Has the housing market peaked? Here are the signs.

In Atlanta and its surrounding suburbs, there’s still plenty of competition to buy the perfect starter home, says Jeanne Morgan, real estate agent with Berkshire Hathaway HomeServices in Georgia.

But for less than optimal properties, it’s a different story. “The homes that aren’t so perfect – that could use a little TLC, a little elbow grease – I’m happy to say are staying on the market a little longer,” she says..

News like this from the front lines of the housing market can be a beacon of hope for potential buyers who are tired of a hyper-competitive market.

Recent data shows home sales have slowed as higher mortgage rates and still rising home prices push some buyers away. All eyes are now on the supply and demand indicators to see if these conditions will last. Several data points can help shed light on the direction the housing market will take.

New Listings and Price Drops

In the nearly two decades Deviree Vallejo has been a real estate agent in Denver, she says she’s never seen anything like the period from December 2021 to April 2022. “It wasn’t even days on the market was hours in the market,” says Vallejo.

But for buyers whose price has not yet been knocked out of the housing market, the selection of homes for sale may improve now, according to home listing statistics.

Vallejo, who works with Liv Sotheby’s International Realty, says competition in Denver peaked the weekend after Easter. “The automatic brake was interest rates rising as much as they did,” Vallejo says, adding that inflation, economic slowdown and a stock market pullback also helped tame the bidding wars. .

Now, because there’s more inventory, the Denver market is “much friendlier to buyers, although it’s still a seller’s market,” she says. “Bidding wars aren’t that crazy.”

Nationally, supply has also increased, providing more options for potential buyers. Active home listings rose year over year for the fifth consecutive week, according to Realtor.com data released today. And for the first time in seven weeks, median listing price growth slowed, though it remained well above the historical norm. (Realtor.com is operated by the same parent company as Barrons.)

“Today’s data offers a hint of relief on the horizon, albeit a very distant one,” said Realtor.com chief economist Danielle Hale. “With more options, home buyers can see a little more room to negotiate and time to make decisions, even if market conditions continue to favor sellers.”

Similar listing price data from Redfin confirms this. In the four weeks ending May 29, sellers lowered asking prices at the fastest rate since October 2019, the company reported.

The cuts reflect sellers’ expectations, said Redfin chief economist Daryl Fairweather. “Sellers got into this mindset that if the house down the street sells for, say, $500,000, then I’m guaranteed $550,000,” Fairweather said. “Now that the market is cooling, that’s no longer true – you really need to price more conservatively.”

Signatures of contracts and mortgage applications

The pace of existing home sales will likely continue to slow, according to gauges of buyer activity like contract signings and mortgage applications.

Contract signings for existing homes fell further than expected in April, according to the National Association of Realtors’ Pending Home Sales Index. The gauge, which measures homes under contract that have not yet closed, offers an early reading of existing home sales in the following months.

That wasn’t the only measure of contract signings that declined in April. New home sales, a government measure of new home contract signings, fell 16.6%, a more dramatic decline than expected.

Mortgage applications to buy a home, as measured by the Mortgage Bankers Association, are another useful indicator of buyer activity. These have declined as mortgage rates have risen. For the week ending June 2, the trade group’s index that tracks the volume of home purchase loan applications fell to its lowest level since October 2016.

“At the demand stage, it really reflects borrower demand,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said of the index in late May. Given the rising cost of buying a home, “it’s no surprise that we’re seeing purchase inquiries are down,” he added.

Homebuyer and Homebuilder Sentiment

There is no doubt that homebuyers felt the slump.

Of those polled by Fannie Mae in May, just 17% said now was a good time to buy a home, the government-sponsored firm reported earlier this week – the lowest share on record.

“These results suggest to us that rising mortgage rates, high house prices and inflation will likely continue to squeeze potential buyers – as well as potential sellers with lower, locked-in mortgage rates – out of the market.” said Fannie Mae chief economist Doug Duncan. The survey results confirm Fannie Mae’s expectation that home sales will slow through the rest of the year and into 2023, Duncan added.

Another closely watched sentiment indicator is the National Association of Home Builders’ Housing Market Index, which measures builders’ confidence in market conditions through a monthly survey of trade group members. The indicator has been sliding throughout 2022, dropping in May to its lowest point since June 2020.

The impact of rising prices and mortgage rates on housing affordability is unlikely to subside anytime soon. But for buyers still looking for a home, all of these factors could mean a little better luck or, at least, a shorter time frame. Morgan, the Atlanta agent, says the house hunting time has been cut for buyers from six months to three. “It may not be the ideal home, but it will be close,” she said.

Write to Shaina Mishkin at [email protected]

About Teresa G. Wilson

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