Archives June 2020

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the developing COVID-19 situation affecting the industry, we want to give readers more timely weekly updates. You can look forward to a Weekly Housing Trends View near the end of each week along with weekly coverage from our Housing Market Recovery Index and a weekly video update from our economists. Here’s what the housing market looked like last week.

Weekly Housing Trends Key Findings

• National Recovery Index: The realtor.com Housing Market Recovery Index reached 92.0 nationwide this week, the highest index value since the middle of March when COVID-19 disruptions began. This week’s jump also represents the largest weekly increase in four weeks, taking the index just 8.0 points below the pre-COVID baseline.
• Local Recovery: An additional two markets have crossed the recovery benchmark this week, taking the total number of markets above the January baseline to 10, the highest since the COVID onset. The overall recovery index is showing greatest recovery in Seattle, Denver, Boston, Jacksonville, and Philadelphia, Regionally, the West (99.6) continues to lead the recovery with the overall index now virtually at the January benchmark. The South (93.9), which led the early recovery, is beginning to lag relative to other regions as we head into the summer, with both the Northeast and Midwest (94.5 and 93.6) catching up.
• New listings are down 19 percent. Buyer interest in the housing market has more than fully recovered whether we’re using online traffic or purchase mortgage applications as a gauge. In comparison to buyers, the pace of sellers coming back to the market is lagging which is helping market balance measures such as price and time on market move in a seller-friendly direction. New listings are a crucial pre-cursor to home sales, particularly in an inventory-light market. 
• Median listing prices are now growing at 5.6 percent over last year, more than a percentage point above pre-COVID pace.
• Time on market is now just 13 days slower than last year. While it takes longer to find a buyer and complete a sale compared to this time last year, the gap is shrinking as buyers return and have to move faster to compete for a limited number of homes for sale.
• Total inventory was down 29 percent. The number of homes for sale continues to shrink at a bigger pace relative to last year because buyers outnumber sellers in this unusual summer season.    

Data Summary

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the developing COVID-19 situation affecting the industry, we want to give readers more timely weekly updates. You can look forward to a Weekly Housing Trends View near the end of each week along with weekly coverage from our Housing Market Recovery Index and a weekly video update from our economists. Here’s what the housing market looked like last week.

Weekly Housing Trends Key Findings

• Median listing prices are now growing at 4.6 percent over last year, just above the pace seen pre-COVID.
• New listings are still down 20 percent. More sellers are returning to the market compared to the early COVID period, but fewer than a week ago, and the number of new listings remains below last year levels. New listings typically peak over the next month (mid-June to mid-July). Given the importance of new home listings to sales, to see home sales bounce back, we’ll need to see a later seasonal peak this year.
• Time on market remained 16 days slower than last year as it takes longer to find a buyer and complete a sale in the current markets. Time on market could speed up if buyers continue to outnumber sellers.
• Total inventory was down 27 percent. Signs are pointing to rising home buyer interest, and steeper declines in inventory are on the horizon unless more sellers list homes for sale. 

Data Summary

Mortgage rates have fallen to a new all-time low for the fourth time this year. But there’s significant upside risk to the low rate environment, and Americans may not want to wait too much longer before locking rates in.

The 30-year fixed-rate mortgage averaged 3.13% for the week ending June 18, down eight basis points from a week earlier, Freddie Mac FMCC, -0.60%reported Thursday. The previous record low was 3.15% back at the end of May. A year ago, the 30-year home loan averaged 3.84%.

The 15-year fixed-rate mortgage dropped four basis points to an average rate of 2.58%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage dipped one basis point to 3.09%.

Mortgage rates have hit another record low due to declining inflationary pressures, putting many home buyers in the buying mood,” Freddie Mac’s chief economist Sam Khater said in the report.

The interest rates on home loans roughly track the direction of long-term bond yields, including the 10-year Treasury note. The 10-year Treasury yield TMUBMUSD10Y, 0.699% has seesawed over the past week in response to weakness in the stock market driven by concerns about the rise in coronavirus infections across many parts of the country.

