Housing Beat: Records Broken For Single-Family And Condo Prices; The 'R' Word Gets Raised

The latest data news from the housing market included new records being achieved in single-family home and condominium sales, the 30-year fixed-rate mortgage crashing through the 4.5% level, and a warning from a prominent industry economist on the potential for a recession created by the Federal Reserve.

The Price Is High: On the single-family home front, a new record was achieved in March when the median listing price hit $405,000, according to data from Realtor.com, a unit of News Corp’s NWS NWSA subsidiary Move, Inc. This marked a 13.5% year-over-year increase.

Listing prices in the top 50 metros grew by an average of 9.1% from one year ago, with Miami (+37%), Las Vegas (+35.2%) and Tampa (+32%) recording the highest year-over-year median list price growth.

On the flip side, the share of homes having their price reduced in March was 6%, up slightly from 5.8% one year ago but also nine percentage points below the typical levels from 2017 to 2019.

"Despite the $405,000 price tag, March data reveals we are starting to take some steps towards a more balanced market," said Danielle Hale, chief economist for Realtor.com. "Buyer demand is moderating in the face of high costs, and we're beginning to see more homeowners take price cuts on their listings and overall inventory declines lessen in response."

Redfin RDFN reported another housing market record being broken with the typical U.S. condo selling for an all-time high of $319,000 in February, up 14.6% from one year earlier and 22.7% from pre-pandemic February 2020. Not unlike the market for single-family homes, high demand and limited inventory helped fuel the price increase while the decline in coronavirus cases is helping to bring buyers back to urban markets.

“The condo market has bounced back,” said Chance Glover, a Redfin manager in Boston. “People are no longer afraid to live downtown, close to the crowds — and they often prefer it, because they’re close to the office and all the amenities of the city. Rising prices are pushing single-family homes out of reach for a lot of buyers, so condos are affordable in comparison.”

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Rates To The Moon? Freddie Mac FMCC reported that the 30-year fixed-rate mortgage averaged 4.67% for the week ending March 31, up from last week when it averaged 4.42%. The 15-year fixed-rate mortgage averaged 3.83%, up from last week when it averaged 3.63%. And the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.50%, up from last week when it averaged 3.36%.

“Mortgage rates continued moving upward in the face of rapidly rising inflation as well as the prospect of strong demand for goods and ongoing supply disruptions,” said Sam Khater, Freddie Mac’s chief economist. “Purchase demand has weakened modestly but has continued to outpace expectations. This is largely due to unmet demand from first-time homebuyers as well as a select few who had been waiting for rates to hit a cyclical low.”

While rates increased, applications for home loans declined. The Mortgage Bankers Association (MBA) reported a 6.8% decline in mortgage applications for the week ending March 25. While the MBA’s Purchase Index recorded a 1% uptick from one week earlier, its Refinance Index decreased 15% from the previous week and was 60% lower than the same week one year ago.

“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve,” said MBA Senior Vice President and Chief Economist Mike Fratantoni. “Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago.”

Fratantoni also observed that “purchase application volumes were little changed last week — this is particularly auspicious, as we are now in the beginning of the spring homebuying season, and those shopping for homes are struggling with not only higher and more volatile mortgage rates, but also an ongoing shortage of homes on the market. Given these hurdles, it appears to be promising news that purchase application volume has not declined, as many potential buyers are likely feeling the squeeze in their purchasing power from the jump in rates.”

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The “R” Word: Edward Dietz, chief economist for the National Association of Home Builders (NAHB), warned that Federal Reserve policy might have a deleterious impact on not only housing, but the wider economy.

“The intended monetary policy path of the Fed is more accelerated than what NAHB had built into its initial 2022 forecast,” Dietz stated in a blog posting on the NAHB website earlier this week. “Our concern is that the Fed will move too quickly, invert the yield curve, and risk an economic recession. Monetary policy tightening can help normalize financial conditions and tamper inflation, but it cannot solve current economic challenges by itself.

“Indeed, tighter monetary policy will not help produce more lumber, building materials and other items necessary to tame building material price growth,” he added. “In addition to construction cost challenges, higher mortgage rates will further reduce housing affordability conditions. New home sales declined 2% in February because of these factors.”

While Dietz noted that although NAHB’s analysis of its industry found builder confidence remained solid, “the measure of future sales expectations dropped 10 points, a significant decline representing growing concerns for housing demand in a tightening credit environment. The level of housing demand and recession risk will be the key factors for the industry’s growth, particularly throughout the next two years.”

Photo: Lesley Parker / Flickr Creative Commons