As pending sales dropped for the fifth consecutive month in March,-1.2% m/m and by -8.2% y/y, the National Association of REALTORS® (NAR) is anticipating “much calmer” market conditions.
Dip in Contract Signings Suggests “Lowered Buying Activity”
Lawrence Yun, chief economist with NAR, said the reduction in pending sales suggests “multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions.”
Yun expects higher mortgage rates to remain a critical factor affecting home sales due to home affordability concerns. Yun said prior to the Federal Reserve’s latest rate hike of 50-basis points that “…the sudden large gains in mortgage rates have reduced the pool of eligible homebuyers, and that has consequently lowered buying activity. The aspiration to purchase a home remains, but the financial capacity (to do so) has become a major limiting factor.”
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Yun’s Inflation Expectations
Yun believes that inflation will average 8.2% for the 2022 “…although it will start to moderate to 5.5% in the second half of this year.”
Sustained price appreciation and higher mortgage rates since March have triggered an increase of +31% y/y in mortgage payments across the country. Some major Sun Belt metros such as Tampa, Las Vegas and Phoenix have seen mortgage payment increases skyrocket closer to +50% y/y.
Yun anticipates, “Overall existing home-sales this year look to be down -9% y/y…” and that the 2022 median home price will likely gain +8% y/y.
What About Renters?
Renters are expected to see continuing rent hikes throughout 2022 as rental demand increases from potential buyers being priced out of the home buying market due to increasing mortgage rate hikes.
Yun said, “Fast-rising rents will encourage renters to consider buying a home (to stabilize their housing costs), though higher mortgage rates will present challenges. Strong rent growth nonetheless will lead to a boon in multifamily housing starts with more than +20% growth this year.”
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Thanks to National Association of REALTORS® and HousingWire.