NAFCU: Housing Market Poised for Rebound

Existing home sales fell by a seasonally adjusted 3.4% from March to April as prices waned and inventory improved, the National Association of Realtors (NAR) reported Thursday.

Also on Thursday, the Mortgage Bankers Association (MBA) reported lenders reduced their losses in the first quarter, even as volume fell from the fourth quarter.

The NAR reported existing homes sold at a seasonally adjusted annual rate (SAAR) of 4.28 million in April, down 23.2% from a year earlier and down 3.4% from March.

NAFCU Chief Economist Curt Long said that despite the decline from March to April, he expects uneven growth in the housing market to continue through the rest of this year. He said the housing market bottomed out in January and the current high rates are no longer a shock.

“The macroeconomic implications are straightforward: Should the economy encounter any weakness leading to lower rates, the housing market is poised for growth,” Long said.

“If the truism that ‘the housing market is the economy’ holds, then recessionary fears are mostly behind us,” he said.

NAR Chief Economist Lawrence Yun said “home sales are bouncing back and forth but remain above recent cyclical lows.”

“The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand,” Yun said.

The NAR also found housing inventory improving, and prices falling.

Half of existing homes sold for at least $388,800 in April, down 1.7% from April 2022’s median price.

Median prices rose in the Northeast and Midwest, where markets had been weaker, but retreated in the South and West, where the markets had been stronger.

Median prices rose 2.8% to $422,700 in the Northeast, and 1.8% to $287,300 in the Midwest. Prices fell 8% to $578,200 in the West, and fell 0.6% to $357,900 in the South.

“Roughly half of the country is experiencing price gains,” Yun said. “Even in markets with lower prices, primarily the expensive West region, multiple-offer situations have returned in the spring buying season following the calmer winter market. Distressed and forced property sales are virtually nonexistent.”

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.35% as of May 11. That’s down from 6.39% the previous week but up from 5.30% one year ago.

The MBA is forecasting rates to fall to 5.5% by year’s end.

Its April 17 forecast also anticipated mortgage originations in first quarter would be about 16% less than the fourth quarter by value and number.

Callahan & Associates reported Wednesday that credit union originations of real estate loans, including commercial, were $48.2 billion in the first quarter, down 43% from a year earlier and down 12% from the fourth quarter.

However, the MBA’s Quarterly Mortgage Bankers Performance Report released Thursday showed a better performance. Mortgage production for the report’s “same store” sample fell 8.7% by value and fell 9.4% by number from the fourth quarter to the first quarter.

The report also found:

• Total production revenue (fee income, net secondary marketing income and warehouse spread) was 358 basis points, up from 317 bps in the fourth quarter.
• Revenue per loan rose 16.2% to $11,199, while costs (commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) rose 5.8% to a study-high $13,171.
• The net loss per loan was $1,972, down from a loss of $2,812 in the fourth quarter.
• The average number of production employees per company fell from 413 in the fourth quarter of 2022 to 374 in the first quarter of 2023.
• The average loan balance for first mortgages increased to $329,159 in the first quarter, up 2.2% from $322,225 in the fourth quarter.

Marina Walsh, the MBA’s vice president of industry analysis, said 32% of companies were profitable last quarter, including both the production and servicing business lines, up from 25% in the fourth quarter.

Costs continued to escalate with the further drop in volume and reached more than $13,000 per loan despite substantial personnel reductions, Walsh said.

“Conditions continue to be challenging for the industry, with now four consecutive quarters of production losses and nine consecutive quarters of volume declines,” she said.