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Prices are still way too high, but… “Buyers are in a better position to negotiate as the market shifts away from a seller’s market”: NAR.
By Wolf Richter for WOLF STREET.
Pending home sales – a forward-looking indicator of “closed sales” over the next couple of months – obviously plunged in November from October because of the Thanksgiving week, and this time they plunged by 20.1% from October, according to the National Association of Realtors today. But they do that sort of thing every November, and so NAR uses big seasonal adjustments to iron out the month-to-month plunge, and this time turned it into a month-to-month rise of 2.2%.
Compared to the collapsed levels in November last year, not seasonally adjusted pending sales rose 5.6%, while seasonally adjusted pending sales rose 6.9%. July had set an all-time low in the history of the data.
So compared to the Novembers in prior years, seasonally adjusted, pending sales were up from rock-bottom, but remain in the frozen zone as the Buyers’ Strike continues because prices are too high (historic data in the chart via YCharts):
- November 2022: +4.6%
- November 2021: -33.5%
- November 2020: -37.2%
- November 2019: -26.9%.
Pending sales are based on contract signings and track deals that haven’t closed yet and could still fall apart or get canceled.
Pending sales by region.
Seasonally adjusted, transactions fell in the Northeast (-1.3%), inched up in the Midwest (+0.4%) and in the West (+0.5%), and jumped in the South (+5.2%).
Not seasonally adjusted, transactions plunged in all four regions (-27.0%, -26.2%, -20.3%, and -12.9% respectively).
What NAR said about this situation:
“Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory.”
“Mortgage rates have averaged above 6% for the past 24 months. Buyers are no longer waiting for or expecting mortgage rates to fall substantially.”
“Furthermore, buyers are in a better position to negotiate as the market shifts away from a seller’s market.”
Mortgage rates are back in the old-normal range.
The average 30-year fixed mortgage rate, as of December 26, rose to 6.85%, according to Freddie Mac’s weakly measure.
In November, when those pending deals were made, that measure of mortgage rates was still a little lower, in the range between 6.69% to 6.84%.
Those rates are far higher than they had been during the Fed’s interest rate repression and QE, which included buying trillions of dollars of mortgage-backed securities. But that phase ended in early 2022. And in mid-2022, the Fed started shedding securities, including MBS, and has so far shed $2.1 trillion of its total holdings.
So mortgage rates are now back into the old normal range before QE, and the industry, including NAR and Fannie Mae, are starting to suggest that those extra-fancy low mortgage rates aren’t coming back, and that it’s time to get re-used to the old-normal mortgage rates.
Supply is piling up – including from new construction.
Buyers now have lots of inventory to choose from, including heavily promoted new houses (not to speak of new condos, of which there is a flood of supply on the market and coming on the market, which isn’t included in the figures here).
Supply of existing homes for sale, at 3.8 months (red line in the chart below), was the second highest for any November over the past eight years, 2017 through 2024, behind only 2018 (yellow).
Inventory of completed new houses for sale spiked by 57% year-over-year to 124,000 houses in November, according to Census Bureau data. This is supply to the overall housing market. Homebuilders are trying to find buyers for these completed “spec” houses by piling on incentives, including costly mortgage-rate buydowns, and by cutting prices, thereby bringing monthly payments below those of equivalent existing homes, and their sales have held up reasonably well, while existing home sales have plunged to historic lows, from which they’re now inching back up.
Inventory for sale at all stages of construction – from not yet started to completed – rose by 8.1% from the already bloated levels a year ago, to 493,000 houses, the highest since December 2007. Supply jumped to 9.1 months. This does not include inventory of new condos for sale:
And the Buyers’ Strike Continued into December.
Applications for mortgages to purchase a home in the latest reporting week, seasonally adjusted, rose 5.6% from the collapsed levels a year ago, but were still down by 14% from the same period in 2022, by 45% from 2021, and by 40% from 2019, according to data from the Mortgage Bankers Association. Mortgage applications are an early indication of home sales – so like pending sales, up a little from rock bottom, but still in the frozen zone:
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The post Buyers’ Strike Continues: Pending Home Sales Remain Deep in the Frozen Zone though up a Tad from Rock Bottom appeared first on Energy News Beat.
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