Real Deal on Real Estate First Day of Summer
Homebuyer Demand is Slowing
The housing market continues to show signs of slowing. Although Redfin is not the only real estate company in the country, they seem to be reporting the most about the changing housing market versus other national real estate firms. Redfin reported another double-digit decline in homebuyer demand when compared to the same time last year. This is the second time they have reported a decline in the last three weeks.
Redfin's homebuyer demand index was down 12% annually for the week of June 5, compared to a 9% decline for the last week of May and a 12% decline from the week before that. This is the largest index drop since the pandemic's early days.
It is clear that more and more sellers are no longer in control of home prices with bidding wars. Repeatedly, we hear stories of sellers reducing their home prices to increase traffic.
However, let's not assume that the housing boom is over. Despite home prices declining and mortgage rates rising, we are seeing some buyers return to the market. Housing inventory is increasing, offering purchasers more homes to choose from. It has been quite some time since buyers have had this many homes to choose from and not have to enter a bidding war.
Mortgage Rates, Home Prices Expected To Stabilize, Forecast Says
The housing and stock markets have been troubled by the quick rise in mortgage rates and inflation since 2022. Fears of a recession and general economic instability have caused analysts to adjust their year-end estimates to account for these changes.
The housing market is projected to alter in the coming year, but not all changes will be unpleasant. Some respite may be on the way for purchasers who have been dismayed by the shortage of available homes and fierce competition. Furthermore, while mortgage rates and property prices are unlikely to fall, they are predicted to steady and may relieve purchasers who have been trying to keep up with escalating costs and rates.
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As demand cools and supply rises, Realtor.com updated its home market projection for 2022 and concluded that calmer waters might be ahead. According to the revised prognosis: Mortgage rates will average 5 percent in 2022, rising to 5.5 percent by the year's conclusion. This compared to an initial projection of a 3.3 percent average increase and a 3.6 percent increase. Moreover, buyer demand is projected to decline over the summer, but most markets will continue to favor sellers.
Fed Hikes Interest Rate Benchmark By 0.75 Percentage Point, The Biggest Increase Since 1994
The Federal Reserve took its most aggressive stance against inflation yet on Wednesday, boosting benchmark interest rates by three-quarters of a percentage point, the most significant increase since 1994.
The Federal Open Market Committee, which sets interest rates, raised its benchmark funds rate to 1.5 percent -1.75 percent, the highest level since just before the Covid epidemic began in March 2020. After the decision, stocks were unstable, but they rose when Fed Chairman Jerome Powell spoke at his post-meeting news conference.
"We want to see progress. Inflation can't go down until it flattens out," Powell said. "If we don't see progress ... that could cause us to react. Soon enough, we will be seeing some progress," Powell said. Based on one widely cited metric, FOMC members projected a significantly steeper path of rate increases to stop inflation from reaching its highest level since December 1981.
According to the midpoint of the goal range of individual members' views, the Fed's benchmark rate will end the year at 3.4 percent. This represents a 1.5 percentage point increase above the March estimate. The committee predicts that the rate will rise to 3.8 percent in 2023, an entire percentage point more than the March forecast.
Next week's potential market moving reports are:
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