On the 18th of August 2022, the National Association of Realtors noted the downward trend in existing home sales that have been evident since the increase in mortgage rates is deteriorating. The data line’s worst feature is not that, though. The startling statistic (for some, not for me) is that the median sales price is up 10.8% yearly, even with the sharp fall in sales since January 2022. The fact that inventory levels began the year at all-time lows is what is causing the brutally sick housing market to persist.
The good news is that inventory is growing, which is encouraging. A more functional housing market can be found in areas of the country where inventory levels are at peak-2019 levels or above. Hence such areas have been taken off the list of severely unhealthy markets. But as a country, we are not there yet.
Observations this year show that the housing market performed poorly when mortgage rates went above 6%. Of course, there has been a daily rate of more than 1% back-and-forth. The market ought to behave better if mortgage rates may rise back to 4%. However, until then, the market is still adjusting to the demand shock to affordability caused by this year’s sharp rate increase. This adds to the 44%+ rise in property prices since 2020, which has significantly impacted affordability.
Since inventory started the year at record low levels and is gradually returning to normal, home prices are still rising more quickly this year than in the previous ten years. To read more on this, click here.
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