The housing market has been a perfect storm for sellers for over a year, but the wind is turning loud CNBC. Strong demand and record low supply are starting to fade, and mortgage rates are falling from their recent highs. While home prices are still rising, these new market dynamics are likely to contain some of those gains as well.
“Many buyers have withdrawn from the housing market and are waiting for more and better homes to be listed,” said Daryl Fairweather, Redfin’s chief economist. “Buyers no longer have the same urgency as they did at the beginning of the year. You don't buy before prices go up because asking prices have already risen and stabilized. "
A monthly Fannie Mae survey of real estate sentiment in June found that 64% of respondents said it was a bad time to buy a home, up from 56% in May. When it comes to selling, 77% of respondents said it was a good time to sell, up from 67% in May.
Potential sellers had held property back from the market and didn't want people to come through their homes while the pandemic raged. They were also concerned that they would not be able to purchase anything else.
“First-time buyers hit a wall in many places across the country as the rise in home prices outweighs the benefits of lower borrowing costs. Younger buyers and first-time buyers, including younger millennials, face the challenge of having enough savings for a down payment, closing expenses and cash on hand, ”said Frank Martell, President and CEO of CoreLogic.
“You (buyer) are not ready to buy until mortgage rates go up because rates are back below 3% and are likely to stay low. As more and more new offers come onto the market, Buyers who have thrown in the towel may want to check again because the market is leaning more in their favor, ”added Fairweather.
"Despite the pessimism about home buying, we expect housing demand to remain high for the remainder of the year," said Doug Duncan, chief economist at Fannie Mae.
NAHB urges Congress to issue guidelines to help builders boost housing production
According to LBM JournalJerry Howard, CEO of the National Association of Home Builders (NAHB), testified to Congress on Wednesday, July 14, calling on lawmakers to pass key policy proposals that will help builders expand the housing supply to reduce the housing deficit and improve housing affordability all Americans.
During a hearing before the House Ways and Means Subcommittee on Oversight on expanding access to housing for all Americans, Howard noted that rising house prices, apartment rents, and construction costs pose additional risks to housing affordability for potential home buyers and renters.
"In the past decade, the housing industry has not kept pace with demand due to various supply-side constraints," said Howard. "These include a shortage of skilled workers and building land, tight credit conditions, scarcity and rapidly rising building material prices as well as excessive regulatory burdens that have increased the costs of a single-family home by around 25 percent and an apartment building by 33 percent." Progress must be made on all fronts to alleviate the supply-side challenges that are holding back housing production. "
With the ongoing housing shortage being the biggest challenge facing potential homebuyers, Howard urged Congress and the Biden government to take the following steps to expand access to affordable housing.
- Repair the building materials supply chain
The US must work immediately with Canada to pass a new softwood agreement and stop the imposition of harmful tariffs on Canadian sawn timber, which increases prices and price volatility. “Trade Minister Gina Raimondo is committed to holding an industry stakeholder summit to investigate supply chain problems for lumber and other materials and to discuss policy solutions. We look forward to being part of this process, ”said Howard.
- Improving the tax credit for low-income residential property
Congress must H.R. Passed 2573, the Affordable Housing Credit Improvement Act. The bill would fund more than 2 million additional apartment buildings over the next decade by increasing the loans allocated to each state and expanding the number of affordable housing projects that can be built with loans from private activities.
- Reformulate current tax incentives for home ownership
Recent tax changes have undermined the effectiveness of mortgage interest deduction, which has resulted in fewer middle-class taxpayers breaking down and more incentives flowing to high-income households. A shift away from mortgage interest deductions to permanent home tax credits aimed at low- and middle-income Americans would make home ownership more accessible to hard-working American families. Additionally, a permanent first-time home buyer tax credit would complement this relocation and ease the challenge of collecting a down payment.
Mortgage applications were up 16% last week
After several consecutive weeks of slumps, mortgage applications rose 16% for the week ending July 9, 2021, according to the latest report from the Mortgage Bankers Association.
As reported by HousingWire, The sudden surge in claims was “heavily” driven by increased refinancing as mortgage rates fell again, said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.
These lower prices can help some home buyers complete their purchases, especially first time home buyers.
"We continue to see ups and downs as housing demand remains strongbut inventory for sale remains low, ”said Kan. "The year-on-year comparisons were significantly lower for both purchase and refinancing applications."
According to a study by Redfin released this week, the sheer number of bidding battles decreased from May to June as more homes slowly entered the market over the past month. The total inventory is still low, of course, but a slowdown in the market could soon lead to more prospective buyers and an increase in mortgage applications, experts said.
Weekly update of the mortgage rate
The summer swoon on mortgage rates continues as the 30-year fixed-rate mortgage fell for the third week in a row. Mortgage rates have fallen thirty basis points since their high of 3.18% in April. While this decline is not large, it does offer modest relief to borrowers buying in a market with high home appreciation and low inventory levels.
The Freddie Mac The weekly survey shows that the average interest rate on a 30-year fixed-rate mortgage is 2.88%, 0.02 points lower than the previous week and 0.10 points lower than last year.