As the spring buying season unfolds there are some rays of light shining down on the sector as would-be home buyers have digested the shock of higher rates. Borrowing costs have declined since last November’s highs while the supply issue has eased a bit.
The inventory problem has been plaguing the sector for three years now, but it may be past the low point. “Maybe the absolute low point in inventory is over,” Lawrence Yun, chief economist at NAR, recently stated, “We are seeing more inventory showing up in the market, and consequently, maybe this is one big factor as to why we are seeing an increase in home sales: more choices for consumers.”
The February Existing Home Sales report showed unsold inventory sits at a 2.9 month supply at the current sales pace, down from 3.0 months in January but up from 2.6 months in February 2023. February Existing Home Sales rose 9.5% from January.
Construction of newly built single-family homes jumped 11% in February from January and was the largest gain in nine months. This is also easing the supply crunch.
The jump in borrowing costs from January 2021 to last November’s highs was a shock to the sector in such a short period. The 30-year fixed rate mortgage rose to near 8% in November but has eased to the mid-to-upper 6% range, where they have been holding. Visions of 3%, 4%, and maybe even 5% may be gone, but no one felt it could move as low as 2.65% when it bottomed out in January of 2021.
There will always be demand for a home purchase as new families are formed every day, renters become owners along with those wanting to upsize or downsize and those who are relocating to name a few.
Bottom line: Jobs buy homes and if you are secure in your current position and feel that you can easily find another position, that can certainly influence decisions regarding homeownership.
Source: Mortgage Market Guide
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