Freddie Mac has published their latest Economic, Housing, and Mortgage Market Outlook which overall found that economic risks remain weighted down due to stubbornly high inflation and dampening affordability and low inventory is impacting sales and originations while prices remain solid for the near term.
According to Freddie Mac, by all available data, the glass is half full right now: a growing economy, strong jobs reports, and resilient first-time homebuyer demand despite poor affordability are all good news. Additionally, GDP grew at a 1.1% annualized rate in the first quarter of 2023—a decline from the 2.6% of growth reported during the fourth quarter of 2022—it is clear that the economy did not enter into a recession in 2022, and at least for now, 2023.
On the housing market side of things noted in the report, higher mortgage interest rates remain a significant challenge for the market as we enter the peak homebuying season.
According to the National Association of Realtors (NAR) existing home sales fell 2.4% month-over-month and 22% year-over-year to a total of 4.4 million units in March 2023, though the market continues to be challenged by low inventory levels.
For example, NAR indicated that the months’ supply of homes available for sale was just 2.6 months, and on average properties remained on the market for 29 days in March. Additionally, the total single-family homes for sale (new and existing) is near historic lows at 1.5 million units.
Freddie Mac also notes that newly constructed units will offer little relief to the inventory problem as housing starts were also down in March 2023. Cumulatively, 2023 single-family housing starts had the slowest first quarter since 2019.
While transaction volumes remain low compared to a year ago, and sentiment is mixed, home prices have gone from modest declines to modest increases in the latest data. Per the latest report from FHFA, the national Purchase-only House Price Index was up 0.5% in February after seasonal adjustment. The S&P CoreLogic Case-Shiller 20-city Composite Home Price Index was also positive in February 2023.
On the mortgage market side of things, as of May 4, the standard 30-year fixed-rate mortgage stood at 6.39%. This is up 1.12 percentage points from a year ago, but down from the peak of 7.08% in the week of November 10, 2022. After peaking last fall, mortgage rates have been drifting mostly sideways staying in the range of 6 to 6.5%. This is welcome stability for the housing market that saw a record increase in mortgage rates during the calendar year 2022.
“Though mortgage rates are substantially higher than they have been on average over the past decade, from an historic perspective rates are about average,” Freddie Mac said. ”For example, since starting on April 4th, 1971, Freddie Mac conducted 2,718 weekly surveys and 62.5% of the time mortgage rates were at least as high as they are now.”
Click here to see the report in its entirety.