Impact of Rising Rates and Low Inventory on Existing Home Sales in 2024

The housing market was moving steadily at the start of 2020, but the onset of the COVID-19 pandemic brought about unforeseen fluctuations. Initially, there was a sharp rise in demand and house prices. However, as interest rates began to climb (in relative terms) and the initial excitement started to fade, home sales plummeted to levels not seen since the Great Financial Crisis by the close of 2022. Sales have mostly hovered around these lows since then. In broader terms, this stability suggests the market data may not warrant extensive analysis until there’s a clear change in trends. However, for those interested in significant details, consider the following points:

Home prices increased by 3.0% compared to the previous year, marking the 15th consecutive month of growth.

Inventory is expanding more rapidly than sales are declining.

First-time buyers represented 26% of all sales, matching the record low, yet not dramatically different from the 2023 average of 32%.

Cash transactions made up 30% of sales, a rise from 26% in the prior month.

Navigating the Mortgage Market in 2024: Strategies for Success Amidst Changing Dynamics

At the ACUMA event in Las Vegas, vendors brought an array of promotional items, from Richey May’s lock picking kit to Byte’s locally crafted sweets. This mirrors the abundance of freebies typical at many conferences. Byte stands out by supporting local artisans, unlike many products sourced internationally, such as from China. On the topic of imports, the Fed’s efforts to control inflation are limited. Today, approximately 50,000 members of the International Longshoremen’s Association (ILA) initiated a work stoppage due to ongoing negotiations with the United States Maritime Alliance, which represents ocean carriers. As a result, operations at East and Gulf ports from Maine to Texas have ceased, disrupting the flow of various goods. The duration of this strike could lead to product shortages. (Today’s podcast, sponsored by Candor, highlights Candor’s AI-driven underwriting system, which has successfully completed over 2 million error-free underwrites, backed by a warranty to eliminate repurchase concerns. It also features an interview with Jaime Seale from Clever, discussing a survey where 50 percent more sellers indicated they’d use an agent for their next home sale if they didn’t have to cover the buyer’s commission fee.).

Emerging Trends in Mortgage and Housing Finance: What to Watch in 2024

With the autumn equinox marking the official end of summer, we’re heading into a season filled with Columbus Day, Halloween, Veteran’s Day, and Thanksgiving. Here in Chicago, known for its festive spirit, I collaborated with Garth Graham of STRATMOR to observe market reactions to the recent drop in interest rates. Many lenders see this as a potential uptick in purchase activity, but Garth notes a possible disparity in who will benefit from this market improvement. He speculates that recent legal changes affecting real estate agents could lead to industry consolidation even as the market grows, a point he elaborates on in his article.

Speaking of legal issues, the Loan Originator Compensation Rule, a persistent challenge for the mortgage industry since its inception in 2011, faces renewed criticism. In his latest column, attorney Brian Levy likens the rule to the Berlin Wall, denouncing its anticompetitive nature that hinders mortgage commission negotiations, to the detriment of consumers.

Additionally, today’s podcast, sponsored by Silk Title Co., explores various industry topics. Silk Title Co. caters to lenders with centralized operations, a tech-driven approach, and a collaborative mindset. The podcast features ALTA’s Chris Morton discussing a previously rejected Fannie Mae pilot program that aimed

Understanding the Surge: Analyzing the Recent Uptick in New Home Sales

May proved to be a challenging month for the housing market. Existing home sales experienced a slight downturn, decreasing by 0.7 percent from April. However, the new home sales segment faced more significant struggles. According to data from the U.S. Census Bureau and the Department of Housing and Urban Development, newly constructed single-family homes were sold at a seasonally adjusted annual rate of 619,000 units. This represents an 11.3 percent drop from April and a 16.5 percent decline compared to May 2023. It’s worth noting that April’s sales figures were revised upward from an initial estimate of 634,000 units to 698,000.

Analysts had predicted stronger performance, with a consensus forecast of 650,000 units according to a survey by Econoday. On a non-adjusted basis, 56,000 homes were sold in May, down from 62,000 in April.

