According to the latest data from the National Association of Home Builders (NAHB) the share of adults planning a home purchase in the next 12 months dropped to 13% in the final quarter of 2022. This is down from 15% in the previous quarter and is not surprising, given that housing affordability worsened during this period, as mortgage interest rates surpassed 7.0% and reached levels not seen in nearly 20 years.
On Friday, the Kansas City Fed President Esther George said that the Federal Reserve must remain “patient” in waiting to see if the pace of price increases in the services sector are waning as the central bank attempts to bring inflation back to its 2% target rate. George added that labor shortages could be a hindrance in getting inflation down. What does this means for home buyers and sellers?
According to a recent articles on usnews.com, Federal Reserve Bank of San Francisco President Mary Daly appeared to signal that the Fed will keep interest rates at their current peak for the foreseeable future. With this news, it is important to understand how this decision impacts real estate. Let’s break down what Daly said and what it means for the real estate market.
It’s well known that mortgage interest rates have been on the climb this year, but the speed of this increase has not occurred since the 1980’s, according to an article written by Jeff Ostrowski for BankRate.com In the article he states…
The internet is filled with both facts and speculations about the continued rate hikes implemented by the Fed Reserve Bank. Will they continue to hike and then hold, or will they hike and then cut? And what is the reality of the impact this will have on our economy?
As inflation surges to levels not seen since the 1980’s, home buyers dreams are slashed. Diana Click for CNBC states “It is clearly due to the plunging affordability,” said Lawrence Yun, chief economist for the Realtors.
Home purchase mortgage applications were 19% lower than the same week in July last year, and 6% lower than the prior week. Those numbers are a direct reflection of the impact inflation is having on our economy.
In a recent CNBC interview, Kansas City Federal Reserve President Esther George noted that the Fed is looking to tighten financial conditions, of which equity markets are a component, in an effort to tamp down price increases running at their fastest pace in more than 40 years.
Rapidly rising mortgage interest rates are having a direct impact on mortgage application volumes, particularly for mortgage refinance applications. In an article by Adam DeSanctis for the Mortgage Bankers Association (MBA) “The Market Composite Index, a measure of mortgage loan application volume, decreased 8.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 8 percent compared with the previous week. The Refinance Index decreased 14 percent from the previous week and was 54 percent lower than the same week one year ago.”