Doctors: July’s sluggish home price growth highlights tension between the nation’s buyers and sellers

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August 19, 2019


MARKET RECAP

Doctors: July’s sluggish home price growth highlights tension between the nation’s buyers and sellers

The average American home listing price rose 5.5% to $315,000 in July, according to Realtor.com’s Housing Trend Report.

Although this rate is only 0.2% down from June, it’s a significant decrease from the 8.7% growth experienced during the same time period in 2018.

With an annual decline of 3.2%, July’s lackluster reading marks the earliest seasonal slowdown in home prices since 2012, according to the company.

“July’s data highlight tension in the housing markets between buyers eager to take advantage of lower mortgage rates and potential sellers concerned about slowing price growth,” said George Ratiu, realtor.com’s senior economist. “The decline in newly listed properties suggests that some would-be sellers are stepping back from the market, during the peak buying season, when most people are searching for their next home.”

While housing inventory is growing, the number of homes in the entry-level segment are declining, Ratiu said. Now that trends are shifting for the market as a whole, challenges for entry-level and first-time buyers are mounting, he said.

The inventory of properties priced below $200,000 in July fell 9.9% year-over-year, while, the inventory of homes priced above $750,000 increased 6.6%, according to realtor.com.

Competition for entry-level homes continues to be tight as homes priced below $200,000 only spent 56 days on the market, whereas properties priced over $750,000 spent a total of 81 days on the market, realtor.com said.

A recent report from John Burns Real Estate Consulting, indicates that only 54% of Americans can afford an entry level home that is priced at 20% of the median home price in their area.

Although this figure seems bleak, the report notes that affordability is improving as a recent drop in mortgage rates has spurred growth by 3%.

“The plunge in mortgage rates has created homeownership possibilities for 2.7 million more households as well as move-up possibilities for current homeowners with enough equity,” the analysts wrote. “This will spur home-buying activity this year, possibly averting the decline in volume we have been forecasting.”

HousingWire | Alcynna Lloyd

Looking Ahead: Upcoming Key Market Dates

Wednesday, August 21, 2019 Existing Home Sales
Wednesday, August 21, 2019 FOMC Minutes
Thursday, August 22, 2019 Markit Manufacturing & Services PMI (Flash)
Friday, August 23, 2019 New Home Sales

Millennials drive mortgage refinance boom

Mortgage interest rates have been falling since May, especially sharply this month, so borrowers, especially millennials, are rushing to refinance.

Applications to refinance were up a stunning 116% this week compared with a year ago, according to the Mortgage Bankers Association. That has lenders scrambling to keep up.

Quicken Loans, the nation’s largest mortgage lender, just saw the best quarter for mortgage originations in the company’s 34-year history. It originated more than $11 billion in mortgage volume in June alone, the highest for any month ever, according to a release. That brought the total quarter volume to a record $32 billion. It is now looking to hire 1,300 more employees, the majority at its Detroit headquarters.

Part of that was a slight uptick in homebuying, but much of it was refinancing. Refinancing had dried up dramatically just a year ago, as interest rates rose. Some lenders let go of workers, as business slowed.

Millennials were especially reactive to the rate drop. In June 2018, just 8% of millennial mortgage applications were to refinance; the rest were to buy a home. This June that jumped to 14%, according to Ellie Mae.

“Savvy millennials looking to lock in lower interest rates on their mortgages have helped drive a surge in refinance activity,” said Joe Tyrrell, chief operating officer of Ellie Mae. “While the Federal Reserve’s rate cut doesn’t necessarily mean that rates on mortgages will continue to drop, we’ll be keeping a close eye on its impact on both the refinance and overall mortgage market as we do anticipate that it will affect consumer behavior, including millennials who look to lower their payments.”

At SunTrust Bank, customer volume has also surged pretty dramatically. That was unexpected, as most predictions last year were that mortgage rates would rise this year, not fall, so banks and lenders are now scrambling.

Mortgage rates have been volatile day to day even, so borrowers have to pay close attention and might want to have their lender ready to jump as well.