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Housing Market News for the Week of January 21, 2022

2021 Existing Home Sales Set Post Crash Record Despite December Slide

Existing home sales dropped in December, snapping a three-month streak of increases. The National Association of Realtors® (NAR) said the month’s sales of pre-owned single-family houses, townhouses, condos, and cooperative apartments fell 4.6 percent from November’s 6.460 million-unit pace to a seasonally adjusted annual rate of 6.18 million in December. From a year-over-year perspective, sales were down 7.1 percent from 6.65 million in December 2020.

Even with the year-end slide, sales in 2021, at an apparent 6.12 million units, represented an 8.5 percent increase from 2020.

Fannie Mae Forecasts a “Return to 'New' Normal”

Fannie Mae’s Economic & Strategic Research (ESR) Group writes that it expects 2022 to be a year “of transition for both the economy and the housing market.” While it hedges its bet as to whether COVID-19 will end any time soon, it expects the market and policy choices driven by the pandemic to be gradually be replaced by more typical pre-COVID economic and housing patterns.

This won’t happen overnight, and the group says the changes may never be completely reversed. Alterations to work, school, and housing arrangements may prove to be long-lasting and even though inflation is expected to slow, it may remain higher than the pre-COVID range for the foreseeable future. That said, this month’s economic commentary from the ESR describes the year ahead as ‘returning to a 'new' normal.”

Pennsylvania’s Housing Prices Up 14% in 2021

Last year’s Pennsylvania housing market reflected what we’re seeing throughout the country. Home prices in the commonwealth rose 14% last year reaching a median price of $192,040, up from $168,152 in 2020, according to a housing market report prepared for the Pennsylvania Association of Realtors®.

The median price in December was $194,637, up about 9% compared to $178,475 in December 2020.

Most of you are continuing to see a rapid pace in your local markets. Our reports show the state has seen a steady increase in prices. The median home sale price is up about 37% compared to approximately $140,000 in 2017. That reflects what you and I both know – purchasing a home is a good, long-term investment for consumers, particularly when interest rates remain relatively low.

Demand For Vacation Homes Up 77% From Pre-Pandemic in December

That’s according to a Redfin analysis of mortgage-rate lock data from real estate analytics firm

Optimal Blue. Redfin created a seasonally adjusted index of Optimal Blue’s data to adjust for typical seasonal patterns and allow for simple comparisons of second-home demand during and before the pandemic. We define “pre-pandemic” as January and February 2020 and set the index for that period to 100. Any data point above 100 represents second-home demand that’s above pre-pandemic levels and any data point below 100 represents demand below pre-pandemic levels. This data is subject to revision.

Interest in second homes started to surge in mid-2020 as affluent Americans dispatched to vacation destinations, taking advantage of low mortgage rates and remote work. The slight slowdown in mortgage-rate locks from November to December is likely an effect of the holiday season and not indicative of dampening demand.

Biggest Challenges Facing the Market in 2022

Rising mortgage rates and growing rental prices are going to continue to make the housing market a challenge for buyers in 2022.

According to Danielle Hale, Realtor.com® chief economist, in a PAR webinar on Tuesday, rents are expected to rise 7.1% in 2022, compared to housing prices, which are only expected to rise 2.5%. “Rents are increasing and it creates a challenge for renters. Rising rents are going to continue to push people in the housing market,” she said. The down payment is what is the most difficult for buyers, most can afford the monthly costs, she added. With more renters looking to buy, competition among sellers may be increased.

Buyers Viewed Just Eight Homes Before Making Their Purchase

In 2021, homebuyers who successfully purchased a home viewed a median of only eight properties before completing their transaction, according to a report by the National Association of Realtors, published on Tuesday.

NAR Research has tracked the number of homes viewed since 1987 and eight is the lowest number on record. Right after the Great Recession, between 2009 and 2011, buyers viewed a median of 12 homes before purchasing, as inventory was plentiful. From 2004 to 2006, during the housing boom years, even though homes were moving at a rapid pace, buyers typically looked at nine homes.

According to NAR, low inventory is partly to blame for the homebuyers looking at fewer homes than before. In December, housing inventory dropped below 1 million units for the first time on record and at the current sales pace there is only a 1.8 month’s supply of homes.

Mortgage Market Update

Mortgage rates moved up again as the 10-year U.S. Treasury yield rose and financial markets adjusted to anticipated changes in monetary policy that will combat inflation. As a result of higher mortgage rates, purchase demand has modestly waned in advance of the spring homebuying season. However, supply remains near historically tight levels and home prices remain high, keeping the market competitive.

We hope you enjoyed this week's Market News. For more information about how PMA can help you, please contact us.

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Information and analysis is obtained through third parties and is deemed accurate but not guaranteed. Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Dept. of Banking and Securities, NJ Dept. of Banking & Insurance, the state of DE, the Florida Office of Financial Regulation, MD Mortgage Lender #23004 and VA State Corporation Commission #MC - 6797. NMLS #128570.