CHM Blog

Price softening finally occurring in some previously hot real estate markets

It had to happen sooner or later. According to MarketWatch’s Aarthi Swaminathan, the U.S. housing sector is finally cooling off, evidenced by the latest data. If you have any interest in moving somewhere where that is happening faster than the rest of the country, pay attention. Some American homes are now on sale.

“Sellers slashed home prices in June in areas that saw red-hot price appreciation earlier in the pandemic, including Reno, Nev., Austin, Texas, and Boise, Idaho, according to Realtor.com," says Swaminathan. “With more homebuyers pulling back amid higher mortgage rates and recession fears, sellers are reacting to the decline in demand.”

He reports on how Realtor.com looked at the 200 largest metro areas in the U.S. and calculated which ones had the highest percentage of home listings with price cuts in June. “With buyers pulling back, homes linger for a longer time on the market and more homeowners have to slash prices to get a deal done,” George Ratiu, senior economist at Realtor.com, said in an interview with the website.

Ratiu also noted that the price cuts have been the sharpest in places that attracted many eager out-of-state buyers earlier in the pandemic, but expects more cities to join this list. It could be that those who assumed remote work would last forever might have had to change their thinking a bit. “For buyers, the change points to more opportunities in the months ahead, especially the fall and winter,” he added.

Among those metro areas with the highest percentage of price cuts in June was Reno, where the median home list price was $677,500. About a third of the homes listed in Reno had their prices reduced by sellers. Austin, TX, follows closely, with 32.4% of homes in the area having their prices reduced, dropping from a once-median list price of $620,000.

Phoenix , Ariz. was a major hotspot earlier in the pandemic as well, but now there’s a surge in homes being listed on the market. “One local outlet said that there have been more homes on the market now in Phoenix than before the Great Recession,” says Swaminathan. “29.5% of homes in Phoenix had prices slashed in June. The median home list price was $548,000.”

One Phoenix Realtor her quotes admits, “Sellers are worried. They missed the peak of the market. So they’re putting their homes up for sale as fast as they can, while their properties can still fetch a high price.” Does this mean the bidding war days are over? It’s sure looking that way if sellers are slashing their prices to get buyers to take a look at their homes. Next is Anchorage, Alaska, fourth on the list, with 28.5% of homes in the area having their prices slashed. Then comes Boise, Idaho, another hot market like Phoenix, where a big share of homes are being listed and prices are being adjusted accordingly.

Ogden, Utah is number 6. There, 27.4% of listings are getting a price cut. And Sacramento, CA, Colorado Springs, CO, Evansville, Ind., and Medford, Ore., round out the bottom of the top 10 list. “Aside from Evansville, where the median home list price was $246,000, the other spots all had median list prices of more than half a million dollars,” says Swaminathan. All told, a quarter of homes in all the cities had their prices slashed, according to Realtor.com.

MarketWatch, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways today. The MBS market improved by +87 bps last week. This was enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Jobs 2) The Fed and 3) Central Banks.

1) Jobs: We get a ton of wage and job related data this week. In fact, we get at least one economic released related to jobs each and every day this week: ISMs, JOLTS, Challenger Job Cuts, Initial Jobless Claims and Big Jobs Friday with Non Farm Payrolls, Average Hourly Earnings, and the Unemployment Rate.

2) The Fed: With Fed ending "forward guidance" the bond market will focus heavily on the barrage of Fed Speak this week. Additionally, the Federal Reserve Bank of NY will purchase 30Y UMBS on Monday, Wednesday and Friday. We get their updated Balance Sheet on Thursday.

3) Central Banks: We get key interest rate decisions from Australia and the Bank of England. The bond market will focus the most on the BofE which is expected to hike by only 25BPS but we may see a 50BPS move.

This Week's Potential Volatility: High

This morning markets are mostly moving sideways. Volatility has started low this week but expect volatility spikes on jobs data.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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