Mortgage Rates Hit 5% for First Time Since 2011 – According to the National Association of REALTORS®, the 30-year fixed-rate mortgage jumped to a 5% average recently, the first time it’s been that high since 2011. Since the beginning of the year, mortgage rates have jumped by 1.8 percentage points and added about $400 to the average monthly mortgage payment for a median-priced home, Nadia Evangelou, senior economist, and director of forecasting at the National Association of REALTORS®, wrote for the association’s blog. Also, with inflation at a 40-year high, home buyers are finding they may need to adjust their budget to buy this spring. “As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices, and tight inventory are making the pursuit of homeownership the most expensive in a generation,” writes Sam Khater, Freddie Mac’s chief economist. NAR predicts that rising borrowing costs will price out about 16 million households from the housing market this year. NAR has forecast home sales activity to drop about 10% in 2022.
Source and link to the full article: Freddie Mac and “Instant Reaction: Mortgage Rates, April 14, 2022,” National Association of REALTORS® Economists’ Outlook blog
Building Materials Rise, But Lumber Prices Ease – Based on the National Association of Home Builders reports, new-home costs likely will continue to increase as rising building material costs squeeze construction budgets. The prices of goods used in residential construction rose again in March and are up 8% since the start of 2022, citing Bureau of Labor Statistics data. Year over year, building material prices have increased 20.4% and have risen 33% since the beginning of the pandemic, the NAHB reports. The rising costs have prompted escalating new-home prices, which have increased 31% in three years. The average sales price of a new home was $511,000 in February. The record high and the rising costs of lumber have made headlines recently, but signs of improvement offer some hope to homebuilders. Lumber prices dropped more than 6% to $829 per 1,000 board feet recently, the lowest of the year, Insider reports. Higher mortgage rates and a slowdown in DIY home renovations are easing demand for lumber, Insider says. Also, improvements are occurring in the supply chain that had bottlenecked the lumber market over recent months. Lumber prices fell 39% from their March high and are 52% below their May 2021 peak of $1,733 per thousand board feet, Insider reports.
Source and link to the full article: “Building Material Prices Rise Further,” National Association of Home Builders’ Eye on Housing blog (April 13, 2022) and “Lumber Falls to Fresh 2022 Lows as Spike in Mortgage Rates Cools Housing Demand and Inflation Puts Dent in Home Renovations,” Insider (April 12, 2022)
Equity Motivates More Sellers – According to the 2022 Buyer and Seller Insights Report released by HomeLight, more homeowners say they are being motivated by the rapid increase in equity in their homes to list their property for sale, saying they have high expectations for a profitable sale. About half of home sellers recently surveyed said they expected to retain 30% or more of the sale price of their homes. Eighty-seven percent of sellers surveyed also expected to receive more than one offer on their home. Fifty-two percent expect to receive four or more offers.
Homeowners cited the following motivations for reasons to sell, according to the HomeLight survey:
Inflation Edges Higher, Affecting Housing – Based on the National Association of REALTORS®’s recent data, the rate of inflation reached 8.5% in March, continuing at a 40-year high and showing few signs of relief for consumers. Higher gas prices, food, and housing costs fueled the consumer price indexes jump. “Aggressive inflation will force the Federal Reserve to raise interest rates multiple rounds this year and actively pursue quantitative tightening,” says Lawrence Yun, chief economist of the National Association of REALTORS®. “That is why mortgage rates recently have shot up so high. Higher mortgage rates will inevitably pull home sales down in the coming months and slow home price appreciation.” Yun projects a 10% decrease in home sales this year. But he continues to say home prices will increase, gaining 5% by the end of the year. The rising costs of living will likely hurt more Americans’ wallets. Rising prices are outstripping the fastest wage gains in four decades, MarketWatch reports. Surveys show consumers are increasingly concerned about inflation as well. Gas prices are up 48% from a year ago. The price hikes account for more than half of the increase last month in the cost of living. The Russian invasion of Ukraine has driven up the price of oil to a 13-year high. That has a widespread impact on consumers, not just because of the increasing costs of driving but also flying and transporting goods.
Source and link to the full article: “Instant Reaction: Inflation, April 12, 2022,” National Association of REALTORS® Economists’ Outlook blog and “U.S. Inflation Rate Leaps to 8.5%, CPI Shows, as Higher Gas Prices Slam Consumers,” MarketWatch (April 12, 2022)