Leading Housing Market Economists Sound Off

The state of the single-family for sale market was summarized nicely by Lisa Sturtevant, Bright MLS, when she pointed out recently that there are 1.2 million homes listed for sale — and 1.6 million agents.

Then Sturtevant, whose firm covers the mid-Atlantic region, added that the typical Realtor does four deals per year.

Sturtevant was among three other leading real estate economists who discussed key topics and offered forecasts at the National Association or Real Estate Editors annual conference in Atlanta on Oct. 13.

Lawrence Yun, National Association of Realtors; Selma Hepp, CoreLogic; and Danielle Hale, Realtor.com.; also appeared for moderator Steve Brown of The Dallas Morning News.

Look for 8.5% Mortgage Rates

Yun suggested that mortgage rates could reach 8.5% over the next few months in another shock to the housing market, should it break through the current 7% point of resistance.

“Rates have never run so high, so fast, but we’re not going to hit that 18% level we saw under then Federal Reserve Chairman Paul Volcker [about 40 years ago],” he said.

Yun said home sales are expected to be down 15% for the year and he expects no home price appreciation next year, nationally; some markets will experience declines. Midwest home values are unlikely to fall because theirs didn’t have the tremendous run-up last year like that of some coastal and southeast markets.

Hepp said another deterrent to home sales is that 99% of mortgage debt today is locked in at 5% or less.

Sellers in the ‘Five Stages of Grief’

It’s a tale of two markets in a lot of ways, Sturtevant said, with potential move-up buyers gaining significant equity during the past few years, as prices climbed, and are in a much better position.

“First-time buyers are in a particularly tough spot,” she said, adding that “sellers are going through the “five stages of grief” as they adjust their price expectations.

Hepp said that with rates at 7% today, “that takes a lot of the incentive away for people to list their homes for sale. And we have not seen a lot of flipping activity this time in the market.”

Reasons for New-Home Cancellations

Yun said rising rates are what caused so many new-home order cancellations for developers.

“[These] buyers committed to houses on vacant lots when mortgage rates were at 3%,” Yun said. “But during construction, rates soaring to 7% and shocked buyers. That’s why you are seeing massive cancellations among the homebuilders.”

Hale said that buyers are fighting inflation by moving to less expensive markets; 53% of shoppers are looking in a market that they don’t live in, an all-time high, something brought on by remote work.”

Hale said that 72% of 2022 sellers and 15% of homeowners are seller-buyers and that homeowner equity totaled $29 trillion or 70.5% of total value.

“Sellers still hold a lot of the cards in the negotiation, but they don’t hold all of the cards, like earlier this year,” she said. “It is becoming harder for buyers and sellers to get together on a deal.”

Sturtevant said views per property are up, but that is partly because there is less inventory. She said she has a sense that when things moderate, there will be “a surge” of home sales from those watching from the sidelines.