Weekend Talking Points - 'Unspring'

Authored By:
Scott Bradley Brixen
John Smith
January 1, 2023
5 min read

I’m heading to southern Africa with my family. Assuming that I am not eaten by lions or sharks, Talking Points will be back on June 14. Sala kahle — that’s ‘stay well’ in Zulu!

Average mortgage rates moved up nearly half a percent in April. As you’d expect, that hurt new and existing home sales. But rates have fallen since then thanks to cooler inflation, employment and retail sales figures. Will the move back to near 7% be enough to put the groove back in Spring sales? Let’s hope so!

Higher rates rain on spring sales. Existing home sales dropped 1.9% month-over-month to 4.14 million units annualized (the 2nd-straight month of decline), but median sales prices rose 3.7% MoM to $407,600. [NAR]

Realtor confidence drops, while competition rises. Only 22% of agents surveyed by NAR in April thought that buyer activity would pick up over the next 3 months (down from 26% in March). That’s almost certainly a result of mortgage rates rising >50 basis points in April. [NAR]

Despite that, we ARE seeing fairly normal signs of competition levels rising as the high season kicks into gear. Days on market dropped from 33 in March to 26 in April, and the % of homes sold that were on the market less than a month rose from 60% in March to 68% in April. [NAR] More on this later.

An unusual drop in rental rates. Rental rates for detached single family homes were +3.4% YoY in March, but attached home rental rates (think duplexes, townhomes etc.) dropped 0.6% YoY. That was the first YoY decrease posted in 14 years! [CoreLogic]

Note: With many would-be buyers unable to afford a home, demand for standalone SFHs (and therefore rental rates) remains strong. However, the near record delivery of multifamily units is clearly having an impact on duplex/townhome rental rates — particularly in the South.

New home sales faded in April. April new home sales fell 4.7% MoM (and -6.6% YoY) to 634,000 units (annualized), and sales from the prior three months were all revised downward. The median home home price drifted 1.4% lower MoM to $433,400. [Census Bureau]

VA says paying buyers broker is ok — for now. Responding to the NAR settlement, the VA has said that it will temporarily allow VA buyers to directly compensate their agents. [NAR]

Realtors Confidence Index for April

Every month, the NAR surveys Realtors and asks them for a combination of hard and soft data. The results of this Realtors Confidence Index (“RCI”) are released on the same day as the existing home sales figure. I consider it a very useful gauge of competitive ferocity.

Higher rates have put a real dent in Realtor confidence. While optimism has improved from last year, it’s still crazy to think that only 26% of respondents see buyer activity rising over the next three months. March 2022 was 36%. March 2021 was 58%.

But the rebound in first-timer buyers continues. Respondents indicated that 33% of the sales in April were to first-time homebuyers. That’s the highest percentage since January 2021! Considering what happened to mortgage rates in April, this is a little difficult to explain. Perhaps it’s simply pent-up demand: they can’t wait any longer.

Competition is heating up, like it does every Spring. The median home sold in April 2024 was on the market for 26 days, a big contraction from 33 days in March (and 38 in February). But this is actually less competitive than last year. The April 2023 median days on market (“DOM”) was 22.

The % of properties selling above list price dipped slightly. In April 2024, 27% of homes sold were priced above their original list price. That was down from 29% in March 2024, but very similar to the 28% in April 2023.

More multiple offers. In April 2024, there was an average of 3.2 offers for every property sold, up from 3.1 in March 2024. In April 2023, the figure was 3.1. We’re obviously nowhere near the kind of bidding war frenzy that we saw in 2021 and 2022 (peak of 5.5 offers per sale).

Mortgage Market

Average 30-yr mortgage rates dropped dramatically last week. This week, they managed to hold most of their gains, hovering around 7.10%. Reminder: around this time last year, mortgage rates started to move much higher (from below 7% in May 2023 to over 8% in October 2023).

Current odds on Fed rate cuts at upcoming FOMC meetings below. This is based on the contract prices for the Fed funds rate futures:

  • Jun 12: 4% (down from 6% last week)
  • July 31: 20% (down from 28% last week)
  • Sept 18: 60% (down from 66% last week)
  • <NOV 5: US PRESIDENTIAL ELECTION>
  • Nov 7: 72% (down from 79% last week)
They Said It

“U.S. single-family rent growth strengthened overall in March, though some weaknesses are revealed in the latest numbers. Overbuilt areas, such as Austin, Texas continued to soften, decreasing by 3.5% annually in March. And for the first time in 14 years, single-family, attached properties posted a year-over-year decline. The continued strength in single-family detached rents indicates that potential homebuyers who are priced out of the home-purchase market are choosing to rent similar alternatives.” — Molly Boesel, CoreLogic’s Principal Economist

“Home prices reaching a record high for the month of April is very good news for homeowners. However, the pace of price increases should taper off since more housing inventory is becoming available.” — Lawrence Yun, NAR’s Chief Economist

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