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Real Estate Data: Is Mortgage Demand Falling As Buyers Respond To High Interest Rates, Low Supply?

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Key takeaways

  • Mortgage applications fell 1.9% from the previous week for the week ending on December 2, with many potential homebuyers likely waiting to see what the rate hike announcements will be like this week.
  • Mortgage rates fell for the fourth consecutive week on the positive inflation data, but potential homebuyers are still wary due to volatile mortgage rates driven by the Fed’s aggressive rate hikes.
  • Pending home sales on existing units dropped 4.6% in October, making it the fifth month in a row with declines.

We saw home prices skyrocket during the pandemic when people took advantage of low interest rates, fled from cities and found themselves crammed into home offices. With aggressive rate hikes and the fears of a recession, the real estate market has changed in 2022.

The real estate market has been expecting a fall for some time now; historically, home prices drop when interest rates go up. However, that hasn’t been the case in 2022 due to a unique set of circumstances. Let’s look at mortgage demand to see if it’s actually falling (or rising).

The current housing market

When the pandemic first started in 2020, there was plenty of uncertainty over what would happen to the real estate market, as nobody knew what to expect. With the economy abruptly halted, the government got involved with stimulus checks and lower interest rates.

Mortgage rates dropped down to a record low of 2.65% in January 2021. With low interest rates and an unprecedented amount of employees now working from home, there was a real estate boom.

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But this boom began to retract quickly. In June 2022, inflation reached a 40-year high of 9.1 due to the combination of pandemic restrictions loosening up, supply chain disruptions, a strong labor market and astronomical housing prices, so the central banks got involved. The Fed began an aggressive rate hike campaign to slow down the overall economy.

Plenty has changed since 2021 when people were taking advantage of low interest rates to get into the real estate market. Mortgage rates have increased to an average of 6.43% as the Fed’s benchmark interest rate is nearly 4%.

Many potential buyers on the sidelines are waiting for either interest rates to drop or for housing prices to decrease. Many experts felt that the inflated housing prices along with increased mortgage rates would be enough to slow down the real estate market. The inflation numbers and housing prices have remained stubbornly high, but show signs of a slow descent.

What’s happening with mortgage demand?

Mortgage application volume dropped 1.9% last week compared to the prior week, based on data from the Mortgage Bankers Association. Mortgage applications to buy a home declined 3% for the week, with an overall drop of 40% year over year.

On the other hand, refinancing applications have fallen 86% year over year despite being up 5% from the previous week. Mortgage rates have dipped slightly in the last few weeks, but remain high compared to pre-pandemic years (more on this in the next section).

It seems that these slightly lower mortgage rates have attracted current homeowners to refinance, but they haven’t been enough to entice more new home buyers. There’s speculation that many folks are focusing on saving up given the uncertainty regarding the economy and a possible recession.

The average loan size for a mortgage application went down to $387,300 — the lowest number since January of 2021. There CPI data for November will be released in the coming days, and this data will play a vital role in mortgage rates and how the Fed moves forward with rate hikes.

In positive news, the inflation rate fell to an annual rate of 7.7% in October. While these numbers aren’t exactly worth celebrating, many analysts felt that this meant that prices would finally be dropping.

Mortgage rates are falling

According to Freddie Mac, the 30-year fixed-rate mortgage hit an average of 6.33% for the week ending on December 8. This rate is down from 6.49% a week ago since reports indicate that the stubborn inflation numbers may be coming down from their peak.

Sam Khater, a chief economist from Freddie Mac, noted that despite a significant decline in mortgage rates, the homebuyer sentiment has remained low, and there hasn’t been a surge in purchase demand with the lower rates.

We also can’t ignore the role of inflation on savings. As people are spending more money on everyday items, they may not be able to save up for a down payment as quickly as they could in the past.

