When will housing recovery happen?
“The bottom line is that we will not see a real housing recovery until mortgage rates fall below 6%, and it will take 30-year Fixed rates moving closer to 5.5% to see any dramatic improvement at all,” said MarketNsight Chief Analyst John Hunt.
MarketNsight takes a look at December stats. Home sales improved the first week of December, but it was pretty much a one-week event. “It is as if there were some buyers who really needed to move but were holding out for any rate decrease before signing a contract,” said Hunt. That group signed their deals, and then pending sales went back down. Fortunately, the drop was not as bad as when rates were at and above 7% in October and November.
Pending sales in the third week of December compared to 2021 were down 34%. Compared to 2019, pending sales were only down 26%. Through December 21, 2022, pending sales are down 14% from 2021 and down 3% against our benchmark year of 2019.
Supply and Demand
The months of supply was unchanged from the first week of December at 2.0. Hunt states, “We appear to have peaked at 2.1 months of supply and will see it continue to decline through the first several months of 2023 under normal seasonal conditions.”
To reach the equilibrium of six months of supply, Atlanta still needs 62,000 units of additional housing inventory over the next 12 months.
What About Price?
Year-to-year price increases began moderating in June when rates went above the Sensitivity Threshold of 5.25%. That moderation accelerated, with rates hitting 7.08% in October. Year to date, prices are up 13% over 2021 but are only up 9% year to year since June.
It appears that prices are settling into a range similar to the pre-pandemic period and are approaching the 47-year average appreciation of 4.6%.
NAR and MarketNsight
Our forecast is that the December NAR pending sales data will show improvement over October and November when it is released at the end of January. Look for a decrease year over year of approximately 33%.
2023 Housing Forecast
There are some high-profile experts predicting that the worst recession in recent memory will hit in 2023. There are other high-profile experts predicting only a mild recession. Still, others are predicting an “unemployment-less” recession or no recession at all. They cannot all be right.
It is clear that housing is already in an interest-rate-driven recession. Our best guess for the overall economy is that we will see a mild recession in 2023 or no recession at all. The underlying fundamentals of the economy are strong. The demographic drivers behind the surge in housing demand—which actually started before the pandemic—are still in place. We believe that today’s consumers are in much better shape financially than in 2008 and are far more resilient than some of the experts and alarmist headlines portray.
MarketNsight is focused on helping its customers make smart decisions regarding purchasing land and pricing product. Its groundbreaking Feasibility Matrix provides a one-stop shop for gauging new home community feasibility by providing ranking reports, lot and raw land sales data, regression analysis and mortgage data.
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