June Purchase Window Update
In earlier posts, we outlined our outlook for an opportune time to purchase a home. In this June purchase window update, we see many factors continuing to move in the direction predicted. On June 16, the Federal Reserve Board of Governors announced no rate hike was imminent and minimal increases expected through the end of 2023. Additionally, the short term interest rate remained the same. And last, the Federal Reserve announced it would continue purchasing mortgages to keep rates low. The purchases of mortgages to keep rates low likely continues through 2021. Mortgage rates remain attractive, falling to between 2.75% and 2.875% for top credit as of June 17.
Lumber prices continue to fall from the peak. The prices dropped 55% from the peak so far. Instead of adding $35,000 or more to a new home price, the increase has been cut in half and the outlook points to additional price decreases. While still high historically, lumber prices are falling rapidly and builders have managed inventory deliveries to minimize the impact.
Don’t Get in a Bidding War by Bidding Over List Price
While some cities see prices bid up well over ask price for some homes, this is rapidly diminishing and will drop further after the spring/early summer buying season. Those paying up and winning bids likely will regret winning as prices start to soften. Get prepared with Winning Mortgage, Winning Home. Target the Advantageous Purchase Window. You have time.
As of June 30, total mortgage applications fell to the lowest level in about a year and half. Much of the decrease came from lack of refinancing, however, this signals a potential break in price escalations. Applications for a mortgages by purchasers fell 17% from a year ago. Numbers a year ago already reflected lower volumes due to Covid 19. Rates continue to be favorable. Watch for continued softening of prices and competition through the end of 2021.
New Supply of Homes for Sale
Just when news reports called a shortage in the number of houses for sale the next Armageddon, they get proven wrong. Again. In any news cycle, the theme repeated over and over and over again becomes way overblown. More supply suddenly came on the market in June. Anyone ever heard of supply and demand? Realtor.com noted June 2021 new listings increased 5.5% year over year and 10.9% compared with May. Even more telling, new listings increased the most in the larger cities. The 10 markets with the highest new listings increases posted gains of 20% or more from a year ago. This occurred in spite of normal patterns where new listings usually fall from May to June.
The great lumber bubble of 2021 popped. Lumber futures tanked more than 40% in June alone, suffering their worst month on record dating back to 1978. Weekly mortgage demand fell 6.9% last week to the lowest level in almost a year and a half. More evidence that panic buying won’t end well!