Existing Home Market: September 2022
The number of EXISTING home sales continues to decrease as both home prices and mortgage rates increased but there is also a very low inventory of homes for sale.
Existing Home---Months of Inventory remain near record lows but have started to increase.
Pending Home Sales Index has materially decreased over the past 8 months---initially due to a lack of homes for sale AND now rising mortgage rates and home prices.
Prior to COVID, the Days on Market (DOM is the blue line) had been gradually decreasing. After COVID the days on market reached record lows and is now 19 Days as of September 2022. 70% of all properties sell in ONE MONTH (red line).
Mortgage rates are now well above 5.00% (red bars) and it is anticipated that this will have a dampening effect on home sales. (blue line). The rate increases in April-Sept will impact October+ closings.
Home prices are the dashed green line and even with mortgage rates rising, home prices rose. This has occurred in the past when rates rose----future near-term home buyers rushed into the market to buy before mortgage rates rose further. Now that they are gone, home prices have declined.
Median home prices for all regions accelerated in early 2022 just as mortgage rates rose. It is noted there was a decline in July and August. This is normally a strong selling month.
For the West---note the flat monthly prices prior to the sudden recent acceleration.
The National Association of Realtor’s Pending Sales Index has been declining from its record highs with substantial declines noted in the South and West regions. The declines are a combination of
Higher mortgage rates.
Higher home prices
Relatively few homes for sale
Distressed-related home sales remain at record low levels. With recent home price appreciation, distressed homeowners will be able to sell and not sustain equity losses due to foreclosures.
First-time home buyers have decreased as mortgage rates and home prices have increased. Record low mortgage rates allowed 5 times income ratios; the ratio now is 3.4 based on 7.25%. That is a ~30% decrease in purchasing power. All cash purchases have increased even though investor purchases have been flat.