What will homes cost for the rest of this year and next year? And did March’s bank crisis cause fewer homebuyers to make offers on homes? Below are some quick answers.
The National Association of Realtors (NAR) index measuring how many home purchase deals got into contract dropped 5.2% from February to March.
It’s the first monthly pending home sales drop since November 2022, when rates began the month at 7.25% and ended at 6.25%.
The chart above shows how rates began March around 7% and ended around 6.5%.
Here’s NAR chief economist Lawrence Yun on reasons for the drop in new March deals, and a positive outlook from now forward:
“Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected. Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market.”
Here are some key notes and takeaways:
– Yun is right that new home sales are doing well, but largely because of lender incentives.
– He makes no mention of bank crisis sentiment as a culprit for fewer new deals.
– But how could a front-page-news bank crisis NOT give some buyers pause?
– The annual figure was dismal: March 2023 pending home sales were down 23.2% compared to March 2022.
– But this makes sense with March 2022 rates way lower, between 3.875% and 4.875%, per Mortgage News Daily (MND).
– As the chart above shows, March 2023 rates began at 7% and ended at 6.5%.
– I agree with Yun’s optimism for better home sales as rates drop this year.
– Core CPI inflation for March dropped 1% to 4.9% and Core PCE inflation for February dropped to 4.6%.
– We get March Core PCE tomorrow, and if lower inflation trend continues, rates will follow.
– In the link below, Yun also provides rate, home sales, and home price forecasts.
– Here are NAR new and existing home price predictions for 2023 and 2024:
– NAR predicts existing home prices between $379,600 and $390,000 in 2023-2024.
– NAR predicts new home prices between $449,100 and $468,000 in 2023-2024.
– Existing home prices are $375,700 right now.
– New home prices are $449,800 right now.
– See links below for affordability on existing and new homes at these prices.
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– We partner with MND and MBS Live on rate data. Check them out!