{"id":3693,"date":"2022-12-07T22:35:27","date_gmt":"2022-12-07T22:35:27","guid":{"rendered":"https:\/\/frankbuysphilly.com\/lower-mortgage-rates-are-stabilizing-the-market\/"},"modified":"2022-12-07T22:35:27","modified_gmt":"2022-12-07T22:35:27","slug":"lower-mortgage-rates-are-stabilizing-the-market","status":"publish","type":"post","link":"https:\/\/frankbuysphilly.com\/lower-mortgage-rates-are-stabilizing-the-market\/","title":{"rendered":"Lower mortgage rates are stabilizing the market"},"content":{"rendered":"
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Since the weaker CPI data<\/a> was released in November, bond yields and mortgage rates<\/a> have been heading lower. The question then was: What would lower mortgage rates do to this data? Now, with five weeks of data in front of us, we can say they have stabilized the market. <\/p>\n Purchase application data came out on Wednesday and the week-to-week data was down 3%, breaking the streak of four straight weeks of growth. The year-over-year data declined 40%, the smallest year-over-year decline since Oct. 19. <\/p>\n For months I have been saying we were going to have challenging comps from October to January because last year at this time mortgage volume was rising \u2014 a rare event this late in the year. <\/p>\n Because of that, we should all expect declines of 35%-45% year over year during this period. If things were getting weaker, 53%-57% negative year-over-year declines would be in play. However, mortgage rates have fallen more than 1% since the recent highs, so it\u2019s time to look at the data to explain how to interpret it. <\/p>\n First and foremost, the bleeding has stopped in this data line, but the context is critical here. We had a waterfall dive in this data line and adjusting to the population, we hit an all-time low, so let’s put the bounce from the lows in context. This isn\u2019t like the COVID-19 recovery where the data was getting noticeably better on a year-over-year metric; the purchase application data just stopped going down. <\/p>\n For now, just think of it as stabilization and we need to see more of this to make a valid premise that the worst is behind us.<\/p>\n <\/p>\n As you can see from the chart above, the last several years have not had the FOMO (fear of missing out) housing credit boom we saw from 2002-2005. Accordingly, we also haven’t had a credit bust in the data line. <\/p>\n What I mean by a credit bust is that after the housing bubble burst in 2005 into 2006, we saw a massive increase in supply. These were forced credit sellers, which means these sellers don\u2019t sell to buy a home like a traditional seller does. Since they were distressed forced sellers, inventory skyrocketed in 2006 and stayed very elevated in 2007 and 2008.<\/p>\n As we can see below, none of that is happening today because the seller isn\u2019t stressed.<\/p>\n NAR:<\/a> Total Inventory levels 1.22 million <\/p>\n Using Altos Research<\/a><\/strong>, which tracks up-to-date weekly data, we can see that inventory is having its traditional seasonal decline now. Remember that inventory is always seasonal; it rises in the spring and summer and fades in the fall and winter.<\/p>\n <\/p>\n One issue that has created a waterfall dive in purchase application data and sales is that new listing data is declining faster than usual. That’s a double whammy on demand and a reason for the waterfall in existing home sales data. <\/p>\n Traditionally, when mortgage rates rise post-2012, home sales trend below 5 million. This time the hit on demand is much more challenging as we are working from a savagely unhealthy<\/a> rise in home prices since 2000, and mortgage rates have skyrocketed in the most prominent fashion in modern history. <\/p>\n Mortgage rates went from a low of 2.5% to a high of 7.37% \u2014 purely savage. Naturally, with those two variables in place, demand will collapse.<\/p>\n <\/p>\nThe bleeding has stopped<\/h2>\n
Total inventory levels<\/h2>\n
<\/strong>Historically inventory levels range between 2 million and 2.5 million, the equilibrium balance between a buyer and seller marketplace that has been here for four decades. Only from 2006-2011 did we see this break due to forced sellers who couldn\u2019t buy homes.<\/p>\n