The number of EXISTING home sales has decreased as both home prices and mortgage rates increased but there is also a very low inventory of homes for sale.
Existing Home---Months of Inventory remain near record lows but have started to increase.
Pending Home Sales Index has materially decreased over the past 8 months---initially due to a lack of homes for sale AND now rising mortgage rates and home prices.
Prior to COVID, the Days on Market (DOM is the blue line) had been gradually decreasing. After COVID the days on market reached record lows and are now 14 Days as of June 2022. 70% of all properties sell in ONE MONTH (red line).
Mortgage rates are now above 5.00% (red bars) and it is anticipated that this will have a dampening effect on home sales. (blue line). The rate increases in April-July will impact August+ closings.
Home prices are the dashed green line and even with mortgage rates rising, home prices rose. This has occurred in the past when rates rose----future near-term home buyers rushed into the market to buy before mortgage rates rose further.
Median home prices for all regions accelerated in early 2022 just as mortgage rates rose. It is noted there was a decline in July. This is normally a strong selling month.
For the West---note the flat monthly prices prior to the sudden recent acceleration.
Sales have been declining from their record highs with substantial declines noted in the South and West regions. The declines are a combination of 1. Higher mortgage rates. 2. Higher home prices 3. Relatively few homes for sale
The National Association of Realtor’s Pending Sales Index continues to decline as a mix of higher mortgage rates, higher home prices, and relatively few homes for sale. Declines are occurring in all regions. We are coming off record-high PSI levels due to low mortgage rates. PSI levels going forward will likely continue to decline as households who have purchased in the recent past will not need to move again. In essence, past future demand was brought forward with low mortgage rates and we are now seeing lower levels of demand.
Distressed-related home sales remain at record low levels. With recent home price appreciation, distressed homeowners will be able to sell and not sustain equity losses due to foreclosures.
First-time home buyers have decreased as mortgage rates and home prices have increased. Record low mortgage rates allowed 5 times income ratios; the ratio now is 4.0 based on 5.75%. All cash purchases have increased even though investor purchases have not materially increased.
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