Upticks in coronavirus cases across the country left market participants skeptical of the economic recovery’s sustainability,” said Matthew Speakman, an economist with Zillow ZG, +1.09% . “This sparked a sell-off in stocks and a flight to the safe haven of bonds — something that normally pushes mortgage rates lower.”

‘Rates could just as easily begin to trend upward again, particularly if key economic data or measures to contain or treat the virus show meaningful improvements.— Matthew Speakman, an economist with Zillow

But now the mortgage market is at a turning point, Speakman said. And it all depends on what happens with the spread of COVID-19 from here on out.

“More bad news regarding the uptick in coronavirus cases would likely send rates back downward, possibly to new lows,” Speakman said. “However, rates could just as easily begin to trend upward again, particularly if key economic data or measures to contain or treat the virus show meaningful improvements.”

Rates going up could spell trouble for the broader housing market. Eager to lock in the cheap financing, buyers have flocked to apply for home loans to purchase property. There’s evidence that the low rates, coupled with pent-up demand caused by the coronavirus stay-at-home orders, is  driving a significant recoveryacross the housing market.

An increase in rates would hamper the housing market’s ability to rebound. But it’s not the only headwind the market is facing. “It would be difficult to sustain the momentum in demand as unsold inventory was at near record lows coming into the pandemic and it has only dropped since then,” Khater said.

In other words, with very few homes for sale, there’s a rather low ceiling on how high sales activity can go for the foreseeable future.

https://www.marketwatch.com/story/mortgage-rates-drop-to-another-record-low-but-heres-why-americans-should-think-twice-about-waiting-to-lock-them-in-2020-06-18?siteid=yhoof2&yptr=yahoo

House hunters rushing to lock in record low mortgage rates likely have a bit more time to shop thanks to a pair of announcements from the Federal Reserve this week.

On Wednesday, the Fed’s policy makers said they would maintain the near zero interest rates instituted earlier this year, indicating they expect to keep rates at basement levels through 2022. In its statement, the Fed also said that it would continue aggressively buying government and mortgage-backed bonds at a steady rate to keep markets functioning.

The measures are the most extreme since the 2008 financial crisis and were first announced in mid-March, as steps to limit the spread of the coronavirus wreaked havoc on U.S. businesses and kept house hunters on the sidelines. By reiterating its commitment to these tools, the Fed is indicating that the economy may take longer to recover than hoped, but is also showing that it will take extraordinary measures to help consumers.

“It’s bittersweet,” says Ralph McLaughlin, chief economist at home investment startup Haus. “It means there is concern about the U.S. economy’s ability to take off.”

That was certainly the message the stock market took. The Dow plunged more than 1,800 points on Thursday as investors reacted to the Fed’s decision and a spurt of new COVID cases around the country.

What the Fed’s move means for mortgage rates

Low rates from the Fed do mean some good news for homeowners: Mortgage rates are likely to remain near record lows for an extended period. (For the week ending June 11, the average interest rate for a 30-year fixed-rate mortgage was 3.21% with 0.9 discount points paid.)

“The risk of rates trending higher, which is something we were facing no more than a week ago, has almost disappeared,” said Zillow Economist Matthew Speakman.

The expansion of the bond buying program, known as “quantitative easing,” also means that people who want to take out a new mortgage or refinance an existing one should be able to, since mortgage lenders will have an easier time selling on mortgages.

“The Fed’s statement essentially stated they are not going to rock the boat,” wrote Sam Khater, chief economist at mortgage giant Freddie Mac. “The Fed’s stance is positive news for the housing market and allows mortgage rates to drift lower since they have room to decline given mortgage spreads.”

What Khater means by “spread,” is the gap between the 10-year Treasury yield and 30-year mortgage rates. Mortgage rates are not directly tied to the federal funds rate, the short term rate the Fed controls. Instead mortgages tend to move in step with the 10-year Treasury note, which responds quickly to Fed statements, since most homeowners typically move or refinance within a decade.

That said, some economists do not expect mortgage rates to sink much lower than they are right now since most mortgage lenders are already operating at capacity. Others warn the record low rates are not available to everyone.

