Lily Katz of Redfin News reports on buyer competition, noting that in April 61% of home offers saw bidding wars, down from 63% in March and 67% from this time last year. This softening is primarily the result of higher interest rates, with the typical monthly mortgage payment up 44% year-over-year to a record of $2,427.

Source: Redfin News (May 2022)

A second Redfin News report also indicates that Google searches of “homes for sale” is down, and their seasonally-adjusted Redfin Homebuyer Demand Index was also down 8% year-over-year.

Samantha Fields of Marketplace reports on this trend, noting that demand for housing has fallen, allowing some reprieve for would-be buyers despite rising borrowing costs. That said, it is early stages, and it will take more time before inventory and prices find balance.

Jeff Tucker of Zillow reports on the rise in home prices, noting “[t]hat run of records is likely to end soon, as the housing market passes an inflection point. That doesn’t mean a housing crash is coming or even that prices will fall, but rather that the pace of price growth is likely to decelerate and more homes will be available for sale. This rebalancing would be welcome news for buyers, especially those purchasing their first home.”

Another Zillow report by Dan Handy shows similar signs of cooling, with existing home sales in April down 2.4% month-over-month, and down another 5.9% year-over-year. Further, the total inventory on the market was up 10.8% in April month-over-month.

Robert Dietz of the National Association of Home Builders (NAHB) reports that builder confidence is waning: “In a sign that the housing market is now slowing, builder confidence took a steep drop in May as growing affordability challenges in the form of rapidly rising interest rates, double-digit price increases for material costs and ongoing home price appreciation are taking a toll on buyer demand.”

For more, check out Derek Thompson’s The Atlantic piece titled, The U.S. Housing Market Has Peaked.

Mortgage applications

Given rising rates, it is unsurprising that mortgage applications have fallen. According to the latest data from the Mortgage Bankers Association (MBA), mortgage loan application volume dropped 11% on a seasonally adjusted basis from the week prior to May 18, despite being in the middle of the busy spring home-selling season.

Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting noted: “[P]rospective homebuyers have been put off by higher rates and worsening affordability conditions. Furthermore, general uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search.”

MBA also reported that mortgages on new home purchases dropped by 10.6% year-over-year, and another 14% compared to March 2022.

That said, there was a small interest rate reprieve according to Spencer Lee of National Mortgage News (subscription required). “The 30-year fixed-rate mortgage average dropped 5 basis points to 5.25% from 5.3% one week earlier for the seven-day period ending May 19.”

Source: National Mortgage News (May 2022)

Hannah Jones of Realtor.com comments on this short-term drop in interest rates, noting “While this development is positive for buyers who have been waiting for their moment, it is the result of rising housing costs pushing many buyers out of the market altogether. Shoppers who are determined to find their perfect home will likely continue to utilize sizable down payments or even relocation to lock in affordable monthly payments. However, for buyers who are unable to contend with higher prices and climbing mortgage rates, still-high inflation and rental prices offer little relief.”

With interest rates possibly peaking, for the time being, you may be thinking about buying or refinancing a rental property. Stessa makes it easy to check current rates from experienced lenders.

Multifamily

Multifamily continues to show signs of strength as an asset class. New MBA data shows that commercial and multifamily mortgage loan originations jumped an astonishing 72% in Q1 of 2022, compared to 2021.

Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research comments on this trend: “The continued growth in lending activity is the result of the ongoing strong demand for certain property types like industrial and multifamily, as well as renewed interest in other property types that saw more dramatic declines during the early stages of the pandemic, such as hotel and retail…It’s likely that the rise in interest rates will take some wind out of the sails of borrowing in upcoming quarters, but strong market fundamentals, property values and investor interest should continue to support the market.”

Further, a new multifamily report from Yardi Matrix shows that the sector remains robust, with average rents increasing $15 in April to an all-time high of $1,659, and that “[a]lthough there is a small handful of weak numbers, multifamily demand and rent growth remain incredibly strong throughout the country. Of our top 30 metros, rent growth was up at least 8.8% over the last year in all but one. Rent growth was positive in each of the top 30 metros over the last one-month, three-month and 12-month periods.”

There are some headwinds ahead for multifamily, however, according to Paul Emrath of NAHB. Confidence for new multifamily housing turned downward in Q1 2022, with the Multifamily Production Index (MPI) dropping six points to 48 and the Multifamily Occupancy Index (MOI) decreasing one point to 68. High construction costs and the impact on affordability is the primary reason for the decrease in confidence.