Why the hot housing market can cool down

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While Black Knight data showed that house prices rose at a record pace in April due to housing shortages and low interest rates, a separate report from Redfin found housing market indicators that began to decline in May.

In April, home prices rose 14.8%, the highest annual growth rate in nearly 30 years when the Black Knight tracked that figure. Single-family real estate prices were actually up 15.6% year on year, while condominium prices were up 10%.

This marks a 17 straight month rise in residential property prices.

The total number of homes for sale is down 60% from the 2017-2019 average for April, and “the situation is not improving either,” said Ben Graboske, president of Black Knight Data & Analytics. in the press release.

Black Knight’s own data showed that single family inventory was sold in just two months for sale nationwide in March, the lowest on record, and the trend continued to decline. “In fact, there were 26% fewer new listed properties in April compared to seasonal levels before the pandemic,” Graboske said.

Higher prices translate into lower affordability, even if the average interest rate on a 30-year fixed mortgage, as estimated by Freddie Mac, has dropped below 3%. in recent weeks.

“In early June, the share of the average income required for monthly payments for a house with an average price rose to 20.5%,” Graboske said, pointing out that while it is below the 25-year average (23.6%), it was above the 5-year average 20.1%

“In recent years, 20.5% has been about the tipping point where the exchange rate has begun to slow down, but given the severity of the stock shortage, house prices – at least for now – have continued to skyrocket even as affordability has tightened.” said Graboske.

If prices continued to rise at the current rate and on average over a 30-year FRM should have slowly increased up to 3.5% by the end of next year, the ratio of payments to income will reach 21.6% by December this year and 25% by 2022. If rates had climbed steadily to 4% by the end of 2022, availability would have been 22%. at the end of 2021 and 26.7% next year.

But there are indications that a slowdown in market growth may already begin, and this could be the result of the lifting of restrictions on the pandemic, Redfin said. Both pending sales and bid prices began to stabilize during the four weeks ending May 30.

“The housing market was accelerating to 100 mph and is now down to 80,” Redfin chief economist Daryl Fairweather said in a press release. “This is not a bursting bubble. Rather, it is a sign that consumers may be more likely to spend their time and money on other things besides housing, now that travel, dining and entertainment are resumed in full force. “

It is too early to tell whether this is an early start to the usual seasonal housing regime or the start of post-pandemic recovery, given that the time period in question ended the day before Memorial Day.

Home sales in progress fell 3% over the four-week period. ended on May 2. This is compared to a 38% increase over this period in 2020 and a 2% increase over the same period in 2019.

Meanwhile, seller’s asking prices fell $ 2,500 over the four-week period ending May 23, to an average of $ 354,975. This is 11% more than in the same period in 2020.

But completed sales during this period indicate that the May market was still hot.

There was a record high four-week moving average home sales price of $ 355,558, up 24% (also a record) over the same period last year.

A record 52% of homes sold above their list price, up from 26% in the same period a year earlier.

And they sold at an average selling price of 102.0% (another record), which means the average home sold 2.0% more than its asking price. A year ago, they sold on average 1.5% less than requested.

The time from listing to sale fell to an all-time low of 16 days, up from 37 days in the same period in 2020.



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