“The rates that we are talking about are the average rates. They apply to your most vanilla loans,” says Speakman. Think 30-year loans for people with excellent credit and who can make a 20% downpayment. “For others, it is still really challenging to get that credit.” 

https://money.com/fed-move-mortgage-rates/

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the developing COVID-19 situation affecting the industry, we want to give readers more timely weekly updates. You can look forward to a Weekly Housing Trends View near the end of each week. Here’s what the housing market looked like last week.

Weekly Housing Trends Key Findings

• Total inventory was down 23%. Signs are pointing to rising home buyer interest, and steeper declines in inventory are on the horizon unless more sellers list homes for sale.  
• Time on market was 17 days slower than last year as it takes longer to find a buyer and complete a sale in the current markets.
• New listings down 23%. With fewer sellers returning to the market compared to a week ago, the yearly declines in new listings remain roughly steady, suggesting that while the general trend is toward improvement, it’s a bumpy road and seller confidence is not quite back to normal yet.  
• Median listing prices have maintained momentum and growth is now closer to pre-COVID levels.

Data Summary

Weekly Housing Trends View

New listings: On the slow path to recovery. Nationwide the size of declines held mostly steady this week, dropping 23 percent over last year, a slight increase over last week but still an improvement over the 30 percent declines in the first half of May. 

More properties will have to enter the market in June to bring the number of options for buyers back to normal levels for this time of the year, nationwide and in all large markets. 
In the first two weeks in March (our pre-COVID-19 base), new listings were increasing 5 percent year-over-year on average. In the most recent three weeks ending May 16, May 23, and May 30 the volume of newly listed properties decreased by 28 percent, 20 percent, and 23 percent year-over-year, respectively. The continued declines in newly listed properties mean we’ve yet to see the full wave of spring sellers return to the market. However, recovery could be on the horizon as three quarters (36 of 99) of large metros continue to see smaller declines this week, including New York and Chicago.

Asking prices: Price gains keep momentum as the mix of homes for-sale continues to revert back toward pricier properties.

In the first two weeks of March (our pre-COVID-19 base), median listing prices were increasing 4.4 percent year-over-year on average. In the most recent three weeks ending May 16, May 23, and May 30, the median U.S. listing price posted an increase of 1.5, 3.1 and 3.1 percent year-over-year, respectively. While current price gains remain below pre COVID-19 levels, we expect them to continue accelerating in the weeks to come as more sellers regain confidence and inventory remains limited relative to buyer interest. Locally, 81 of the largest 100 metros saw asking prices increase over last year.

Total Active Listings: Sellers have yet to come back in full force, limiting the availability of homes for sale. Total active listings are declining from a year ago at a faster rate than observed in previous weeks, and this trend could worsen as buyers regain confidence and come back to the market before sellers.

Weekly data show total active listings declined 23 percent compared to a year ago as the lack of sellers is currently outweighing the extra time homes spend on the market. Signs, such as more purchase mortgage applications than last week and a year ago, are pointing to rising home buyer interest, and steeper declines in inventory are on the horizon unless more sellers list homes for sale to meet rising demand. 

Time on market: While new listings and asking prices are gaining momentum, homes are still sitting over two weeks longer on the market than this time last year. It could take a few more weeks for time on market to reach pre-COVID levels as buyers come back to the market and the pace of sales resumes.
In the first two weeks in March (our pre-COVID-19 base), days on market were 4 days faster than last year on average. The trend in time on market began to slow in mid-March, but the indicator didn’t register an increase until April. Data for the week ending May 30 showed that time on market was 17 days or 30 percent greater than last year, the biggest increase in time on market since 2013. With fewer fresh new properties and buyers taking their time in this strange new world of home searching, sellers should be prepared to wait longer to find a buyer and longer for the transaction to close as well. It’s visible in local data as well as the national figures, with 85 of the largest 100 metros showing similar double-digit percent increases in time on market from one year ago. However, more markets continue to see smaller single-digit increases and could see time on market drop in June, including Dallas, San Francisco and Nashville.