Author: Roger Mills, Director of Product Management
The three factors of increasing mortgage rates, low housing inventory and high prices will most likely combine to present the following situation for mover volumes the rest of the year:
- Inventory will stay low but still follow the standard seasonal trends with possible higher levels reached during peak season which is Easter – Labor Day. Increasing rates may push more sellers to put their house on the market before higher rates dry up the pool of buyers.
- Foreclosures should remain low due to the good positioning of existing home owners, this should also keep volume lower.
- Rates will rise but at a slower speed, this will cool the market for buyers and increase inventory but not so much as to put people off of moving.
- Home prices should remain fairly stable for the short term until rising rates reduce the number of buyers on the market. The inflated house pricing does give movers incentive to sell sooner whilst there is still market for buyers this. This could lead to increased inventory over the summer period before rates rise to higher levels in the fall.
- Due to the low housing inventory, the amount of new movers that are renters will likely increase comparatively to where we have normally seen them
Let’s dive into the details that lead us to these predictions:
Looking at Speedeon’s Mover data over the past months we have seen:
- Our New Mover data mirrors what is seen in the industry at large. Lower volumes than last year but continuing to follow traditional seasonal trends. The continued shortage of inventory shows in the numbers but does show promise for increases later on in the year.
- We did see a lower dip in February this year compared to last with the volumes so far this year seeming more stable.
- Pre-mover counts works as good crystal ball for mover counts. Both of these show positive volume trends with PMAL matching last year's totals and PMAC whilst starting slower at the beginning of the year have showed a sharper increase in Feb and Mar than last year.
Inventory is low but catching up with last year.
Realtor.com provides an in depth look at volumes Realtor.com Article
The national inventory of active listings declined by 12.2% over last year, while the total inventory of unsold homes, including pending listings, declined by 10.7% . This went along with the inventory of active listings being down 60.1% compared to 2020 right at the onset of the COVID-19 pandemic. In effect this means that there are now only 2 homes available for sales compared to 5 that there were previously
Inventory does seem to be matching seasonal trends, with more houses on the compared to last year but as stated there is still a reduction in inventor year over year. However, this decline is smaller than the previous months, 12.2% for April compared to a year on year drop of 18.9% in March. This could suggest some directionality that could lead to growth in the coming months as rates stabilize. Good to note that there is nowhere near enough housing on the market and that there is a glut promoting a buyers’ market. Other factors that suggest supply will stay low is the low level of foreclosures. Unemployment levels are low, equity is high, and people have low mortgage rates, all these factors lead to a low level of foreclosures which would cause a large amount of listings as seen in the past.
Supply chain issues continue to impact new house builds and push prices up for those on the market.
Rates rise but continue to still stay historically low
According to forecasts for the coming year Rocket Mortgage Article rates will continue to rise with rates currently being at their highest in a decade 5.5%. Analysts at Lending Tree and Bankrate had thought at the beginning of the year that rates would peak at around 3.5 to 4% however with rates hovering around the 5-6% this assumption has proven to be incorrect. However, rates are still below levels seen prior to 2010 Freddie Mac Article. Last time rates rose in 2018 sales slowed down and that impacted sellers’ behavior. Any impact on sales will be dependent on if rates continue to rise higher.
Looking forward with the Fed continuing its aggressive attitude towards interest rates to keep inflation down we can expect rates to rise. The Mortgage Reports Article However since the fed has already laid out this plan of increases, mortgage markets may have already factored this into their adjusted rates blunting the impact for the rest of the year and leading to smaller increases.
House Prices Remain High
Even with rates rising levels still being palatable for those who need to move, this along with continued inventory shortage will push more people to sell but at a continued steady pace and below demand, this will mean that the median home price will continue to increase. Per data from Realtor.com its is estimating a rise of 2.9%. Realtor.com Article Prices will continue to show a seasonal curve rising over the summer months before reducing again in the fall. Last year home prices rose quickly whilst available volume declined. In 2022 things sill look better for sellers rather than buyers but things will improve as the year goes on for buyers Washington Post Article
Fear of further rate increases could lead to an urgent rush before rates rise further coupled with reduced inventory will most likely be key to a continued high level of pricing.
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