NAR Economist Predicts That Home Prices Won't Decrease in 2023
Lawrence Yun, chief economist for the National Association of Realtors (NAR), examined the home market's current position and provided his market forecast for 2023 on Friday at the NAR conference in Orlando.
Yun said that although high mortgage rates, slow home sales, and rising inflation have had a significant negative impact on the housing industry, it is unlikely that these problems will result in a decline in home prices in 2023. He also noted that even if mortgage rates remain at or close to 7%, we might see a further increase in home prices in 2023. Yun's market predictions are counter to the majority of analysts. Most experts are predicting home values to decline by 15% or more.
Although Yun anticipates a 1% rise in the national median home price the following year, he pointed out that some markets will see price increases while others will see price drops.
Additionally, Yun anticipates a 7% drop in home sales in 2023. He projects a 10% increase in home sales and a 5% increase in the country's median home price for 2024, leading to a significant resurgence in home sales.
Whereas the view for 2023 was generally favorable, Yun voiced concern about the difference between mortgage and federal funds rates. "The gap between the 30-year fixed mortgage rate and the government borrowing rate is much higher today than it has been historically," Yun said. "If we didn't have this large gap, mortgage rates wouldn't be 7%, they would be 5.8%. A normal spread would revive the economy. If inflation disappears, then we'd see less anxiety within the financial markets and lower interest rates, which would allow owners to refinance."
The Refi Market is About to Bottom Out, says Black Knight
Mortgage loan rate locks have decreased significantly over the previous 12 months due to the slowing purchase and refinance activity brought on by the high mortgage rates, which ended October at 7.06%. The refinance market is getting close to the bottom despite the rising rates.
According to Black Knight, the decrease in rate lock volume was caused by a 25.1% drop in cash-out locks from September and an additional 15.7% drop in rate/term refi.
When property equity was close to all-time highs early in the year, cash-outs displayed some early resilience even as rates started to increase. However, rate/term refis have plummeted by a startling 92.6% year over year, and cash-out refis are currently down 83.6% compared to October 2021.
Since Optimal Blue started monitoring the data in 2018, purchase mortgages account for the most significant percentage of rate locks at 86%. However, challenges to home affordability have continued to put downward pressure on purchase credit. By dollar volume, purchase locks declined 39% from October 2021 and 13% from September.
MBA Weekly Survey Nov. 16, 2022: Rates Fall; Applications Up 1st Time in 8 Weeks
According to the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending November 11, mortgage applications increased for the first time in eight weeks as interest rates dropped below 7 percent. The outcomes for the week have been modified to account for Veterans Day.
On a seasonally adjusted basis, the Market Composite Index gained 2.7% over the previous week. The unadjusted Refinance Index dropped by 2%, and the number of mortgage applications for refinances fell from 28.1% the last week to 27.6% overall.
The seasonally adjusted Purchase Index went up 4% over the previous week. The share of FHA loans among all applications rose from 13.3% to 13.5%, and VA applications rose from 10.3% the prior week to 10.6%. The USDA's percentage of all applications grew from 0.5% last week to 0.6%.
With points falling to 0.64 from 0.78 (including origination charge) for loans with an 80 percent loan-to-value (LTV), the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (more than $647,200) jumped from 6.50 percent to 6.51 percent on average.
Next week's potential market-moving reports are:
Monday, November 21st – Chicago Fed National Activity Index
Tuesday, November 22nd – No Report
Wednesday, November 23rd – Initial Jobless Claims, New Home Sales (SAAR), FOMC Minutes
Thursday, November 24th – No Report
Friday, November 25th – No Report
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