May 2022 highlighted numerous real estate market challenges facing prospective home buyers. Now, the data directly supports the drop-off in activity.
Higher Mortgage Rates Fueling Real Estate Market Challenges
When discussing the latest real estate market challenges, higher mortgage rates take the top spot across many lists. Throughout the early days of the COVID-19 pandemic, mortgage rates notoriously declined to record-low levels. After an abysmal 2020, 2021 bounced back in full force. In fact, refinancing activity soared.
However, the latest data from the Mortgage Bankers Association (MBA) shows that average 30-year fixed rates increased over 2.0% higher compared to last year. With the significant leap in mortgage rates, purchase applications decreased 8% year-over-year. To make matters worse, refinance applications absolutely plummeted a shocking 72%. Looking ahead, the Mortgage Bankers Association anticipates a 35% decline in total mortgage originations for year.
Limited Housing Inventory Remains Part of the United States Age-Old Real Estate Market Challenges
Since the 2008 recession, the United States has grown infamous for its limited housing inventory. Compared to 2021, inventory levels declined 10% year-over-year. Now, the United States housing market sits at a measly 2.2-month supply across the country. Generally, experts consider a 6-month supply to represent the point of market equilibrium between prospective home buyers and home sellers.
Further contributing to the lack of inventory, housing starts decreased from March 2022 to April 2022. Falling short of analyst expectations, single-family housing starts decreased 7% month-to-month. As a barrier to improved housing start figures, home builders attribute shortages in land, materials, and skilled labor as part of their real estate market challenges.
Median Home Prices Still on the Rise
One of the most crucial real estate market challenges concerns home prices as a whole. While existing home sales slightly declined from March to April, the median existing-home price reached a new record. In fact, the new median existing-home price is $391,200. With this 15% year-over-year spike, it is a very good time to be a potential home seller.
Similarly, new home sales posted a decline, dropping 17% from March to April. Unlike existing home sales, new home sales fell to their lowest level since April 2020. Despite these statistics, the median new-home price jumped even higher than the median existing-home price. Notching a whopping 20% year-over-year growth, the median new-home price achieved $450,600.
Forecasting the Remainder of 2022’s Housing Market
As mentioned, the aforementioned real estate market challenges create a severe barrier to entry for prospective home buyers. With mortgage rates now exceeding 6%, many home buyers might feel discouraged. Furthermore, the ongoing lack of home inventory and progressively rising prices generate an affordability issue.
With the Mortgage Bankers Association forecasting 2022’s total mortgage originations to come in at a third of what they were in 2021, the market generally favors existing homeowners. That being said, the real estate market fluctuates over time, so this isn’t to say that home buyers won’t have their day back on top.
For questions on the real estate market, contact the title and escrow specialists at Plymouth Title Guaranty Corporation.
Information accredited to MBSQuoteline.
Please note: The safety of our staff and clients is our highest priority. Effective immediately, Plymouth Title Guaranty Corp. will be taking the following precautions to limit the spread of the COVID-19 virus:
All purchase transactions need to take place at a Plymouth Title Guaranty Corp. closing office.
- If a party to the closing is not feeling well, please contact your closer before the closing so appropriate precautions can be taken.
- We ask visitors to utilize the restroom in our building upon arrival to thoroughly wash their hands before entering our office.
- Only individuals required to sign and/or deliver documents at closings will be allowed in our office. Specifically, closings will be limited to borrower(s), seller(s), agents, and lenders.
- All pens used in the closing will be given to the client after use.
- All closing rooms will be cleaned and disinfected in-between each closing.
- Those picking up checks at our office will be instructed to call our main line and request to speak to a staff member who will plan for delivery to the lobby or parking lot of our office.
- All staff will refrain from shaking hands before or after closings and ask clients to do the same.
Please be advised that our staffing may be impacted during this unprecedented event. While we are committed to continuing to provide outstanding service, we ask for your patience in the face of this pandemic.