July 2023 Saw Rising Home Sales

According to the National Association of Realtors (NAR), US pending home sales rose 0.9% for the second month in a row. This does come as a surprise due to the elevated home prices and rising mortgage rates. This still was lower than a year ago, as the year-over-year pending transactions dropped by 14%.

“The small gain in contract signings shows the potential for further increases in light of the fact that many people have lost out on multiple home-buying offers. Jobs are being added, thereby enlarging the pool of prospective home buyers. However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many,” said Lawrence Yun with NAR.

Pending home sales and contract signs for a new construction still top the existing home sale by about one to two months. There was an increase though in existing home sales in July. “But, unlike the market for new homes, which has received convincingly above last year’s lows, pending home sales continue to lag behind year-ago levels. This means more of the same is ahead for existing home sales, which have bounced back only modestly,” said Danielle Hale of Realtor.com.

“Today’s data suggests that home sales activity is unlikely to see a strong pick up in the next few months as limited options and significant affordability headwinds weigh on buyers,” says Hale.

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Is the Housing Market Slowing Down?

 According to data from the National Association of Realtors, pending home sales increased for the first time in six months in December 2022. Along with this it also reports that new home sales and mortgage applications are rising.

This has many in the industry asking if the housing market is slowing down. “The recent low point in home sales activity is likely over,” says NAR Chief Economist Lawrence Yun. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”

The new home market is seeing some progress even with higher construction costs and low affordability.

“Builder incentives and declining mortgage rates during the month of December helped push new-home sales up for the month,” says Jerry Konter, chairman of the National Association of Home Builders.

“The new normal for mortgage rates will likely be in the 5.5% to 6.5% range,” Yun says. “Job gains will steadily become important in driving local markets. The South, in particular, is set to outperform the rest of the country, thanks primarily to better job market conditions in this part of the country compared to other regions.”

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Is A 20% Downpayment Necessary?

 

Whenever a buyer thinks about a downpayment twenty percent comes to mind. This is a common misunderstanding that homebuyers have to come up with twenty percent. According to Lending Tree over half of the people surveyed said that a down payment is the biggest deterrent to purchasing a home.

Freddie Mac states “The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20 percent is necessary.”

The Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) reports that the median down payment hasn't been over twenty percent since 2005. The current average downpayment is twelve percent and even lower for first-time homebuyers at 7%.

There are benefits to putting 20 percent down on a new home. One of the best perks is not having to obtain Private Mortgage Insurance (PMI). PMI is insurance that protects your mortgage lender in case you do not make your mortgage payments. Even if you are unable to put twenty percent down, you can ask your lender to remove PMI once you have obtained twenty percent equity in your home.

There are even good benefits for those who can put over twenty percent down. The more money you put down, the better interest rate you can get. This is not wise to do if you might need the cash in the near future. A first-time homebuyer might also opt-out from doing this because you might run into unplanned repairs or updates.

Saving for a downpayment can take time for some and be stressful. Trying to save 20 percent or more might take some months, years, or even longer. Waiting to save this much might not be in your best interest because you might miss out on a good opportunity. As you save money home vales are going up and you will lose out.

Currently, the mortgage rates are at historic lows. There are several programs that are for homebuyers to purchase a home with no money down. There are also some programs that will accept as little as 3% down.

If you are considering purchasing a home, contact a local Realtor who can help you with the loan, downpayment and home buying process. Remember interest rates are low and you do not need a huge down payment to thrive as a new homeowner.

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Will the Fall Bring a Cooler Housing Market?

The National Association of Realtors says the housing market is hinting at cooling off this fall. This doesn't mean the market still will not be viable, it just will not be as hot as we have seen in the first half of 2021.

"There has been a turn in the market from superheated to still very strong," said Lawrence Yun, NAR's chief economist.

High home prices have detoured many from purchasing but this scenario is improving a little according to Yun. Unsold homes increased 7.3% from June 2021 to July 2021 and unsold inventory is up at a 2.6 month supply at the current sales pace. There is a balanced market currently at around a 6 month supply of homes.

"We see inventory beginning to tick up, which will lessen the intensity of multiple offers," said Yun. "Much of the home sales growth is still occurring in the upper-end markets, while the mid-to lower-tier areas aren't seeing as much growth because there are still too few starter homes available."

As of July 2021, the median home price for existing homes was up 17.8% from a year ago to $359,900. The year-over-year gains have increased for the past 113 months in a row. Cash purchases have remained strong with all-cash sales making up 23% of home sale transactions in July. This was up 16% from July 2020. Low mortgage rates are still helping the current market and homebuyers.

"Despite the ongoing challenges of today's housing market, including limited inventory, lightning-fast home sales and competition from investors with deep pockets, many buyers are finding ways to persist until they find and close on a home," said Danielle Hale, Realtor.com chief economist.

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Newly Built Home Sales Rise 25.8% Year-Over-Year

Just like summer here in New Orleans, July’s housing market was hot! The new home sales activity is on its way back to normal with annual home sales already reaching 507,000. The Census Bureau and HUD reports that newly built home sales rose 5.4% from June of this year and 25.8% from July of last year.  New home inventories were reported at 218,000 in July which is the highest level that have been seen in over five years.
This increase can also be seen in private residential construction spending where the high was at an annual rate of $387 billion in July.  This solidifies the continuing economic growth in the construction industry.  Single-family homes have pushed construction expansion 15.8% on a year-over-year basis and multifamily new home construction spending is 21.2% higher than it was reported a year ago.

Developers are not the only ones that are seeing a positive growth, the National Association of Realtors (NAR) reports increase in existing home sales.  Existing home sales increased in July 0.5% from June and 7.4% from July of last year. Completed sales (closings) were reported at the highest since February 2007.

The confidence for home buyers stems from the strengthening economy.  The Bureau of Economic Analysis reports that the global economic developments (GDP) growth is at a strong 3.7% rate.  These findings were based on several factors including investment, faster growth for consumption, government spending and trade components.

Now is the time for buyers buying new homes or existing homes to tap into the housing market. Sales are solid which makes the real estate market a stable venture. New home prices are continuing to strengthen making real estate a great investment.

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