The Fannie Mae Home Price Index Accelerated in Q1 2022 To Its Fastest Pace in 47 Years

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Fannie Mae released their Q1 2022 Home Price Index This Week in Real Estate showing the Index accelerated to its fastest annual pace in its 47-year history, up 20.0% year-over-year, topping the 19.1% annual rate recorded in Q4 2021. The 30-year fixed-rate mortgage jumped to a 5% average, the first time since 2011. And, the Mortgage Bankers Association is re-forecasting their purchase origination volume to a record $1.72 trillion, down from its previous forecast of $1.77 trillion. Below are a few newsworthy events from the second week of April that influence our business: 

Fannie Mae Home Price Index Measured Home Price Growth At Annual Rate Of 20.0% In Q1 2022. The Fannie Mae Home Price Index (FNM-HPI) accelerated in Q1 2022 to its fastest annual pace in the 47-year history of the index, measuring 20.0 percent year over year, non-seasonally adjusted, up from the 19.1 percent annual rate recorded in Q4 2021. On a quarterly basis, home prices rose a seasonally adjusted 4.8 percent in Q1 2022. “After decelerating toward the end of 2021, the FNM-HPI sped up in the first quarter due to continued strong homebuying demand and a lack of inventory. We believe recent homebuying demand was augmented by many homebuyers pulling forward their home purchase plans in anticipation of rising mortgage rates. Now, with rates having sharply risen since the start of the year – and some of that homebuying demand now met – we expect price growth to begin cooling as the year progresses,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

Mortgage Rates Hit 5% For First Time Since 2011. The 30-year fixed-rate mortgage jumped to a 5% average this week, the first time it’s been that high since 2011. Since the beginning of the year, mortgage rates have jumped by 1.8 percentage points and added about $400 to the average monthly mortgage payment for a median-priced home. Also, with inflation at a 40-year high, home buyers are finding they may need to adjust their budget to buy this spring. “As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices, and tight inventory are making the pursuit of homeownership the most expensive in a generation,” writes Sam Khater, Freddie Mac’s chief economist. NAR predicts that rising borrowing costs will price out about 16 million households from the housing market this year. NAR has forecast home sales activity to drop about 10% in 2022.

Bankers Lower Their Mortgage Demand Outlook For The Year As Rising Rates Hurt Affordability. The Mortgage Bankers Association now calls for overall mortgage originations, which include refinancing loans, to total $2.58 trillion in 2022, a 35.5% decline from 2021. The previous forecast was for $2.61 trillion. Supply in the housing market is tight, and prices are high. Americans are grappling with the hottest inflation in four decades, while the Federal Reserve is aggressively raising interest rates to keep it in check. Originations for purchases are still forecast to increase to a record $1.72 trillion this year, but the previous forecast was for $1.77 trillion. “Even though existing sales volume will be slightly lower than last year, the continued growth in new home sales and the rapid rise in home prices should deliver a smaller, but solid, 4% annual growth in purchase origination volume,” said Michael Fratantoni, MBA’s chief economist. Mortgage applications to purchase a home rose 1% for the week but were 6% lower than the same week one year ago. More potential buyers are now turning to adjustable-rate mortgages, which carry lower interest rates. Their share of applications last week was 7.4%, the highest level since June 2019. “In a promising sign of strong purchase demand amidst affordability challenges, both conventional and government purchase applications increased,” said Joel Kan, an MBA economist.

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