Is the housing market recession approaching a trough? Experts have noted an increase in activity

This morning, home builders and mortgage lenders woke up to some positive news: There is a chance that activity in the US housing market, which is in free-fall mode in the second half of 2022, bounced to the bottom.

The seasonally adjusted Mortgage Purchase Application Index—a key leading indicator for housing activity that tracks mortgage applications—rose to 198.7. That was the highest weekly reading since September, and was up 24.7% from last week’s reading of 159.4.

The good news for brokers and builders? This increase in purchase applications potential mean housing demand recovers after crushing rise in mortgage rates last year. The bad news? The Mortgage Purchase Application Index—which a week earlier hit its lowest point since January 2015—was down 35.4% on a year-over-year basis.

“Mortgage application activity rebounded strongly in the first full week of January, with refinancing and purchase activity increasing by double-digit percentages compared to the previous week, which included the observance of the Bag- year,” wrote Mike Fratantoni, chief economist at the Mortgage Bankers Association, in the company’s statement about the latest purchase application numbers. “Despite these gains, refinancing activity remains more than 80% below last year’s pace and purchase volume remains 35% below last year’s level.”

The reason housing market activity has gone into free-fall mode in the second half of 2022 is simple: Housing affordability has reached “pressurized” levels—meaning this is currently one of the most expensive times in history to buy a home. That will happen when mortgage rates increase from 3% to 7% immediately thereafter the Pandemic Housing Boom sent US house prices to 41%.

On the other hand, the reason the housing market activity will be good is because the affordability has been “depressurized” relatively recently. In the last two months, the average 30-year fixed mortgage rate decreased from 7.37% to 6.04%. While falling home prices in the US (down 2.4% between June and October) and rising income also helped to “depressurize” the market.

But let’s be clear: Although the activity of the housing market is low, it does not guarantee that the prices of the national house also. Indeed, among the 27 leading real estate forecasters in the country23 expect US home prices to decline further in 2023.

“Requested at home [home sales] near a trough; home supply [housing starts and completions] hasn’t hit bottom yet; and [U.S.] Home prices have a way to go before reaching their nadir,” Moody’s Analytics chief economist Mark Zandi recently said. luck. The reason? Housing affordability, Zandi said, remains unbalanced.

In September, Fed Chair Jerome Powell had a clear message: “This rough [housing] Correction should put the housing market in better balance. As we head into the spring season, brokers and builders alike continue to deal with the housing correction initiated by rising mortgage rates. The question remains: Where will mortgage rates go as inflation eases? And on where regional housing markets will keep prices stableand what markets keep correcting?

Want to stay updated on home improvement? Follow me Twitter on @NewsLambert.

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