The inventory of homes for sale saw improvement. At the end of May, there were 481,000 homes available, an increase of nearly 13 percent from the previous year. Given the current sales pace, this inventory represents a 9.3-month supply, which is a 14.8 percent increase from April

Understanding the Latest Trends in Home Prices: Insights from the Case-Shiller and FHFA Reports

In April, two prominent home price indexes diverged in their assessments of annual home price growth, though both indicated significant month-over-month gains. The S&P CoreLogic Case-Shiller U.S. National Home Price Index showed a slowdown from March, whereas the Federal Housing Finance Agency’s (FHFA’s) Home Price Index (HPI) reported higher values. Case-Shiller’s non-seasonally adjusted National Index covering all nine U.S. census divisions decreased from a 0.7 percent annual growth in March to a 0.2 percent decline in April. Both composite indexes marked an improvement over the prior month’s decline. The 10-City Index fell by 1.2 percent annually in April compared to 0.7 percent the previous month, while the 20-City Index saw a 1.7 percent annual loss, down from 1.1 percent. Miami experienced the highest 12-month gains among the 20 cities at 5.2 percent. Chicago entered the top three for the first time with a 4.1 percent gain, and Atlanta climbed to third place with a 3.5 percent increase, displacing Charlotte. Seventeen of the 20 cities had lower annual price changes than the previous

“Revamping the Landscape: Unpacking Trends in Residential Construction – 2020 Analysis”

May experienced a decline in both construction permitting and the commencement of residential construction, marking the third consecutive month of permitting reducing. According to reports by the U.S. Census Bureau and the Department of Housing and Urban Development, residential permits were issued at an adjusted annual rate of 1.386 million, a decrease of 3.8 percent from the estimated 1.440 million units in April. This is also 9.5 percent slower than the same month in the past year. The issued permits for single-family constructions were at an annual rate of 949,000, while multifamily approvals stood at 382,000. This represents a reduction of 2.9 percent and 6.1 percent respectively, indicating a year-over-year increase of 3.5 percent in single-family permits but a staggering 31.4 percent drop in multifamily permits. The month also saw housing starts decrease by 5.5 percent to 1.277 million, from 1.352 million in April, a substantial 19.3 percent decline compared to the same month last year. Single-family starts fell below 1 million for the first time since October, at 982,000 which is a 5.2 percent reduction from April and 1.7 percent decrease year-over-year. Multifamily starts were noted at a rate of 278,000 showing a significant 10.3 and 51.7 percent reduction from the prior periods respectively. Despite Econoday’s polled analysts predicting a minor increases in permits and starts over their April figures, with a consensus forecast of 1.450 million permits and 1.373 million starts, these declines were observed instead.

“Inside the Mortgage Industry: Trends, Updates, and Essential Information for Loan Officers”

During World War II, my grandfather was held accountable for the downfall of 25 German aircraft, earning him the dubious distinction of being the Luftwaffe’s most incompetent mechanic. As we commemorate D-Day, we aspire for a world devoid of war, despite the historical recurrence of human conflicts.

On a much smaller scale, this repetitive motif is also perceivable in various conferences and private functions, the most recent ones being the MBA New Jersey, which was attended by my son Robbie, and the Bay Equity event in San Diego that I am attending. Lending institutions are focusing on key issues, such as decreasing operational costs, including those seen by loan seekers with regards to closing costs – a topic highlighted by the White House and regulatory authorities in their bid to reduce housing expenses.

In pursuit of borrower acquisition and retention, lenders are leveraging all available benefits while enhancing operational efficiencies, all in an effort to assist loan originators. Another crucial consideration is whether to maintain or relinquish servicing, due to its potential long-term business effects. Our current environment is challenging and in stark contrast to the situation four years ago when hiring was rampant.

Today’s podcast, sponsored by Visio Lending – the leading lender for buy and hold investors with more than 2.5 billion in loans closed for single-family rental properties including vacation homes – features an engaging conversation with PCV Murcor’s Marc Tatarcuk. The discussion delves into how Appraisal Management Companies source and assign appraisers, the role of Artificial Intelligence in the appraisal sector, and an overview of the present appraisal landscape.