Housing supply issues

Last year, the National Association of Realtors predicted that the housing market needed about 5.8 to 6.9 million new homes to satisfy the supply issues. The NAR’s chief economist Lawrence Yun commented, “There is a strong desire for homeownership across this country, but the lack of supply is preventing too many Americans from achieving that dream.”

It’s believed that the supply shortage has kept prices from falling more drastically as people still need somewhere to live. These figures can’t be ignored because the persistent rate hikes may only be hurting those with variable mortgages who are now spending more on their monthly payments.

What’s happening with home sales?

The National Association of Realtors (NAR) recently released data for house sales. In October, existing home sales fell 5.9% from the previous month. Sales have fallen 28.4% year over year, dropping from 6.19 million in October of 2021. Properties have remained on the market for about 21 days in October, up a few days from the 19 days in September. It’s also worth mentioning that first-time home buyers made up 28% of sales in October.

The annual share of first-time home buyers hit 26%, the lowest figure since NAR started tracking data. There’s plenty of speculation that many potential home buyers have simply chosen to invest in other assets.

According to other data released from the NAR, pending home sales in October fell 4.6% from the previous month, marking the fifth consecutive month of declines. The pending homes sales data is critical because a sale is listed as pending when the deal has been signed but the transaction hasn’t gone through. There have been issues with folks qualifying for mortgages due to the higher rates.

New home starts also fell 8.8% in October on an annual basis. This decline resulted from construction prices going up, the overall increase of prices in the economy, and volatile mortgage rates. First American deputy chief economist Odeta Kushi revealed that prices for construction materials like plywood, steel and concrete were all much higher than they were during the pre-pandemic era. Kushi also spoke about how the average hourly earnings in construction had risen 6.6% in October on a year-over-year basis. Increased construction prices and lower mortgage applications have led to builders pulling back. The rising interest rates are also impacting housing affordability.

Additionally, homebuilder sentiment in the single-family housing market dropped to its lowest level since June 2012. With builders facing problems with increased labor and material costs that are leading to lower demand, the index from the National Association of Home Builders went to 33 in October. This is the 11th consecutive monthly drop in this index.

What can we expect in 2023?

Many experts have chimed in with predictions on what we could expect from the real estate market in 2023. Morgan Stanley expects home prices to decline by 10% from June 2022 to 2024. So while they don’t expect a real estate crash, they foresee a market correction.

Redfin recently released its real estate predictions for 2023 where they shared that they expected 30-year mortgage rates to drop slowly until they hit 5.8% near the end of the year.

How should you be investing?

Judging by the decline in mortgage applications, there’s less demand, which could eventually lead to price reductions in the housing market. If you’re looking to purchase real estate in the near future, you may be unsure of how to invest your money as you wait for prices to come down.

For all future homebuyers looking to keep their assets relatively liquid while still watching your money grow, Q.ai takes the guesswork out of investing. We also bring a strategy to your portfolio and diversify your investments by bundling them up in Investment Kits. You can activate Portfolio Protection at any time to protect your gains and reduce your losses, no matter what industry you invest in.

The bottom line

As the interest rate hikes continue, there are fears that the economy could tip into a recession. All we know for sure is that the markets will be paying attention to this week’s Consumer Price Index data to see if the rate hikes have done enough to cool down the economy overall.

If the rate hikes continue as the Fed has indicated, then mortgage rates will continue to remain volatile for the near future, which will definitely impact mortgage demand.

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Ottawa Valley real estate ends on a high in a dismal year – Ottawa.CityNews.ca

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The 2022 real estate year in the Ottawa Valley ended with a little bump in what can best be described as a year to forget if you are a realtor or an individual searching for that perfect home at a reasonably affordable price. 

The number of homes sold through the MLS® System of the Renfrew County Real Estate Board totalled 83 units in December 2022. This was a substantial decline of 21 percent from December 2021 but still came in around average levels for this time of year.  

The year started off slow and never really gained any momentum during the 12 months, a trend that the rest of Canada was mired in for the first eight months of the year.  

