” said Richard Curtin, chief economist of UM Surveys of Consumers.
Buyer Competition Reached 12-Year High at the End of 2020. Pandemic-induced demand – for homes with more living space and located in lower density neighborhoods – coupled with historically favorable mortgage rates and declining for-sale inventories led to the most competitive market seen since at least 2008. Buyers competing for fewer properties on the market were generally willing to offer relatively more than they have been in recent years, leading to the ratio of closing price to listing price reaching the highest level since at least 2008. The high ratio also signifies that a higher share of homes are selling over the asking price compared to a year prior – in November, when the Buyer/Seller Market Indicator peaked, 36% of homes sold over the asking price, up from 19% in 2019. Going forward, buyer competition is expected to remain strong as we approach the traditional spring home-buying season and the inventory of homes listed for sale remains at historic lows. Successful administration of mass vaccinations may help bring more inventory later in the year but with currently inventory-starved markets, the additional homes may not bring enough respite. The recent upswing in mortgage rates may push some potential home buyers out of the market, though with such low inventories of homes for sale the impact on the Buyer/Seller Market Indicator will likely be minimal.
Did you know every home listed for sale with Berkshire Hathaway HomeServices Northwest Real Estate is eligible to receive no obligation home warranty coverage the first six months the home is listed with our company?