“Exploring the Intricacies of Mortgage and Real Estate Industry: A Comprehensive Insight”

Swiftness of time is undeniable; it feels like yesterday when the spectacle known as “Tiger King” was the talk of the town. Now we are back in the throes of summer, which some claim to be the most heated in the centuries past. However, I prefer to frame it optimistically as the chilliest summer for the centuries to come. Regardless of our personal standpoints on climate change, forest conservation, or heightened storm damage, the fact remains that critical entities, such as insurers, government sectors (Freddie and Fannie included), prominent investors, service providers, and rating agencies, are either currently revising their pricing structure, or aspiring to. These shifts inevitably seep into the life of your borrowers.

One striking instance is the homeowners’ insurance scenario. Loan officers have recounted numerous instances where clients could manage the mortgage payment but the steep monthly insurance premiums made the project unfeasible. Besides, the devastating effects of natural disasters like wildfires, tornadoes, hurricanes, and flooding on the housing stock is concerning.

For more insights, tune into our recent podcast episode here, featuring our valued sponsor, Visio Lending. Visio is the leading lender for long-term investors, with a portfolio that includes more than 2.5 billion closed loans for single-family rental properties, vacation rentals included. The episode unveils a fascinating conversation with Carrington’s Steven Winokur that explores the non-QM space, its course, and investor interest. You’ll also find a roundup of software, products, and services for lenders and brokers. Please note that the source of information won’t be mentioned in this summary.

“Exploring the Future of Green Housing and Real Estate Transformations: A Comprehensive Insight”

With the summer solstice just three weeks away, we can still host hope for more sun as the day length in the Northern Hemisphere continues to grow, and the Southern Hemisphere becomes the go-to for sun worshippers. On the other hand, the belief that presidential administrations or Federal Reserves can completely do away with business cycles is a misconception. And those basing their business models on reduced rates might be taken aback by this revealing chart from the Federal Reserve.

Today’s financial “Rundown” features Christy Beck, who serves as both the Corporate Director of Sales and Marketing for Caruso Homes and the current President of the Raleigh-Wake County Home Builders Association, one of the biggest of its kind in the nation.

In an age where privacy seems to be dwindling, it raises questions as to why companies insist on retaining substantial amounts of personal data. Such practices expose us to risks like the Ticketmaster data breach where our information is sold to malicious entities. Further emphasizing the need to minimize data collection to essential transactions only.

This week’s podcasts, brought to you by the innovative mortgage lender, American Financial Resources, offer an enlightening conversation with Tim Braheem. He shares valuable insights on how originators can foster relationships with agents in the current market, and diversify their referral sources to avoid over-reliance on realtors.

Also, keep an eye out for the latest software, products and services designed to assist Lenders and Brokers in the market.

“Revival in the Housing Market: Understanding the Surge in U.S. Pending Home Sales”

The National Association of Realtors® (NAR) reported a further 7.7% decline in pending home sales for April. The NAR’s Pending Home Sales Index (PHSI) stood at 72.3, down from 78.3 in March. This Index, which measures the purchasing agreements for previously owned houses, townhomes, condos, and co-op apartments, was also 7.4% lower compared to the same month last year. Lawrence Yun, NAR Chief Economist, attributed the slump to increased interest rates throughout the month which, despite increased market inventory, have made it harder for potential buyers to buy homes. However, he also anticipated improvement as a result of the Federal Reserve’s planned rate cuts later in the year, expressing hope for increased affordability and supply. A comparison of the national PHSI since the Federal Reserve began increasing interest rates shows a noticeable decrease in home sales. The Index averaged 115.2 in 2022 and 91.9 in 2023, but hasn’t passed 78.5 at any point this year. Every major region displayed losses on both a monthly and yearly basis. The PHSI for the Northeast dropped 3.5% from March and 3.1% year-on-year to 62.9. The Midwest index saw a 9.5% decrease to reach 70.7, an 8.7% fall from last year. In the South, the PHSI was down 7.6% and 8.2% compared to previous periods, now standing at 88.6. Lastly, the index in the West declined 8.5% from March and 7.3% from last year, resting at 55.9.