The 10-year old seller’s market continues, evidenced by:
Modest purchase volume declines, in spite of a cumulative 39% increase in constant quality HPA since January 2020, Historically tight supply, The work from home revolution, and Arbitrage opportunities due to metro & regional price differences. Purchase volume for week 29 is down 25% and 2% from 2021 & 2019, respectively, with HPA projected to moderate to 10.2% in August.
If the current mortgage rate of around 6% holds, we expect December 2023 HPA to slow to 4-6% (y-o-y ) as demand will further moderate and supply will increase. HPA declines seem plausible at the high end of expensive markets, at the low end of some FHA markets, and in metros with stagnating or declining job growth.
While in the midst of the most rapid slowdown in Home Price Appreciation (HPA) since the bust of 2007-2011, demand pull inflation continues to exert a strong influence on general inflation.
While HPA is rapidly slowing, loan originations (other than FHA) continue to exhibit stressed mortgage default rates that will contain default levels.