CHM Blog

A paradox: Home prices climb while sales sink

When Charles Dickens wrote, ”It was the best of times, it was the worst of times," he couldn’t have known it would apply so specifically to the housing market. Prices rose in 78% of U.S. metro areas in the third quarter, while pending sales in the four weeks ending Oct. 25 sank to the lowest level in Redfin's records. Inman's Jessi Healey explains how both can be true at once.

The National Association of Realtors says the national median single-family existing-home price rose 1.7% from a year earlier to $432,900. Prices climbed in 78% of the roughly 235 metros it tracks, down from 80% in the second quarter. NAR Chief Economist Lawrence Yun says homeowners are the ones benefiting. "Over the past seven years, the average house has appreciated by $146,000."

Redfin sees a slightly different picture. Its median sale price for the four weeks ending Oct. 25 slipped 0.1% to $389,601, after a 0.2% dip the week before, the first two drops in more than three years. The two companies measure different things. NAR looks at quarterly sales of existing single-family homes, while Redfin tracks listings and sales across more than 900 metros on a rolling four-week basis.

Regionally, the Northeast led with a 4% gain to $561,500, followed by the Midwest at 3.6% and the South at 1%. The West was the only region to fall, down 0.6% to $629,000. Gulfport-Biloxi-Pascagoula, Mississippi, topped large markets with an 11% jump. Yun says many Midwest markets offer real value, while the AI boom keeps pushing Bay Area prices up. San Jose remains the priciest market at a median of $1.92 million, and nine of the 10 most expensive markets sit in California or Hawaii.

Buyers feel the cost. A typical monthly payment with 20% down was $2,251 in the third quarter, up $69 from a year earlier. For first-time buyers, a typical $368,000 starter home with 10% down came to $2,208 a month, or 36.3% of income. Redfin puts its own median payment, at $2,786, up 10.7% and the second-highest on record.

Those payments help explain the sales slump. Pending sales fell 15.9% from a year ago and dropped in all 50 of the most populous metros for the third week running, with Seattle down 31.6% and Atlanta down 25.9%. New listings hit their lowest level since January, so inventory rose only 0.3%. Redfin reports hundreds of thousands more sellers than buyers, giving buyers more negotiating power than they've had in over a decade.

So why aren't prices falling faster? First American Chief Economist Mark Fleming says that in eight periods of sustained rate increases since 1993, prices generally kept rising. From December 2021 through October 2023, they rose an estimated 14%, even as affordability worsened much faster.

Limited inventory helps, since owners with low-rate mortgages hold off selling and some pull their homes rather than accept less. "Higher mortgage rates can put pressure on home prices, but the economy, household incomes and the number of homes for sale all play a role in what happens next," Fleming wrote.

Inman, 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. The MBS market improved by +29 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

These are the three things that have the greatest ability to impact rates this week. 1) Jobs 2) Geopolitical and 3) ISMs

1) Jobs: We have tons of job and wage related data all week culminating in Big Jobs Friday with Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings and more.

2) Geopolitical: How will the bond market react to the mid-terms?

3) ISMs: We will get both ISM Manufacturing and ISM Services this week. The bond market will focus on Prices Paid.

This Week's Potential Volatility: High

This morning markets saw some initial support but are back to sideways trading. Volatility has started at moderate to high levels and will likely become high later this week.

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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