Could homebuying activity be on the rise?
The US is gearing up for a spring housing market whose performance could vary dramatically by region.
Mortgage rates have been ticking steadily downwards in recent weeks, although they inched back toward 7% last week amid resilient economic data and weakening borrower demand. Still, the overall outlook on interest rates is generally strong, according to Mortgage Bankers Association (MBA) president and chief executive officer Bob Broeksmit.
“Mortgage applications declined slightly over the [last] week, with purchase and refinance activity both posting declines,” he said on Thursday. “As we enter the spring homebuying season, we still anticipate rates will decrease in the coming months.”
That dip in mortgage rates from the highs of last year helped boost home sales at the beginning of 2024, with total sales activity hitting 4.66 million in January – a jump of 2.9% from the previous month.
Existing housing inventory was also on the up at the beginning of the year, Freddie Mac highlighted, although affordability remains a thorn in the side of many would-be buyers.
February, meanwhile, saw existing home sales hit their highest level in a year as an increase in home supply and cautious uptick in buyer optimism helped propel activity even higher.
Sales activity, bidding intensity vary from one market to the next
Corrina Carter (pictured top), chief executive officer at CMS Mortgage Solutions, emphasized the regional disparities at play in the current US mortgage market and even within her own state of Virginia, with each of the regions her company services seeing varying levels of activity.
“We have a market where we have a surplus of buyers, the Virginia Beach area [Tidewater],” she told Mortgage Professional America. “The buyers’ houses go in 48 hours – in most cases, two to three days max.
Mortgage applications were down 1.6% from a week earlier, according to the Mortgage Banker Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 15.https://t.co/vS7wK8QQyz#mortgageindustry #mortgageapplication #interestrates #ratehike
— Mortgage Professional America Magazine (@MPAMagazineUS) March 20, 2024
“We have a surplus of buyers – but drive two hours north, in one of my other markets, we have not enough buyers. The houses are sitting 30 to 40 days in the same price range.”
Another of the regions serviced by the company, Arizona, is marked by a surplus of houses, according to Carter. “We have a lot more houses on the market, and we need to just find buyers for those houses – and the prices are starting to drop a little bit on those because of the surplus,” she said.
What regions are expected to see the biggest price growth?
Real estate marketplace company Zillow expects existing home sales to hit 4.06 million this year, a revised figure below its prior forecast and also under the 2023 total.
Home values are forecast to remain steady or tick up slightly in many parts of the country, although San Jose and San Francisco are both expected to see price declines (3.0% and 2.6% year over year, respectively) along with New Orleans (4.6%), Baton Rouge (2.4%), Jackson (1.4%), Minneapolis (1.6%), and Baltimore (1.1%).
Markets such as Portland, Oregon, Los Angeles, Denver, San Antonio, Houston, Little Rock, Louisville, Baltimore, Bridgeport, and Pittsburgh are all slated for a milder slide in home prices.
The spring outlook could be tempered somewhat by the likelihood that interest rates will remain high for the foreseeable future. Freddie Mac’s latest forecast indicated mortgage rates will stay above 6.5% “through this quarter and next” with little chance of a Federal Reserve rate cut until at least the summer.
The year as a whole is expected to see only a modest recovery in home sales, providing inflation continues moving towards the Fed’s 2% target – with the so-called “rate lock” effect also likely to prevent homes from making their way onto the market.
That trend arose because scores of homeowners locked in an interest rate during the lucrative pandemic era of rock-bottom borrowing costs, meaning they would likely have to consider financing at a much higher rate if they made a move now.
The US housing market is slowly ticking towards better days – but it still has a ways to go, according to First American Financial chief economist Mark Fleming.
“If the 2020-21 housing market was too hot, then the 2023 market was probably too cold,” he said in his yearly forecast, “but 2024 won’t yet be just right.”
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