Winter Sales Activity Will Remain Strong And Push Mortgage Demand Higher

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Fannie Mae released its November housing forecast This Week in Real Estate reporting monthly price growth has moderated yet year-over-year appreciation sits at the highest level in more than four decades. The report is the first to project housing market activity through the end of 2023 which expects double-digit home-price appreciation will last until the middle of 2022 and it won’t be until 2023 when home inflation returns to a single-digit pre-pandemic pace. Below are a few newsworthy events from the fourth week of November that influence our business: 

The US Housing Market Will Finally Be Back To Normal In 2023 – But Prices Will Be Stuck Permanently Higher. If surging home prices put you off from buying a house in 2021, you’ll have to wait another year for the market to cool down. The third quarter of 2021 likely marked the peak for the housing market’s price surge, economists at Fannie Mae said in its November housing forecast. The cool down has started, but it will take time for the market to normalize, the team added. Double-digit home-price inflation will last until the middle of 2022, according to the forecast. It won’t be until 2023 when home inflation returns to the 5% pace seen before the pandemic. Monthly price growth has eased slightly, but the year-over-year pace still sits at the highest level in more than four decades. The November report revises home construction lower while lifting expectations for home sales. Put simply, Americans are still snapping up homes at breakneck speed – but builders haven’t been able to keep up. That combination of factors is set to leave price growth at stifling highs throughout 2022. 

Yun: Expect An Unseasonably Hot Winter For Home Sales. “Compared to other past winter seasons, this winter season’s sales activity will be stronger,” says Lawrence Yun, chief economist of the National Association of Realtors. “This winter, there will be more sales compared to pre-pandemic winters going back all the way to 2006.” The momentum from the last few months is expected to continue. From March through October, homes have been selling faster than they traditionally do. “Although there are fewer buyers in the winter months than in the competitive spring and summer period, all signs suggest that housing demand remains high,” says Danielle Hale, realtor.com’s chief economist.  Housing inventories remain tight. The inventory of unsold homes fell by 12% in October compared to last year, according to NAR data. A limited supply of homes for sale is an ongoing issue for the housing market against continued strong demand among potential home buyers. Homes are selling fast. Eighty-two percent of homes sold in October were on the market for less than a month, according to NAR data. 

Unusual Holiday Home-Buying Surge Pushes Mortgage Demand Higher. An unusual surge in home buying, just as the market enters the historically slow holiday season, is driving mortgage demand higher. Total mortgage application volume rose 1.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The increase was largely driven by applications to purchase a home, which rose 5% for the week but were still 4% lower than the same week one year ago. That was the third-straight weekly gain. Buyers may be rushing in during the usually slow holiday season because they are concerned that mortgage rates will move even higher than they have in the past month. “The financial markets continue to discern the Federal Reserve’s policy path in the coming months in light of the current high growth, high inflation environment. Despite a fair amount of rate volatility last week, mortgage rates were higher,” said Kan, MBA’s associate vice president of economic and industry forecasting. “Borrowers continue to lock in mortgages in anticipation of higher rates in the future.”

Did you know every home listed for sale with Berkshire Hathaway HomeServices Northwest Real Estate and Berkshire Hathaway HomeServices Real Estate Professionals are eligible to receive no-obligation home warranty coverage from American Home Shield or 2-10 Home Warranty the first six months the home is listed with our company?