Mortgage & Housing Update 10/27/2023

Underlying home demand remains strong. Despite average 30-year mortgage rates near 8% and record home prices, pending existing home sales eked out a small increase, and first-time buyers were still around one-third of existing home purchases. The same housing issues are holding back sales: Inventory and Rates. 

Happy Halloween! I welcome you to tune into this Creepy edition of my Mortgage & Housing Update.

US economy surprises

The US economy grew faster than expected in the 3rd quarter. GDP rose 4.9% on an annualized basis. That's the fastest rate of growth since 4th quarter 2021, and more than double the 2.1% increase posted in the previous quarter. Consumer spending, private investment and government spending drove the better-than-expected performance. This near 5% growth does not seem sustainable. BUT, at this point a recession looks less likely.

Pending Home Sales

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose 1.1% in September. The Northeast, Midwest and South posted monthly gains while the West experienced a loss. In all four US regions, year-over-year transactions declined 11%. 

Pending contracts remain at historical lows due the higher mortgage rates in 20 years. 

First-time home buyers are resilient

Despite home price records, mortgage rates approaching 8%, and the competition against all-cash offers, first-time home buyers are not being forced out of the market. According to the Realtors Confidence Index for September, first-time buyers still represented 27% of total purchases.

Look at the chart. It’s amazing how little the share of monthly sales going to first-time homebuyers has changed over time. As the graph shows, the % has ranged from 26–49%, the median at 31%. It basically doesn’t matter what home prices or mortgage rates are doing; first-timers buyers are consistently one-third of all transactions.

Why are first-timers so resilient? While first-time home buyers should be the most price and rate sensitive, they’re also the most motivated by life events, like marriage and starting families. Even in an unaffordable and unavailable market like this, they’re willing to bite the bullet.

Mortgage Market

Last week, the 30-year mortgage rates pushed above 8%. While inflation continues to trend down, the US economy and the jobs market keeps surprising to the upside. The Fed is expected to keep rates steady on November 1. The market is currently pricing in a 96% chance of NO rate hike. But it’s still putting a 24% probability of a hike at the December 13 FOMC meeting. 

A lot depends on the inflation and jobs data that we get over the next week. We’re definitely getting close to the end of this tightening cycle.

Spooked by High Prices

As Halloween approaches, homebuyers are facing mortgage rates at a more than 2 decade high and record home prices. But don't be scared off! If you're dreaming of a new home this autumn, I can help you find and finance a BOO-tiful one! Remember: the spooky season is also the beginning of the fall/winter slowdown, when home sellers are often more willing to negotiate on listings that didn't sell during the summer.

My name is Pauline Lee. I am an independent real estate professional. I would be happy to connect with you to talk about your specific scenario. Find me through the links in my bio or comments. I encourage you to get pre-approved. 

Pauline Lee | | (617) 965-1988 x205 |

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.