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This Week In Real Estate – August 27, 2023

Central Oregon Real Estate - This Week In Real Estate

This Week In Real Estate – August 27, 2023.

With the availability of existing homes at historical lows, the new-home market capitalizes on the lack of inventory by creating greater choices for home buyers. The rise in mortgage interest rates has not cooled demand for newly built homes as the Mortgage Bankers Association reported, this week in real estate, U.S. mortgage applications for new home purchases increased 35.5 percent in July compared to a year ago. New-home sales typically make up only about 10 percent of the market, but newly built single-family properties comprised a record share of homes on the market in the second quarter, making up nearly one-third of housing inventory nationwide. Below are a few newsworthy events from the fourth week of August that influence our business:

These Are 5 Ways Surging Mortgage Rates Are Reshaping the Housing Market.

Mortgage rates have climbed to the highest level in more than two decades – and that’s leading to a split-screen market in housing. Here are five things to know about the unusual housing market. Some would-be buyers are priced out of the market. The Federal Reserve‘s aggressive interest rate increases since last year have led to much more expensive mortgages. Many sellers are sidelined as well. About 15% fewer existing homes were on the market in July than a year ago. Bidding wars are still common. Fewer existing homes are changing hands these days, but surprisingly, there has been little or no break in prices, and buyers who are in the market are still willing to pay up. In fact, the average existing home sold in July cost nearly $407,000 – an increase of 1.9% from a year ago. More than a third of homes sold for more than their asking price last month. New homes are in high demand. With so few existing homes to choose from, more would-be buyers are turning to new construction. Sales of new homes in July were up more than 31% from a year ago. Small is the new big. Builders offering discounts have been helped by falling costs for lumber and other materials, but they’ve also been designing somewhat smaller houses in an effort to keep prices in check. The average size of a new house has fallen from about 2,350 square feet at the end of 2021 to about 2,200 square feet today, according to the National Association of Home Builders. Full Story…

New Home Sales Rose To A 17-Month High In July.

New home sales rose in July from the month before, beating estimates and reaching a 17-month high, as buyers continue to look to new construction as an option in the face of a historically low supply of existing homes. Sales of newly constructed homes were up 4.4% in July to a seasonally adjusted annual rate of 714,000 from a downwardly revised rate of 684,000 in June, according to a joint report from the U.S. Department of Housing and Urban Development and the Census Bureau. Sales were up 31.5% from a year ago. Even with higher mortgage rates and still elevated prices, new home sales have less competition from resales allowing them to sell better due to the scarcity of available housing, said Kelly Mangold of RCLCO Real Estate Consulting. “Household formation continues to outpace new construction which has continued to bolster the market despite the multitude of headwinds.” “Builders are benefitting from the lack of resale inventory,” said Odeta Kushi, deputy chief economist at First American, a financial services company that provides title insurance and settlement services to the real estate industry. “Existing homeowners don’t have to sell, and by not selling, they continue to gain the utility of shelter. But a builder will do what’s necessary to sell their inventory, including offer incentives.” New home inventory as a share of total home inventory in July reached nearly 31%, which is a much larger share than it has been historically, said Kushi. “From 2000 until the pandemic, new homes on average made up about 11% of total inventory,” she said. Full Story…

It’s The End Of An Era For Mortgage Rates.

For two decades, American homeowners enjoyed historically cheap mortgages. Rates on home loans ranged from low to ridiculously low. Let’s take a trip down memory lane: From April 20, 2011, through Oct. 3, 2018, the average 30-year mortgage rate never topped 5 percent. After an eight-week period of mortgage rates barely above 5 percent in the fall of 2018, rates plunged again, falling below 3 percent during the depths of the pandemic. It wasn’t until April 2022 that they rose above 5 percent again. To put it another way, throughout an 11-year period, the typical mortgage rate ticked above 5 percent for all of two months. “The Federal Reserve has closed the door on the era of super-low interest rates over the past year and a half,” says George Ratiu, chief economist at Keeping Current Matters, a real estate data firm. “There’s no doubt that we’ve been spoiled to some degree by record low or low-interest rates over the years going back to the Great Financial Crisis,” Hamrick says. “The reality is that mortgage rates have settled into a range that’s more in line with modern history.” Not everyone is writing the obituary for low mortgage rates, however. While no one thinks they will plunge back to 3 percent in the near future, some housing economists see a retreat on the horizon. The Mortgage Bankers Association, for example, predicts 30-year mortgage rates will fall to 5.9 percent by late 2023, and to 4.9 percent by late 2024. High rates are challenging for homebuyers, but it’s worth noting that millions of Americans bought homes before the recent era of super-low rates. From late 1978 through late 1990, mortgage rates averaged more than 12 percent, and they dipped into the single digits only on rare occasions. Buyers still found ways to get deals done. “​​The silver lining for housing through the first seven months of 2023 is that many buyers are seeing current rates as the new normal,” Ratiu says. Full Story…

Originally compiled & posted by Jason Waugh on the Berkshire Hathaway HomeServices Northwest Real Estate company blog.

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Mitch Darby

I am a real estate broker, architect (both licensed in the State of Oregon), and life-long Oregonian. If you are looking to buy or sell, I can help! I have Northwest Knowledge and am proud to be associated with Berkshire Hathaway HomeServices - Real Estate's Forever Brand!

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