The Homebuying Market Remains Competitive
By: Real Estate Hotline
Summer 2022 (Vol. 40, No. 2)
The National Association of Realtors released a summary of existing-home sales data showing that housing market activity is decreasing. Summer 2022 sales of existing homes declined 20.2% from the same timeframe in 2021.
The national median existing-home price for all housing types reached $403,800 in June, up 10.8% from a year ago. Regionally, all four regions showed strong price growth from a year ago. The South had the most significant gain of 14.7%, followed by the Northeast and the West; both shared an incline of 8.1%. The Midwest had the smallest price gain of 7.0% over 2021.
Demand remains strong as home buyers are snatching listings quickly off the MLS, and it takes approximately 14 days for a home to go from listing to a contract in the current housing market. A year ago, it took 17 days.
Compared to a year ago, all of the four regions had double-digit declines in sales in July. The West had the most significant dip of 30.4%, followed by the South, which fell 19.6%. The Northeast decreased 16.2%, followed by the Midwest, down 14.4%. The South led all regions in percentage of national sales, accounting for 44.3% of the total, while the Northeast had the smallest share at 12.9%.
Overall, the Real Estate market is cooling down but according to NAR we still have a highly competitive market. As reported in the latest NAR Existing-Home Sales data, inventory remains in tight supply, which means homes are still moving at a fast pace despite the recent rise in rates and home prices.
Furthermore, across the nation, 82% of homes listed sold in just one month. In 2011, less than one-quarter of homes sold in under a month. While here are fewer buyers who can afford the rising prices, many regions remain a seller’s market. For every home that was listed, there were 2.8 offers. This is down from the frenzied market from April of this year when every home listed had 5.5 offers. However, historically 2.8 offers is still a competitive housing market.
One way to understand the market’s competitiveness is to look at buyers who are waiving contingencies. While this data series is shorter, it reflects a slight ease that mirrors the number of offers for every home. In the spring, nearly one-third of buyers waived an inspection or appraisal contingency, but July it had fallen 25% for both.
Another measure of the housing market is the number of distressed homes. Due to the consistent rise in home prices, homeowners typically have equity in their homes, and distressed sales are not common today. In 2008, 49% of REALTORS® had a client with a distressed sale; today, it’s only 1%.
Who is purchasing homes has shifted some in the last month. There is a reduction in the share of all-cash buyers (who may be waiving the home appraisal) and a reduction in vacation and investment purchases. All cash buyers now stand at 24%. The last high among all-cash buyers was seen at 35% in 2014.
Non-primary residence buyers are now at 14% from a high of 22% in January 2022. Unfortunately, the share of first-time buyers remained suppressed at just 29% last month. While it is not the high seen during the First-time Home Buyer Tax Credit in 2010, it is also not the historical norm of 40% seen in the annual Profile of Home Buyers and Sellers report. During the time period of the First-time Home Buyer Tax Credit, there was more housing inventory than is in the U.S. housing market today.
Q: How are rising interest rates affecting affordability?
A: Affordability is a problem for many homebuyers. Rates are nearly three percentage points higher than a year ago and the median home price increased by $40,000. In dollars, this means buyers could spend as much as $720 more monthly for the median-priced home.