New Jersey Real Estate Report

From CNBC:

The housing market was already painful, ugly and anxious. Now the 8% mortgage rate is back

Today’s housing market is a toxic mix of high mortgage rates, high prices, tight supply and strangely strong pent-up demand — and it’s scaring off buyers and sellers alike.

Prices were already high, driven by supercharged demand during the height of the Covid-19 pandemic. Now the popular 30-year fixed mortgage rate is at 8%, the highest in decades, making things even tougher. Mortgage demand is at its lowest point in nearly 30 years.

“I think it’s painful. I think it’s ugly,” Matthew Graham, chief operating officer at Mortgage News Daily, said on CNBC’s “The Exchange” on Thursday.
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Would-be sellers, meanwhile, are trapped. They have little desire to trade the 3% rate they currently have for an 8% mortgage rate on a new purchase.

“I don’t think anybody in my community of mortgage originators would disagree that in many ways, this is worse than the great financial crisis in terms of volume and activity,” MND’s Graham said.

He’s also unsure when the market will see a decline in rates. “But we do hear a chorus of Fed speakers, especially last week, in a very notable way, saying that they are restrictive and that they can wait and see what happens with the policy filtering through to the economy,” he said.
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Prices are a different story.

“Prices look to be flat from this point onwards at an 8% rate, despite the housing shortage,” added Lawrence Yun, chief economist for the NAR.

Yun noted that metropolitan markets with faster job growth and relatively affordable prices, however, will see an upswing in sales. He points to Florida markets such as Tampa, Jacksonville and Orlando, as well as Houston, Texas, and Memphis, Tennessee.

Buyers today will likely get the best deals from homebuilders, especially the large production builders such as Lennar and D.R. Horton. The builders are helping with affordability by buying down interest rates for their customers. This is something they have not typically done in the past — at least not at this scale.
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For those still wanting to upgrade to a bigger home or downsize to a smaller one, they are caught in a conundrum.

Prices are still rising due to the supply and demand imbalance, but sellers are being more flexible. So a buyer could purchase now at the higher rates and hope to get a break on the price, or they can wait until rates drop.

But when they do, there is likely going to be a flood of demand, resulting in bidding wars.

From CNBC:

September home sales drop to the lowest level since the foreclosure crisis

Sales of previously owned homes dropped 2% in September from August to a seasonally adjusted, annualized rate of 3.96 million units, according to the National Association of Realtors. Sales were 15.4% lower compared with September 2022.

This is the slowest sales pace since October 2010, during the Great Recession, when the market was in the midst of a foreclosure crisis. As a comparison, just two years ago, when mortgage rates hovered around 3%, home sales were running at a 6.6 million pace. The average rate on the 30-year fixed today is right around 8%, according to Mortgage News Daily.

“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” said Lawrence Yun, NAR’s chief economist. “The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”

There were 1.13 million homes for sale at the end of September, down more than 8% from a year ago. Inventory is now at a 3.4-month supply, which is slightly better than last year, but only because sales have dropped so much. Supply is based on the current sales pace.

Adding to higher mortgage rates, the median price of a home sold in September was $394,300, up 2.8% year over year. Roughly 26% of home sold above list price, due to the lack of supply which is resulting in bidding wars.

First-time buyers made up just 27% of sales. Historically, they make up about 40%.

From the NYT:

Rates Are Jumping on Wall Street. What Will It Do to Housing and the Economy?

Heather Mahmood-Corley, a real estate agent, was seeing decent demand for houses in the Phoenix area just a few weeks ago, with interested shoppers and multiple offers. But as mortgage rates pick up again, she is already watching would-be home buyers retrench.

“You’ve got a lot of people on edge,” said Ms. Mahmood-Corley, a Redfin agent who has been selling houses for more than eight years, including more than five in the area.

It’s an early sign of the economic fallout from a sharp rise in interest rates that has taken place in markets since the middle of the summer, when many home buyers and Wall Street traders thought that borrowing costs, which had risen rapidly, might be at or near their peak.

Rates on longer-term government Treasury bonds have been climbing sharply, partly because investors are coming around to the belief that the Federal Reserve may keep its policy rate higher for longer. That adjustment is playing out in sophisticated financial markets, but the fallout could also spread throughout the economy.

Higher interest rates make it more expensive to finance a car purchase, expand a business or borrow for a home. They have already prompted pain in the heavily indebted technology industry, and have sent jitters through commercial real estate markets.
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Policymakers have continued to watch banks for signs of stress, especially tied to the commercial real estate market. Many regional lenders have exposure to offices, hotels and other commercial borrowers, and as rates rise, so do the costs to finance and maintain the properties and, in turn, how much they must earn to turn a profit. Higher rates make such properties less valuable.

“It does add to concerns around commercial real estate as the 10-year Treasury yield rises,” said Jill Cetina, an associate managing director at Moody’s Investors Service.