The market conditions home buyers encounter when they head out to shop for a home depend a lot on what they’re looking for and where. Some markets are still hot, with buyers competing for available listings and sellers receiving multiple offers – others have slowed significantly from their pandemic pace. One new analysis looked at recent patterns in home prices, affordability, underwater mortgages, and foreclosures in an effort to determine exactly which markets are feeling the slowdown and which are still running strong. The results show affordable markets – especially in the South, Midwest, and Northeast – have been relatively unaffected by housing’s recent downturn. Markets in the West, on the other hand, and those where median home values exceed $350,000, have seen a bigger impact. “We are starting to see some patterns that show where the U.S. housing market is cooling off and how it’s hitting homeowners based on some key metrics,” Rod Barber, ATTOM’s CEO, said. “It looks so far – and it’s important to stress, so far – to be having more impact in places with the highest housing costs and less impact elsewhere.” (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell for the second straight week last week. Rates were down across most loan categories including 30-year fixed-rate loans with conforming balances, loans backed by the Federal Housing Administration, 15-year fixed-rate loans, and 5/1 ARMs. The decline was good news for home buyers, though challenging conditions remain. Joel Kan, MBA’s vice president and deputy chief economist, says buyer demand has been constrained. “Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory continue to constrain home buying activity in many markets,” Kan said. Still, demand for loans to buy homes surged last week, increasing 8 percent from the week before. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

When mortgage rates began to climb last year, many wondered whether the market would crash and send home prices tumbling. Now, more than a year later, we have an answer. Not only did the market survive the rate spike, it’s currently enjoying a surprisingly strong spring selling season. In fact, according to one recent analysis, home sales – though down from the heights reached during the pandemic – are now near their pre-pandemic norm. Additionally, home prices rose 1.4 percent from April to May, which was the largest monthly increase since last June and a bigger gain than over the same period in both 2018 and 2019. Simply put, the housing market has shown resilience. Buyer demand has continued to outpace the number of homes for sale, despite affordability challenges and rate volatility. Of course, it remains to be seen whether the market will follow seasonal patterns this summer or break with its typical pattern. But so far this year, the housing market has remained resilient even amid challenging conditions. (source)

Housing affordability hit a low point at the end of last year, according to the National Association of Home Builders’ Housing Opportunity Index. The index – which measures whether new and existing homes are affordable to families earning the U.S. median income – found that just 38.1 percent of homes sold during the fourth quarter of 2022 could be considered affordable. It was the lowest reading since the NAHB began tracking affordability. Fortunately, though, the newly released first-quarter results of the HOI show housing affordability has since rebounded from that low point. In fact, first-quarter data shows 45.6 percent of homes sold between January and March were affordable. That’s a significant improvement. But while quarter-over-quarter results were encouraging, Robert Dietz, NAHB’s chief economist, says affordability still trails year-before levels. “Elevated interest rates and higher home prices coming out of the pandemic have left housing affordability conditions considerably lower on a year-over-year basis,” Dietz said. “While affordability posted a gain in the first quarter, it is still well below the breakeven point of 50.” (source)

The lack of available homes for sale is not a new problem. Home buyers have been dealing with low inventory for years now. It was the primary reason prices surged during the pandemic and, even after last year’s market volatility, it continues. But while the number of available homes for sale has been low overall, according to one new analysis, it is hitting a particular income bracket harder than any other. The National Association of Realtors’ Housing Affordability and Supply report found that middle-income home buyers face the biggest shortage of homes. In fact, according to the report, the market needs an additional 320,000 homes priced below $256,000 to satisfy demand from buyers earning a household income under $75,000. “Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership,” Nadia Evangelou, NAR senior economist and director of real estate research, said. “We must boost the number of homes at the price range that most people can afford to buy.” (source)

Fannie Mae’s monthly Home Purchase Sentiment Index is based on a survey of Americans. The survey asks participants for their perception of the current housing market, including where they think home prices and mortgage rates are headed, how secure they feel in their job and financial situation, and whether or not they think now is a good time to buy or sell a home. In May, affordability conditions had respondents less optimistic overall, though a growing share said they feel now is the right time to sell a home. According to the results, selling sentiment was up 8 percent from the previous month. But while respondents feel good about selling a house, they’re also feeling the effects of higher home prices and mortgage rates. Mark Palim, Fannie Mae’s vice president and deputy chief economist, says the survey found respondents high on selling but hesitant about buying. “As we near the end of the spring home buying season, the latest HPSI results indicate that affordability hurdles, including high home prices and mortgage rates, remain top of mind for consumers, most of whom continue to tell us that it’s a bad time to buy a home but a good time to sell one,” Palim said. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week after several weeks of increases. Rates decreased for 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Joel Kan, MBA’s vice president and deputy chief economist, says rates may have fallen last week but it wasn’t enough to boost mortgage demand. “Overall applications were more than 30 percent lower than a year ago, as borrowers continue to grapple with the higher rate environment,” Kan said. “Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers.” Kan says demand for FHA loans performed better than other categories, an indication that there’s a growing share of first-time buyers in the market. (source)

First-time home buyers typically account for a large share of the homes sold in any given year. Historically, they’ve made up around 40 percent of annual home sales. For the past several years, though, the number of first-time buyers has run lower than its historical average. In fact, they now account for something closer to 30 percent of all sales. That means fewer young Americans are active in the housing market. It also explains a new analysis which found that – for the first time in nearly a decade – older home buyers have been more active in the market than younger buyers. The data shows 39 percent of home buyers between July 2021 and July 2022 were baby boomers. Millennials trailed behind at 28 percent of buyers, and Gen X followed at 24 percent. The reason for the generational switch is pretty simple: High home prices, low inventory, and rising mortgage rates have made it more challenging for first-time buyers, while baby boomers are more likely to have the financial resources necessary to navigate the current market. (source)

Coming up with an adequate down payment can be an obstacle for home buyers. After all, it’s a lot of money to have on hand. These days, that’s especially true. That’s why it may be good news for buyers that the average down payment has fallen for the first time since 2020. According to a recent analysis from the National Association of Realtors’ consumer website, the average down payment during the first quarter of this year was 13 percent, that’s down slightly from 13.1 percent last year at the same time. That may not seem like much but considering the previous years’ increases, it represents a break for prospective home buyers. Clare Trapasso, the website’s executive news editor, says affordability is still a challenge but buyers have a little more negotiating power this year. “As buyers’ budgets are being stretched to the max, there are opportunities for negotiation, especially on homes that have been sitting on the market for a while,” Trapasso said. “They can ask sellers to come down on the price, make costly repairs, as well as contribute to their closing costs or buy down their mortgage rates.” (source)

When calculating the costs of buying a home, it’s important to think beyond the upfront expenses. You have to have a plan to cover the down payment and closing costs, of course, but you should also know what your prospective monthly mortgage payment will be. After that, you need to think about the “hidden” costs of homeownership. Things like property taxes, homeowners insurance, utilities, and home maintenance will add up. And depending on where you live, they can add up to a lot. In fact, according to one recent analysis, they can add up to as much as $14,000 a year. Property taxes alone account for a large share of that. In New York, for example, property tax can be as much as $9,000 a year. Naturally, repeat buyers are less likely to be caught off guard by the price of taxes, insurance, and utilities. First-time buyers, though, have to be sure to work them into their buying equation. It’ll help produce a more realistic budget and reduce the risk of buying more house than you can afford. (source)