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All Eyes On The Fed – Real Estate Market Update

Kevin Graham4 minute-read
March 16, 2022

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The calendar has turned to March. That means we’re heading into home buying season. Is everybody ready to roll? Let’s get you up to speed on what you need to know.

The Big Story

Existing home sales continue to be hampered by incredibly low inventory. At the current pace of sales, the January release showed all the inventory would be sold within 1.6 months. Meanwhile, prices are up 15.4% on the year at a median of $350,300. With most home sales being preexisting homes, this is distressing for buyers.

There are two things buyers should be able to take heart in: the first is that the inventory situation is much better on the new home side. There are 6.1 months’ worth of supply when we look at new construction. This signifies a market in balance and perhaps partially tilted toward buyers. Of course, there is currently a $73,000 difference in the median sale price, but the construction is brand-new, so it might be worth it for some.

The other thing you could potentially look forward to is the Federal Reserve raising interest rates. I know that sounds like a paradox, but hear me out. As rates begin to rise, sellers will also know that rates are going up. While prices aren’t likely to take a major downturn, the growth of home prices might start to moderate. If your clients are frustrated, empathize, but preach patience.

More News You Can Use

As always, this portion of the report is supplemented with analysis from our friends at Econoday.1 Let’s jump right into it.

Retail Sales

Retail sales were up 3.8% overall in the month of January and 3.3% when vehicles were taken out of the equation, when further excluding gas sales, these rose 3.8% in core categories.

In categories that matter for housing, sales at furniture stores were up 7.2% while sales at building and garden equipment stores rose 4.1%. This is a good omen heading into spring.

Housing Market Index

For the second consecutive month, this index of builder sentiment was down a single point in February to come in at 82.

Present sales of single-family homes went up a single point at 90 buyers hoping to close and get the lowest possible rates in a rising rate environment. Meanwhile, sales expectations over the next 6 months came in at 80, down 2 points due to rising interest rates. Finally, the traffic of home buyers going through homes was down 4 points at 65.

New Residential Construction

Housing completions in January were down 5.2% at 1.246 million. This is 6.2% less than the same time a year ago. On the single-family side, the current annual rate is 927,000, down 7.3% from January last year. Meanwhile, multifamily completions in buildings with 5 units or more was at a rate of 309,000.

Meanwhile, housing starts came in down 4.1% at 1.638 million. The good news is this is 0.8% higher than last year at 1.708 million. On the downside, single-family starts were 5.6% lower at 1.116 million. Multifamily starts came in at 510,000.

While permits are the furthest out from becoming actual homes, there was good news here as well. Authorizations were up 0.7% at 1.885 million, including a 6.8% increase in single-family authorizations at 1.128 million. Finally, multifamily permits came in at an annual rate of 629,000.

Existing Home Sales

Existing home sales were up 6.7% in January to settle at 6.5 million on an annual basis. This is still down 2.3% compared to last January, but it’s a big number.

As we mentioned earlier, supply is in somewhat dire straits. Total inventory is only 860,000 units across the country. The average home was only on the market for 19 days. One good thing is that the median home price did drop a little bit, down 1.2%, providing some relief for buyers.

Consumer Confidence

Consumer confidence was down 0.6 points in January to come in at 110.5. However, of most concern to this audience, plans to buy homes in the next 6 months were down.

Case-Shiller Home Price Index

This index is based upon a rolling 3-month average of all purchase transactions. In the latest December release, prices were up 1.1% for the month and 18.6% since last January.

FHFA House Price Index

Unlike the case-Shiller index, this one isn’t a rolling average and it’s only based on conforming transactions backed by Fannie Mae or Freddie Mac. However, prices were up 1.2% in December, and they’ve gone up 17.6% since December of last year.

Gross Domestic Product (GDP)

In the second estimate of fourth-quarter economic growth, GDP was up 7%. This included a 3.1% increase in personal consumption expenditures. There was a 1% uptick in residential investment as well.

Pending Home Sales Index

The number of homes under contract for sale in January was down 5.7% at an index level of 109.5. Unfortunately, this isn’t a good sign for February existing home sales.

Mortgage Rates

Mortgage rates were higher last week, according to Freddie Mac. Although the situation in Ukraine might make for some ups and downs in the short term, as the Federal Reserve works to get inflation under control, in part by raising the federal funds rate, you’ll need to counsel your clients to jump on any rate they like.

The average rate on a 30-year fixed mortgage with 0.8 points paid in fees was 3.85%, up 9 basis points on the week and rising from 3.05% at this time a year ago.

Meanwhile, looking at shorter terms, the average rate on a 15-year fixed was up 8 basis points to 3.09%. This is up from 2.38% last year.

Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable-rate mortgage with 0.3 points paid was up 6 basis points at 2.97%. It was 2.77% in early March of last year.

Now that you have the knowledge, go forth and spread it like wildfire. If you’re looking for more tips and tricks, here’s a great article on buying and selling vacation homes.

1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2022 Econoday, Inc. All rights reserved.

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    Kevin Graham

    Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage he freelanced for various newspapers in the Metro Detroit area.