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In its final report of the year, the Canadian Real Estate Association (CREA) reported the national slower than usual real estate sales in the first half of the year was caused by a number of factors.  

“In 2022, we saw one of the biggest single-year shifts on record in Canadian housing activity, from record highs last winter to just below the 10-year average to end the year,” said Jill Oudil, chair of CREA. “That said, the market’s adjustment to higher rates may be mostly in the rear-view mirror at this point. That could start to bring buyers back off the sidelines this spring.   

Leading the way for the slump in sales was the uncertainty of the Canadian mortgage rates and the pattern of following the American bank rate that was drastically increased over the latter part of the year.  

The Federal Reserve waged a war on inflation throughout 2022 and as a result the interest rate set by the Fed increased by a whopping 4.25 per cent during the 12 months. The high rate of inflation, the war in Ukraine, shortages of materials in the global supply chain all contributed to the massive increases. 

In Canada, the Bank of Canada often followed suit. In October the cost of borrowing to purchase a home was determined by the national rate which sat at 1.75 percent. By December 2022, it was 4.25 per cent.   

In Renfrew County, home sales were eight percent below the five-year average and six percent above the 10-year average for the month of December. On an annual basis home sales totalled 1,652 units over the course of 2022. This was a significant decrease of 25.9 percent from the same period in 2021. 

The average price of homes sold in December 2022 was $402,804, down sharply by 10.1 per cent from December 2021. 

The more comprehensive annual average price was $465,948, an increase of 14.2 per cent from all of 2021. 

The dollar value of all home sales in December 2022 was $33.4 million, a big reduction of 28.9% from the same month in 2021. 

The number of new listings increased by 8.2 per cent (five listings) from December 2021. There were 66 new residential listings in December 2022. 

New listings were 9.1 per cent below the five-year average and 21.7 per cent below the 10-year average for the month of December. 

Active residential listings numbered 226 units on the market at the end of December, more than double the levels from a year earlier, surging 113.2 per cent from the end of December 2021. 

Active listings were 20.3 per cent below the five-year average and 55.5 per cent below the 10-year average for the month of December. 

Months of inventory numbered 2.7 at the end of December 2022, up from the one month recorded at the end of December 2021 and below the long-run average of 7.3 months for this time of year. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

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8Twelve Enters into Mortgage Solution Agreement with Your Home Sold Guaranteed Realty – Financial Post

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TORONTO, Jan. 30, 2023 (GLOBE NEWSWIRE) — 8Twelve Financial Technologies Inc. (“8Twelve” or the “Company”) is pleased to announce that it has entered into an agreement to provide mortgage solutions to Your Home Sold Guaranteed Realty (“YHSGR”), its agents and their clients.

8Twelve’s proprietary INFIN8 utilizes real-time analytics, AI, and workflow automation to identify the best possible mortgage from Canada’s largest marketplace of bank, alternative, and private mortgage products.

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At Your Home Sold Guaranteed Realty, we invest in our agents more than any brokerage you will find,” said Todd Walters, CEO and Co-Founder. “Partnering with 8Twelve fits our model perfectly because we consistently equip our agents with differentiating tools that help them to build their business and dominate in the industry. This partnership ensures that YHSRG realtors have the best tool to secure financing for their deals.”

YHSGR is the only real estate brokerage in North America to be licensed by the US and Canada’s #1 real estate Coach Craig Proctor. The distinction brings with it exclusive access to Craig Proctor’s proprietary business teachings and systems for YHSGR agents; systems that have been proven to create more millionaire agents than any other real estate trainer or coach.

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“With rising interest rates and tighter lending requirements, Canadians now more than ever need to know all their home financing options,” said Akber Abbas, President & Chief Information Officer of 8Twelve.  “This agreement highlights the strength of our service offering in enabling large scale enterprises to deliver the best financing solutions to their clients.”

