Budding Homebuying Season Ahead
An uptick in buyer activity and cooling inflation could signal a busy spring ahead for the housing market.
Signed Contracts for Homes Increase
After last year’s slowdown in the housing sector, recent reports indicate that some homebuyers are back in the market. New Home Sales rose 2.3% from November to December, per the Commerce Department. This report measures when a sales contract is signed or a deposit is accepted for a home at any stage of construction, be it not yet started, under construction or already completed.
Signed contracts for existing homes were also on the rise, as the National Association of REALTORS® reported that Pending Home Sales were up 2.5% in that same period, marking their first monthly increase since May. This is important because Pending Home Sales are considered a leading indicator of housing activity, as a home usually goes under contract a month or two before the sale closes.
NAR’s Chief Economist Lawrence Yun noted, “This recent low point in home sales activity is likely over. Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”
Home builders have also seen signs of rising buyer traffic, helping confidence levels increase in January after twelve straight monthly declines, as noted by the National Association of Home Builders (NAHB) Housing Market Index. This monthly survey measures builders’ perceptions of current sales, sales expectations for the next six months and buyer traffic.
NAHB Chairman Jerry Konter said that “it appears the low point for builder sentiment in this cycle was registered in December.” This is significant because, as he explained, “The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023.”
Data Continues to Reflect Cooling Inflation
Reports released in January provided more indications that runaway inflation has started to slow. Annual readings for both the Consumer Price Index and Personal Consumption Expenditures, which measure consumer inflation, both declined in December. Inflation at the wholesale level has also moved lower, with the annual Producer Price Index falling in December as well.
Cooling inflation is welcome news and not just because it will help lower the costs of goods for families around the country.
Inflation reduces the value of fixed investments, and this includes a type of bond called Mortgage-Backed Securities, to which home loan rates are inversely tied. Rising inflation can cause mortgage bonds to worsen, or move lower, and home loan rates can move higher when this happens. Though many factors impact the markets, declining inflation is usually beneficial for both mortgage bonds and home loan rates.
If you’re thinking of buying a home this spring and want to review your financing options, call or email me any time. I’m happy to help you make the most of the opportunities that are ahead this year.
Sources: U.S. Department of Commerce, U.S. Census Bureau, National Association of REALTORS®, National Association of Home Builders, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis |