Real Estate Update: NAR Declares Housing Recession Over
Real estate reports for the month of June have been released, and the expert prognosis is that the worst is behind us.
“The recovery has not taken place, but the housing recession is over,” announced Lawrence Yun, the Chief Economist of the National Association of Realtors. “The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers.”
Yun made this determination after the NAR’s nationwide survey indicated an increase in pending sales of 0.3%, the Pending Home Sales Index. This may seem to be a modest figure, but it takes into account all of the markets across the United States.
Here in Alabama, for instance, the past June saw a 1.9% increase from May across the state, while the Huntsville Area Association of Realtors (HAAR), in partnership with the University of Alabama’s Culverhouse College of Business, reports a striking increase of 7.2% for Huntsville-Madison County.
HAAR’s monthly report also shows an increase of 50% for the monthly supply here in Huntsville, an indicator of brisk construction activity, but these boosts to inventory still aren’t sufficient to meet demand.
Interest rates continue to hinder the market, but barring unforeseen events, the rates should hover around 6%.
“With consumer price inflation calming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out,” Yun said. “Given the ongoing job additions, any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next.”
With Fixed-Rate Mortgages (FRMs) remaining around six percent, some buyers have taken to Adjustable Rate Mortgages (ARMs) as an alternative. ARMs plummeted during the 2008 housing market crash, going from 45% of mortgage originations in 2005 to a mere 2% in 2009. In 2021, ARMs accounted for 4% of mortgage originations, but by April of this year, that percentage swelled to 18%.
The difference between the conditions of the mid-2000s and today is that these increases in ARMs are concentrated largely in big-ticket purchases exceeding $1 million, with 45% of these mortgages being ARMs. Meanwhile, in the range of $200,000 – 400,000 purchases, only 10% are ARMs.
As always, the Huntsville Business Journal strongly recommends consulting expert Financial Officers and Realtors when making real estate purchases. The Huntsville Business Journal will continue to report on real estate market conditions.
