Although recently released data points to rising macroeconomic uncertainty that is beginning to spill over into the housing market, prospective homebuyers are beginning to enjoy some of the benefits of a shifting market. To be sure, rising rates have reduced buyer purchasing power, but rising inventories and reduced competitiveness means that buyers who remain in the market have a better shot at having their offer accepted than at any point since the pandemic began.
Inventory Now Exceeds Pre-Pandemic Levels: After more than two years of consistent year-over-year declines in the number of active listings available for sale, the inventory shortage has shown consistent signs of improvement in recent weeks. Last week, there were more active listings on the market than at any time in the past two years. Nearly 48,000 were on the market last week, which edges out the week of May 23, 2020 as the highest level of active listings since we began reporting weekly MLS statistics at the beginning of 2020. It is important to note that listings still remain depressed by historical standards, but it is encouraging to see them trend upward on a more consistent basis this year.
Rising Inventory Helping Homebuyers: As the number of homes to choose from rises, homebuyers are finding the market less frenzied than at any point since the pandemic began. Last week, the percentage of homes that sold over list price dipped to 46% of closings. That is only the second week since September 2020 when fewer than half of homes sold above list price. In addition, more sellers are willing to reduce their price, with 37% of active listings down from the original list price last week—also a 2+ year high. Taken together with a recent reduction in rates, buyers currently in the market should be encouraged by rising prospects of finding a home and having their offer accepted.
Mortgage Rates Begin to Rise Again: After two consecutive declines in the weekly rate posted by Freddie Mac, the average 30-year fixed-rate mortgage rose last week. At 5.51%, rates are still lower than they were last month, but that represents a 20 basis-point increase from the week prior. Given the expectation of a rate increase in the 75-100 basis-point range at the upcoming Federal Reserve meeting, it is likely that mortgage rates will continue their upward trend as inflationary pressures remain and demand for short-term bonds wane.
Declining Mortgage Applications Accelerate: The number of prospective homebuyers applying for residential purchase loans dropped 18% last week compared to the same week 1 year earlier. This marks the 60th consecutive week of year-to-year declines in mortgage applications that began after the peak homebuying season last summer. Through the first two weeks of July, mortgage applications are at their lowest level of any July going back to 2014. This suggests that recent reading on pending sales in California, which suggested further moderation in home sales in July and August, should be given credence.
Home Sales Dip to 12-Year Low: Existing, single-family detached home sales in California was down 8.4% on a monthly basis from 376,560 in May and down 20.9% from a year ago, when 436,020 homes were sold on an annualized basis. Outside of the initial lockdown in the Spring of 2020, this is the lowest level of home sales since 2008. California’s median home price declined 4.0% in June to $863,790 from the revised record-high of $900,170 recorded in May. The June price was 5.4% higher than the $819,630 recorded last June. The moderation in the median home price was due partly to a change in the mix of sales in June, as the high-end market started pulling back.
Rising Prices Begin to Weigh Consumers Down: The latest reading on inflation showed the issue getting worse rather than coming in for a soft landing. The consumer price index (CPI) rose 9.1% on a year-over-year basis in June, which was another 40-year high and suggests that recent hopes that the Fed may ease off their aggressive schedule of rate hikes may be misplaced. Outside of motivating the Fed, rising prices are also expected to begin eating into overall economic growth as, despite a nominal increase in retail sales, real spending has declined in 3 of the last 4 months.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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