Mortgage rates are rising, home sales are falling for the seventh month and suddenly here comes the new listings

But it still doesn’t reflect the recent hike in mortgage rates to 4.5%.

By Wolf Richter for WOLF STREET.

OK, the “Existing Home Sales” data released by the National Association of Realtors today is for February, and in February average mortgage rates were much lower than today. In mid-February, the average 30-year fixed-rate mortgage rate was just above 4% for the first time since 2019, according to the Mortgage Bankers Association’s weekly index.

According to Mortgage News Daily’s daily measurement, the average 30-year fixed-rate mortgage hit 4.50% yesterday, its highest since March 2019. Since last fall, the average interest rate has risen 1.5 percentage points from 3% to 4.5 % up ( chart above Mortgage News Daily):

In their report for November, the National Association of Realtors expected the average 30-year mortgage rate is expected to reach 3.70% by the end of 2022. Now it’s only March 2022 and we’re already at 4.5%. Going fast. Last month I speculated that 4% could be the magic number at which the housing market will start to feel it.

It’s no secret: As mortgage rates rise, more and more buyers are being priced out at these sky-high prices and are exiting the market.

But among buyers who still qualify, rising mortgage rates are sparking a mad scramble to buy something “now,” at any price, no questions asked, waving inspections and taking huge risks — even NPR has it something like a warning aired about it yesterday, LOL – to lock in the remaining mortgage rates before they go up any further.

There’s a well-established pattern: Selling activity picks up in the early stages of the rising mortgage rate cycle, and we’ve seen some of that, but it’s becoming impossible for a growing number of potential homebuyers.

Sale of single-family houses, condominiums and cooperatives in February, up 7.2% in February and 2.2% yoy to a seasonally adjusted annual rate of 6.02 million homes, the seventh straight month of yoy decline (historical data via YCharts):

“Housing affordability remains a major challenge as buyers take a double hit: rising mortgage rates and continued price increases,” the NAR said in the press release. It pointed out that monthly payments were up 28% year over year. “Some who previously qualified for a 3% mortgage rate may no longer be able to buy at a 4% rate,” the report said.

Home sales peaked in the 2003-2006 era. The current era remains solid below this peak. February’s seasonally adjusted annual rate of 6.02 million sales was also well below the pandemic peak but higher than previous years.

Sale of single-family houses fell 7.0% for the month and 2.2% year-on-year to a seasonally adjusted annualized rate of 5.35 million homes.

Sale of condominiums down 9.5% for the month and 4.3% year-on-year to a seasonally adjusted annualized rate of 670,000 condos.

By regionthe percentage change in the seasonally adjusted annual rate of total home sales in February from January and year-on-year (year-on-year):

  • Northeast: -11.5% as of January, -12.7% yoy.
  • Midwest: -11.3% as of January, -1.5% YoY.
  • South: -5.1% as of January, +3.0% yoy.
  • West: -4.7% as of January, -8.3% yoy.

Here are the new ads. The number of homes for sale rose 13.4% yoy in February, after rising 13.2% in January, and declined just 3.0% from February 2020.

New listings are coming out of the woodwork as interest rates rise and volume falters — because now it’s suddenly time to put that extra home on the market before the market turns. In February, new listings essentially rebounded to the normal range for a February after being pathetically low for the past two years. The green lines connect the February (Source: Residential Real Estate Database):

Brokerage of houses for sale rose to 1.7 months of sales from record low in January. The number of unsold homes on the market rose a seasonally adjusted 2.4% from a record low in January to 870,000.

The median price ticked up 15% from January to $357,300. Annual peaks peaked last May and June at over 23%. The median price seasonal high was $362,800 in July 2021:

The share of investors in the sales remains roughly at the same level. “Individual investors or second home buyers who make up a lot of cash sales” accounted for 19% of transactions in February, up from 22% in January but up from 17% in February 2021. “All cash” sales stayed the same range, the 25% of transactions in February, down from 27% in January but down from 22% in February 2021.

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