8Twelve is seeing increased interest and user success in its offering as companies are exploring more ways to help their clients.  8Twelve’s secure, smart technology is able to provide fast turnarounds and exceptional service levels to homebuyers as it strives to provide a mortgage solution for every borrower situation.

About Your Home Sold Guaranteed Realty
Your Home Sold Guaranteed Realty was founded with this vision: To Be the Best Place to Work, Buy, and Sell Real Estate! We are proud to be one of the fastest-growing real estate companies nationwide. If you’re looking to buy or sell a home, Your Home Sold Guaranteed Realty is there for you every step of the way. You can count on knowledgeable agents with PERFORMANCE GUARANTEES that are ready to handle every situation, giving you the peace of mind that you made the perfect choice in a Real Estate Agent and Company!

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About 8Twelve Financial Technologies
8Twelve is transforming the home financing experience by providing consumers with one convenient platform to solve all their mortgage needs. Gone are the days of needing to search for a mortgage through multiple providers such as banks, mortgage brokers, and private lenders. Borrowers can now access Canada’s largest selection of mortgages in one convenient marketplace. 8Twelve’s proprietary cloud platform INFIN8 utilizes real-time analytics, AI, and workflow automation to identify the best possible financing solution in the Canadian market (from over 65 lenders and over 7000 mortgage products).

Follow 8Twelve on:
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Contact:
Rick McLaughlin
Email: rick@8twelve.mortgage 

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Saskatoon Real Estate: 6 most expensive house lisitngs | CTV News – CTV News Saskatoon

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Housing sales have been dropping in Saskatoon. However, sales are still higher than the 10-year-trend according to the Saskatchewan Realtors Association (SRA). For those searching for something a little above average, the Saskatoon market still has some of the top luxury homes to offer.

Here are six of the most expensive homes in the region.

 

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(Realtor.ca)

(Realtor.ca)

A four-bedroom, six-bathroom home in the Nutana neighbourhood. The property has direct access to the South Saskatchewan River and offers captivating views. Over four-thousand square feet spread over three levels, including a developed basement. It also has an in-ground pool, courtyard and a dock at the river’s edge. The open-concept kitchen contains a butler’s pantry, coupled with a formal living and dining room on the main floor.

 

(Point2Homes.ca)

 

(Point2Homes.ca)

A four-bedroom, three-bath luxury home overlooking the South Saskatchewan River. This property was custom created to make the most of the breathtaking view. It offers floor-to-ceiling windows, an ultra-private rear courtyard with a built-in cooking area, a basement that has a space for a live-in nanny suite and a home gym. It also has a unique high-heel style bathtub in the master bedroom. 

 

(Realtor.ca)

(Realtor.ca)

This five-bedroom, four-bathroom home offers views of the South Saskatchewan River. It is also automated, which means you can control elements through your phone, such as windows, temperature, surround sound, lighting and security system. There is also a four-car garage on the property, a second-flood deck and landscaping.

 

(Point2Homes.ca)

(Point2homes.ca)

A five-bedroom, seven-bathroom home that offers a lot of space and comes completely furnished, except for the piano. In the basement, there is a theatre room, powder room, and storage room. The main level features a powder room, pantry and kitchen with Miele appliances. In the yard, there is a ground-level patio and a triple garage that offers direct entry to the basement.

 

(Realtor.ca)

(Realtor.ca)

One of Saskatoon’s original mansions, this 5-bedroom, 4-bathroom home was designed by Frank P. Martin, a well-known architect from the 1900s. Renovations have kept the original plan while updating the wiring, plumbing and more. This home features a private rooftop patio, a third-floor self-contained suite that is separate from the rest of the home, and the original carriage house with a loft.

 

(Realtor.ca)

 

(Realtor.ca)

This four-bedroom, three-bathroom home was built in 1962 by George Kerr in the Mid-Century Modern Style. It includes a large art studio, a floating staircase, a 20-foot ceiling and floor-to-ceiling windows. It offers views of the green space in Grosvenor Park and is a short walk to the University of Saskatchewan.

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