Existing home sales are expected to increase at a moderate pace, although affordability pressures from inventory shortages and rising mortgage rates could slow the potential for even stronger sales momentum. This was reported at an economic forecast forum produced by the National Association of Realtors.
Several economists expressed their opinions during the forum. Lawrence Yun, chief economist at NAR, presented his 2016 economic and housing forecast.
The forum report noted that “Yun was joined onstage by Cris deRitis, senior director of credit analytics at Moody’s Analytics, who also shared his insights on the housing market and U.S. economy, and Jonathan Corr, president and CEO at Ellie Mae, who discussed issues impacting the mortgage industry and how real estate professionals can adjust to the upcoming wave of new millennial buyers,” according to the report.
Yun said, “The pent-up demand for buying in recent years finally broke out in a meaningful way in 2015, fueled by sustained job growth in many parts of the country and rising home values giving more homeowners the incentive to sell — a trend that he expects to continue next year.
“Sales activity in 2016 will once again be primarily driven by the ongoing release of more pent-up sellers finally realizing their equity gains and using it towards the down payment on their next home,” said Yun.
“With demand expected to remain stable through the final two months of the year, Yun forecasts home sales to finish 2015 at a pace of 5.30 million and then expand 3 percent to around 5.45 million in 2016. The national median existing home price is expected to rise to around 6 percent this year before slightly moderating to around 5 percent in 2016,” the report noted.
Have Questions? We have answers.
Q: Are mortgage rates finally rising?
A: Rates are indeed slowly rising. The most recent report shows average fixed mortgage rates rising amid continued market expectations of a possible rate increase by the Federal Reserve and following jobs report that was stronger than expected. Several economists predict the Fed will pushthe rate higher this month, (December). Currently, the rate for a 30-year fixed rate mortgage averaged 3.98 percent with an average 0.6 point. A year ago, at this time, the 30-year FRM averaged 4.01 percent.
Q: Is the refinance share of mortgage applications rising?
A: No, the refinance share is decreasing, according to a recent report from the Mortgage Bankers Association. “The refinance share of mortgage activity decreased to 58.6 percent of total applications from 59.8 percent the previous week,” the report noted. “The adjustable-rate mortgage (ARM) share of activity decreased to 6.3 percent of total applications. The average loan size for purchase applications rose to a survey high of $301,200. “The FHA share of total applications increased to 14.4 percent from 14.1 percent the week prior. The VA share of total applications increased to 11.7 percent from 10.9 percent the week prior.”
Q: What’s the current trend with home prices?
A: Several economists have recently commented on this subject. Here’s a portion of a report by the National Association of Realtors: “The encouraging lift-off in existing-home sales amidst ongoing inventory shortages kept home prices rising in most of the country during the third quarter, but overall price appreciation slowed to a healthier pace,” according to the latest quarterly report by the NAR. “The median existing single-family home price increased in 87 percent of measured markets, with 154 out of 178 metropolitan statistical areas showing gains based on closings in the third quarter compared with the third quarter of 2014. Twenty-four areas (13 percent recorded lower median prices from a year earlier.”
Q: Are home sales increasing?
A: Home sales are running at a steady pace. With mortgage rates remaining below 4 percent for the third straight month, existing home sales in October were at a healthy pace. However, they failed to keep up with September’s jump, according to a report from the National Association of Realtors. “Total existing home sales, which are completed transactions that include single-family homes, town homes, condominiums and co-ops, fell 3.4 percent to a seasonally adjusted annual rate of 5.36 million in October from a slightly downwardly revised 5.55 million in September. Despite last month’s decline, sales are still 3.9 percent above a year ago (5.16 million),” the report noted.