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As buyers wait for even lower mortgage rates, lower prices, and higher wages. Mortgage rates already dropped to 6.15% from 7.9%, but that didn’t help at all.
By Wolf Richter for WOLF STREET.
We’ve been saying this for many months, and now Fannie Mae’s Economic & Strategic Research group is saying the same thing – the Buyers’ Strike is expected to continue despite much lower mortgage rates and a very sharp increase in active listings — because prices are too high:
“Although mortgage rates have fallen considerably in recent weeks, we’ve not seen evidence of a corresponding increase in loan application activity, nor has there been an improvement in consumer homebuying sentiment,” Fannie Mae said in the report today, lowering its forecast.
“We think it’s likely that many would-be borrowers are waiting for affordability to improve even further, and that some may be anticipating additional declines in mortgage rates given expectations that the Fed will lower the federal funds target rate,” Fannie Mae said.
And so, potential buyers are waiting for even lower mortgage rates.
“Others may be waiting for household incomes to improve further to offset some of the recent home price growth, or they may be thinking that future supply growth will ease affordability.”
The last phrase means lower prices, because prices are too high, and so potential buyers are waiting for prices to come down.
“Regardless of the lever, we expect affordability to remain the primary constraint on housing activity for the foreseeable future, and we now think full-year 2024 will produce the fewest existing home sales since 1995,” Fannie Mae said.
And mortgage rates have already come down a whole lot. Except for a three-month period between mid-January through mid-April, mortgage rates have zigzagged lower incessantly since November 2023.
According to the Mortgage Bankers Association today, the average 30-year fixed rate has dropped to 6.15% in the latest reporting week, that’s down by over 1.6 percentage points from the rates 10 months ago.
So Mortgage rates have come down a lot, paralleling the moves in the 10-year Treasury yield, in anticipation of a whole bunch of rate cuts by the Fed. With so many rate cuts already baked in, mortgage rates may not fall a lot more.
Fannie Mae today estimated that the 30-year fixed mortgage rate will “average” 5.9% next year, and it has already fallen to 6.15%, from 7.9% in November last year:
“Despite a significant decline in mortgage rates and improved supply in some parts of the country, existing home sales are not expected to pick up meaningfully through the remainder of 2024, with the annual pace now forecast to be the slowest since 1995,” Fannie Mae said.
Based on its own data, Fannie Mae expects annual sales of existing homes to fall another 0.3% in 2024 from 2023.
Here are annual sales of existing homes through 2023, as reported by the National Association of Realtors, which appears to differ slightly from Fannie Mae’s data. Year-to-date through July, the NAR’s metric is down by 2.0% from the same period last year, which had already been the lowest since 1995 (historic data via YCharts):
“Recent data, including softness in pending home sales [we covered their amazing plunge to record lows here] and purchase mortgage applications, continue to suggest limited home-purchase demand at current affordability levels,” Fannie Mae said.
So, these applications for mortgages to purchase a home have collapsed over the past year to record lows in the data and have hovered near those lows ever since. In the latest reporting week, they ticked up a tad from the prior weeks, but are still down by 46% from the same week in 2019 and by 54% from the same week in 2021. Those multi-year declines have been roughly the same over the past six months:
Demand for mortgages has collapsed, despite the much lower mortgage rates, because prices are too high. And people are waiting for even lower mortgage rates and lower prices, and for their incomes to rise while they wait for mortgage rates and lower prices.
In case you missed it: The Most Splendid Housing Bubbles in America: Price Declines Spread to 25 Metros of Top 28, with 19 Below 2022 Peaks. 3 Set New Highs.
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The post Fannie Mae Gets Gloomier about Home Sales, Buyers’ Strike to Continue Despite Dropping Mortgage Rates & Surging Listings appeared first on Energy News Beat.
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