As US mortgage rates rose during the interest rate hike cycle, and house prices continued to rise driven by record highs of inflation, some potential home buyers began to wait and see, and the white-hot housing market intensified during the COVID-19 epidemic began to ease gradually.
Zitong Financial APP learned that data released last week showed that US housing starts and building permits fell more than expected in May, and homebuilder confidence fell for the sixth consecutive month to its lowest level since June 2020. But the data show that the industry is not completely in trouble, with mortgage applications rising 6.6 per cent last week, rebounding from a 6.5 per cent decline the week before.
Us housing starts fell 14.4 per cent last month from a year earlier, or an annualised rate of 1.55 million, the lowest level in more than a year (14 months), according to government data released last Thursday. The median market expectation is 1.69 million sets. In terms of mortgage interest rates, the data showIn the week to June 16, the average interest rate on 30-year fixed-rate US mortgages rose to 5.78 per cent, up from 3.11 per cent at the start of the year and the highest level since November 2008.It is reported that this figure was released before the Federal Reserve announced that it would raise interest rates by 75 basis points. At present, some US banks have already quoted 6% or higher interest rates, so it can be seen that the Fed will increase the pressure on American home buyers.
The latest reports from Redfin and Re/Max also show that the real estate industry is expanding at a slower pace. Re/Max, a world-renowned real estate brokerage group, said in its housing report of may 2022 that the number of home transactions fell 8.5 per cent in may from a year earlier, and may is usually one of the most active months of the year.
In addition, although housing inventories are still well below historical levels, inventories have begun to increase. Re/Max said sales of homes for sale in May were 16.3 per cent higher than in April. Monthly inventory supply rose to 0.9 from 0.8 in April. In the five years before the COVID-19 outbreak, more typical inventory levels were equivalent to two to three months of supply today, the company said.
However, these factors do not seem to stop house prices from rising. The median sales price in May 2022 was $430000, up 1.2% from $425000 in April and 13.2% from $380000 in May 2021.
Another sign that house prices have not yet reached weakness is that the average near-listing price ratio in may was 103%, which means the price of the house is 3% higher than the asking price. By comparison, the proportion was 102 per cent in May 2021. Redfin saw a similar development in the housing bid. In May, a typical home received 5.3 bids in the bidding war, down from 6.8 in April and 7.4 in May 2021, according to data from its brokers.
Nevertheless, Redfin said in the report: "the competition among homebuyers is cooling because rising mortgage rates and soaring house prices have made it less feasible for many Americans to buy homes."This is confirmed by the typical monthly mortgage rate for new buyers, which stands at $2.514 at the current US 30-year mortgage rate of 5.78 per cent, up nearly 50 per cent from 2.93 per cent a year earlier.
Economists from Redfin expectBy the end of 2022, the bidding rate will fall below 50%--On average, 5.6 per cent of home prices for sale fall each week, the highest level since Redfin began collecting data in early 2015.Redfin said in a separate report that in the four weeks to June 12, home sellers also indicated that they were likely to lower the list price.
Wall Street begins to downgrade real estate service companies
As the chart below shows, real estate service companies have outperformed housing construction companies and the S & P 500 over the past five years. However, as activity in the market slows, Wall Street analysts have been re-evaluating these stock ratings.
It is understood that Wells Fargo & Co downgraded TOL.US, M.D.C. Holdings (MDC.US) and Meritage Homes (MTH.US), while Bank of America Corporation downgraded Dream Finders Homes (DFH.US). B. Riley downgraded Taylor Morrison Home (TMHC.US), Tri Pointe Homes (TPH.US) and Green Brick Partners (GRBK.US).
Sales of existing homes for May will be released on Tuesday, and the market is widely expected to have 5.39 million units at an annualised rate, compared with 5.61 million in April. New home sales figures for May will be released on Friday, and the market is expected to be 580000 units, down from 590000 in April.