SUPPLY SHORTAGE WORSENS

Elevated mortgage rates–the daily average was 6.94% on June 7, near its highest level in two decades–are driving the inventory shortage. The vast majority of homeowners have a mortgage rate below 6%, discouraging them from listing their home and giving up their relatively low rate. 

Limited inventory is keeping national home-price declines relatively modest, with the typical U.S. home price down 1.6% year over year.

That’s the smallest dip in three months and half the size of April’s 3.2% drop, which was the biggest in at least a decade. Home prices are still increasing in some parts of the country.

The median U.S. asking price is unchanged from a year ago after several weeks of declines. This shows that sellers in at least some metro areas are seeing that they can command favorable prices.  

In addition to propping up prices, the scarcity of listings is limiting purchases; pending home sales are down 17%, continuing a year-long streak of double-digit drops. But early-stage homebuying demand continues to hold up, with Redfin’s Homebuyer Demand Index–a measure of requests for tours and other services from Redfin agents–near its highest level in a year. That indicates that would-be buyers are out there and may make an offer when mortgage rates decline and/or more homes are listed. 

“Homes priced under $500,000 are flying off the market because buyers in that price range don’t have many options,” said  Sacramento Redfin Premier agent David Orr. 

“I’ve been working with one first-time homebuyer for about a year, and she’s adjusted her search as rates have risen. Now that mortgage rates are close to 7%, she’s looking at lower-priced, smaller homes. But the problem we’re facing now is competition: In that lower price range, it takes many misses before you get a hit.

She just made an offer nearly $30,000 above asking price for a home listed at $429,000, but she lost out because it had four other offers. I’m advising buyers to get their loan pre-approved and look at homes under budget so they’re prepared to go above asking price.”

JOBLESS CLAIMS REPORT DUE THURSDAY

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. 

Initial Jobless Claims surged by 28,000 in the latest week, with 261,000 people filing for unemployment benefits for the first time.

This is the highest level we’ve seen in 20 months. This number has been trending higher, with Initial Jobless Claims topping 200,000 every week since the start of February. 

Meanwhile, the number of people still receiving benefits after their initial claim is filed remains elevated with 1.757 million Continuing Claims reported.

This is well above the low of 1.289 million seen last September and this upward trend shows the difficulties many people are having as they search for new employment.

If Thursday’s report shows the same trend, it could send a message to the Feds that its time to stop hiking. We will be watching closely. 

Article Written and Provided by Padi Goodspeed at CCM