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Mortgage rates soar, home sales plummet for the 7th month and suddenly here are the new listings

But that still doesn’t reflect the recent spike in mortgage rates to 4.5%.

By Wolf Richter for WOLF STREET.

OK, the “existing home sales” data released today by the National Association of Realtors was for February, and in February average mortgage rates were much lower than today. In mid-February, the average 30-year conforming fixed mortgage rate had just topped 4% for the first time since 2019, according to the Mortgage Bankers Association weekly index.

According to Mortgage News Daily’s daily gauge, the average 30-year fixed-rate mortgage hit 4.50% yesterday, the highest since March 2019. Since last fall, the average rate has jumped 1.5 points percentage, going from 3% to 4.5% (graph via Daily Mortgage News):

In its November report, the National Association of Realtors expected that the average 30-year mortgage rate reaches 3.70% by the end of 2022. It is only March 2022 and we are already at 4.5%. It’s moving fast. Last month, I speculated that 4% might be the magic number beyond which the housing market will feel it.

It’s no secret that as mortgage rates rise, more and more buyers are being offered exorbitant prices and are walking away from the market.

But among buyers who are still eligible, rising mortgage rates are sparking a mad rush to buy something “now”, at any price and no questions asked, and they’re dangling inspections and taking huge risks – even NPR aired something like a warning about this yesterday, LOL – to lock in mortgage rates that are still available before they go up even more.

There is a well-established trend: selling activity picks up in the early stages of the mortgage rate hike cycle, and we’ve seen some of that, but it’s becoming impossible for a growing number of potential buyers.

Sales of houses, condos and cooperatives of former owners in February fell 7.2% in February from January, and 2.2% year-over-year, to a seasonally adjusted annual rate of 6.02 million households, the seventh consecutive month of decline from one year to the next (historical data via Y-Charts):

“Housing affordability continues to be a major challenge as buyers take a double whammy: rising mortgage rates and sustained price increases,” the NAR said in the Press release. He pointed out that monthly payments were up 28% from a year ago. “Some who previously qualified for a 3% mortgage rate are no longer able to buy at the 4% rate,” the report said.

Home sales peaked between 2003 and 2006. The current era remains solidly below that peak. The seasonally adjusted annual rate of 6.02 million sales in February was also well below the pandemic peak, but up from previous years.

Sales of single-family homes fell 7.0% for the month and 2.2% year over year, to a seasonally adjusted annual rate of 5.35 million homes.

Condo sales fell 9.5% for the month and 4.3% year over year to a seasonally adjusted annual rate of 670,000 condos.

By regionthe percentage change in the seasonally adjusted annual rate of total home sales in February compared to January, and year over year (yoy):

  • Northeast: -11.5% compared to January, -12.7% year-on-year.
  • Midwest: -11.3% from January, -1.5% YoY.
  • South: -5.1% compared to January, +3.0% year-on-year.
  • West: -4.7% compared to January, -8.3% year-on-year.

Here are the new announcements. The number of homes listed for sale in February jumped 13.4% year-over-year, following the 13.2% jump in January, and was down only 3.0% from February 2020.

New listings come out of the woodwork when interest rates rise and volume stagnates because now is suddenly the time to put the extra home on the market before the market turns. In February, new registrations were essentially back to normal for a month of February, after being terribly low for the past two years. The green lines connect the months of February (source: realtor.com residential listings database):

Supply of homes for sale fell from January’s record low to 1.7 months of sales. The number of unsold homes on the market rose 2.4% from January’s record lows of 870,000, seasonally adjusted.

The median price ticked up from January and up 15% from a year ago to $357,300. Year-over-year peaks had peaked last May and June at more than 23%. The seasonal peak of the median price was in July 2021 at $362,800:

Share of investors in sales remains roughly stable. “Individual investors or buyers of second homes, which constitute many cash sales”, represented 19% of transactions in February, compared to 22% in January but up from 17% in February 2021. cash” remained in the same range, representing 25% of transactions in February, compared to 27% in January but up from 22% in February 2021.

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