Existing home sales fell a second month in March, data out Wednesday showed.
At 5.77 million, the seasonally-adjusted annual rate was in line with consensus. The range of forecasts, from more than four-dozen economists, was 5.5 million to 6.1 million.
Although March’s 2.7% decline was expected, February’s already sizable decrease was revised lower to show a near 9% drop (figure below).
Inventories rose, but would still be exhausted within two months at the current sales pace.
On a YoY basis, sales fell in every region. The data came a day after housing starts figures showed that although construction broadly held up last month, multifamily projects were the linchpin. Single-family starts, permits and completions all slipped.
Mortgage rates have surged almost two full percentage points in 2022 to 5%, adding insult to injury for some would-be buyers who are already staring down record-high prices in a market increasingly beholden to all-cash bids from deep-pocketed investors.
All-cash sales accounted for 28% of transactions last month, the most in eight years. That figure will rise as mortgage rates go higher. You don’t need a mortgage when you’re paying cash.
“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” Lawrence Yun, NAR’s chief economist, said Wednesday.
That’s an important point which is often lost in this discussion. Homes aren’t the only thing that’s more expensive in 2022. Almost everything costs more, which means families attempting to save for a downpayment or pondering how much they can afford to spend on a mortgage payment are compelled to factor in sharply higher prices for gas and food.
That said, Yun noted the obvious. “Homes are selling rapidly, and home price gains remain in the double-digits,” he remarked.
The median existing home price in March was $375,300. It was the 121st consecutive month of YoY increases. Needless to say, that’s a record. Nearly all homes (87%) sold in March were on the market for less than a month.
The NAR pointed to the prevalence of first-time buyers in noting that Americans are keen to lock in rates before they rise further, which Yun said is “inevitable.”
He also delivered a warning (of sorts). Sellers shouldn’t necessarily “expect the easy-profit gains” to continue, Yun said, adding that multiple offers will likely “fade as demand continues to subside.”
The all cash is a misnomer. If you time it right and / or have the right lender you can present cash offers while not actually having the full amount. Have made offers this way and spoken to mulitple lenders about this.
TD, so to clarify, you enter into contract without a loan contingency (financing contingency), but then ultimately close the escrow with loan proceeds + buyer cash (down payment) ? And this goes “into the record books” as All Cash based on the contract terms (…not the actual sources of funds on the closing statement) ?
Not calling you out here, just interested to know if the data is muddled by this approach in the marketplace.
The dynamics of the housing market look nothing like they did in 2006-2007 in the days of NINJA loans. The impact from higher rates to housing seems likely to be much more muted this time around as does the retrenchment in residential investment, which is typically one of the transmission mechanisms for tighter monetary policy to feed through into the economy. Moreoever, I find myself sympathetic to some of the arguments about how the housing market is enjoying a once in a century moment given the cohort of 32 year olds, plus or minus a few years, are the largest population cohort and own fewer homes than others did when they were that age, and are finally starting to buy.
Your point about the 32 year olds is a very important point. The demographics of our country are this:
Greatest Generation (born
before 1928) 1.3M
The Silent Generation (born 1928-
1945). 21.8M
The Baby Boomer Generation
(born 1946-1964). 70.7 M
Generation X (born 1965-1980). 65.0 M
The Millennial Generation (born
1981-1996). 72.3M
Generation Z (born 1997-2012). 67.0M
The delay in forming households that covid inflicted on Millennials was significant and they are not yet caught up. The other thing that I am hearing and seeing is that the Baby Boomer Generation (parents of Millennials) are front loading the transfer of their wealth to their children in order to assist with the purchase of a home.
I do not want to do this, but I might. My kids are not quite yet at that point, so I do not have to decide right now.