March 2022 U.S. Housing Market Update

March 2022 Blog

More of the same was delivered in the U.S. housing market last month, with March 2022 being the hottest market on record. That’s according to Seattle-based Redfin Corp. (NASDAQ: RDFN), which found homes sold at their fastest pace, and for more above list price, than any other March on record. Nationally, the median home-sale price rose 6.2% in March, to an all-time high of $412,700.

Another month, another record-breaker. But there were some early signs of a potential letting up in the housing market later in March, and so far in April, although buyers — especially in hot Sun Belt markets — likely won’t feel many ripple effects for months to come.

SEE GRAPH of  ANNUAL CHANGE IN HOME VALUES

Daryl Fairweather, chief economist at Redfin, said a slowdown has so far primarily been observed in U.S. coastal markets. But if a buyer is outpriced in a market like Los Angeles, they may instead try their luck in a more affordable market like Phoenix or Las Vegas, she added.

That’s bolstering a pandemic-increased migration out of higher-cost cities to more affordable Southeastern and Southwestern states, which have generally seen the largest gains in home-price appreciation since March 2020.

Nationally, typical home values grew 20.6% from March 2021 to March 2022, according to Zillow Group Inc. (NASDAQ: ZG) data. Among markets tracked by Redfin, the largest annual price increases were in Tampa, Florida, at 29%; Phoenix, at 27%; and McAllen, Texas, also at 27%. Both pending and actual home sales fell in March, at an annual rate of 6.1% and 8.1%, respectively. Those metrics dropped 3.6% and 3.7% from a month prior.

SEE GRAPH of HOMES SOLD, MARCH 2022

The spring months, the traditional kickoff to prime homebuying months, usually see an uptick in inventory. That’s not been the case so far in 2022.

Seasonally adjusted listing activity dipped in March, at a decrease of 1.1% from February and 6.2% from March 2021, Redfin found.

It’s possible some sellers aren’t motivated to list their homes if they refinanced their mortgages during the recent historic lows, Fairweather said. With mortgage rates spiking in recent weeks and months, that’s still expected to have a chilling effect on the overall housing market, but major metrics like the rate of home-price appreciation won’t be observed for months yet, as inventory remains constrained and buyer demand high.

What might start to burn off are the ultra-intense bidding wars that’ve been hallmarks of the pandemic housing market, or scenarios like waiving contingencies on a deal, she added. Higher mortgage rates are eroding how much a household can afford to pay for a home.

Twelve percent of homes listed on the market had a price drop during the four-week period ending April 3, up from 9% a year earlier and the highest share since early December, Redfin found more recently.

SEE GRAPH of 30-YEAR FIXED MORTGAGE RATE

This article by Ashley Fahey – Editor, The National Observer: Real Estate Edition, 04.18.22

2020 Home Value Predictions

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As recession fears mount, I wanted to share some information on why home prices are predicted to stay level (from MarketWatch). The last, “great recession” of 2008 was fueled by a series of events happening in sequence that in hindsight were avoidable:

  • An explosion in both home-building activity and mortgage credit to home buyers with no income documentation or down payment + 0% introductory loans that allowed them to be over-leveraged.
  •  Add to that rampant unemployment.
  • Very little home equity as it had been leveraged through home equity loans (often to purchase rental properties).
  • An unexpected downturn in the housing market as it was flooded with “upside down” rental properties.
  • A foreclosure crisis that could not be absorbed by the market, banking institutions, or loan service companies.

 

With this combination of events you begin to understand how this period of economic downward spiral was fueled by the perfect storm. Unlike the 2008 recession, the current housing market today is not driven by homeowners who are highly leveraged. In fact, the household debt-to-income ratio is at a four-decade low.

 

Since 1980, the U.S. Housing market has weathered all other recessions. Deputy Chief Economist Odeta Kushi with First America in a recent report is quoted as saying, “In 2020, we argue the housing market is more likely poised to help stave off recession than fall victim to it.” Kushi goes onto share, “With the exception of the Great Recession, house price appreciation hardly skipped a beat and year-over-year existing-home sales growth barely declined in all the other previous recessions in the last 40 years.

 

The recent growth in home prices is fueled by: Supply & Demand. While this is making the possibility of homeownership unaffordable for millions of Americans, it also means that countless more homeowners have seen their home equity grow substantially in recent years. This equity decreases the likelihood that they will be underwater on their loan if home prices were to dip and thus serves as a shelter during a downturn.

In terms of the corona virus’ effect on the housing market, Mark Fleming, Chief Economist of First America, states, “This time, housing is a casualty of a public health crisis turned economic, not the cause of an economic crisis.” In his recent post, he charts the differences between the pre-Great Recession housing market and the one at the cusp of the coronavirus outbreak.

 

ThisTimeItsDifferent

 

“Today, house-buying power is nearly twice as high as the median sale price of home, implying that housing is not overvalued, and is in fact in a much better position entering this potential recession than it was ahead of the last,” continues Fleming.

But homeowners should stay alert for potential red flags! Be cautious of scenarios where:

  1. A significant number of homeowners begin to take cash-out or home equity loans that will result in a whittling away of their equity and this “safety net” against economic downturn.
  2. A ripple effect of foreclosures in our region which would cause your home to drop in value.

THERE’S REASON TO BE ENCOURAGED:

“Many expect the housing market to follow a similar trajectory in response to the corona virus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it, ”
Mark Fleming, Chief Economist of First America

In closing, we can all take heart that our leaders, scientists, and healthcare providers are doing everything possible to minimize the economic effects of the corona virus. And, we can all do our part as well. #stayhome #staysafe