There was more incrementally good news on the US housing front Wednesday.
On the heels of a better-than-expected showing for the NAR’s marquee gauge of contract signings, the MBA’s weekly update found purchase applications rising double-digits as rates receded.
At 6.35%, the average 30-year fixed was the lowest in over a month. The 7bps decline was the third straight.
As the figure shows, the purchase index and rates are now moving in the “same” direction, where that just means to two are behaving intuitively: Purchase apps are rising (the left axis is inverted) as rates fall.
MBA SVP Mike Fratantoni thanked the ceasefire in the Mideast and the “positive” financial market response. “Despite geopolitical uncertainty, housing demand is being supported by a still resilient job market,” he said, adding that “homebuyers are experiencing a buyer’s market in most of the country.”
Indeed they are. As documented in these pages on too many occasions to count since last year, sellers outnumber buyers by the widest margin in at least 15 years.
In March, there were 43.1% more sellers than buyers, down slightly from February but still an enormous gap.
And yet, as Redfin’s Lily Katz is always keen to point out, “it’s only a buyer’s market for those who can afford to buy.”
On Wednesday, Katz’s colleague Dana Anderson delivered an update on deal cancelations for March. Recall that home-sale agreements are falling through at record rates when measured on a same-month basis.
The figure shows this March was no exception to the trend: Some 53,000 deals fell through last month, equating to nearly 13.5% of homes that went under contract.
That’s the highest for any March since at least 2017. (March of 2020 doesn’t count, for obvious reasons: The world ended that month.)
An Arlington-based realtor summed things up in remarks to Anderson: “There have been layoffs, ups and downs in the market and geopolitical turmoil — and on top of all that, housing costs are still high.”
The housing market is not in extreme distress. At least not yet. Correlations between various markets are not that high. The Northeast and Midwest are doing ok. The former moonshot markets in the south and west are suffering from supply indigestion. I can say that markets in nyc are doing ok, and prices are still firm and up a bit from last year. The moonshots not so much…
If correlations were really high that’s when you would know to foam the runway.
I wonder if the supply is partly due to my fellow Geezers offering larger homes in the hope of downsizing. Folks I speak to in that cohort who have been selling or thinking of it have been alarmed by the prices on smaller homes they’d like to downsize into. So what appears to be sellers stubbornly clinging to “optimistic” prices may partly be driven by this.
We casually explored that option and quickly decided that the swap was not worth it. It was actually made more economic sense to stay in our oversized but fully paid off home.
Probably the best decision. A lot of us will be thinking the same thing.
My wife and I down-sized about two-years ago and found pretty much the same thing. Going from a 4-bedroom, 2-bathroom house to a three-bedroom house on a much smaller lot in L.A. was essentially a break-even proposition (although our property taxes would just about double in the process!) We even looked at some tiny 2-bedroom homes and found they were only slightly cheaper than the 3-bedrooms were. The idea of selling your existing home, paying cash for something smaller, and still coming out $100,000 ahead simply doesn’t work anymore. In the end, our answer was to move two counties away for about 1/3rd the price. (Drastic true, but effective.) That’s why the market is frozen: boomers — who own the lion’s share of homes — cannot down-size efficiently. Why give-up the bigger house with the lower rate on what’s left of your mortgage, for a smaller home, with a similar monthly payment on a new mortgage and dramatically higher taxes? (Remember, that new property tax bill is forever!)