As mortgage rates fall, housing-market players say they felt a sense of relief wash over them. One CEO says he’s upbeat about the rest of the year.
“I’m very optimistic about housing this year,” Jay Farner, CEO of Rocket Companies
told MarketWatch in a recent episode of Barron’s Live. “It’s going to be a strong market.”
His optimistic comments come at a challenging time for the housing market. Mortgage rates have taken off since the same period last year. Last year, the 30-year mortgage was averaging at 3.55%. The average rate was 6.09% as of Thursday, according to Freddie Mac. Demand has fallen off a cliff, as home buyers backed off as affordability plummeted.
Rates have since modestly recovered. And that’s giving lenders and realtors enough reasons to look forward to the rest of the year.
But Farner said his upbeat outlook is based on the market establishing more balance in 2023. “It feels like a more normal market that we’re entering into in 2023,” he said.
recently released a report stating that the housing market has started to “recover.”
“We expect more homebuyers and sellers to gradually return to the market by springtime,” Chen Zhao, economics research lead at Redfin, said in a that report. “But mixed economic news and mixed reactions from the market mean the recovery will be uneven.”
Farner at Rocket, one of the biggest players in the mortgage-lending space, said that the recovery will be driven by strong underlying demand.
“We won’t be in the 5 million-plus units sold range …things have changed,” Farner said. “We’re certainly not in the heart of the pandemic, like we were a few years ago that was driving the desire for homeownership and second homes, but it’s still a strong housing market.”
And hence “our outlook is that it’s going to be a very positive year for home buying for Rocket,” he added.
But whether buyers will return in the spring is the key question at hand. Recent data by the Mortgage Bankers Association revealed that, despite a slight drop in rates, purchase demand — which refers to mortgages for buying homes — fell 9%. Rates have fallen for four weeks in a row.
Why are buyers so skittish? It’s unclear.
The economic outlook still remains robust, with the U.S. economy adding 517,000 jobs in January. That’s the biggest gain in six months.
People have questions about what job security looks like, and whether there be a fall in wages in some industries, Farner said. “And so when you have that uncertainty, sometimes that can cause buyers to remain on the sidelines,” he added.
Some indicators suggest sellers are accepting a new reality — home prices are no longer riding a high.
Homes were on the market for 49 days — up from 33 days a year ago, according to the Redfin report. And only 21% were sold above the final list price, down from 40% a year ago. What’s more, 5.6% of homes for sale each week had a price cut, Redfin noted, up from 2.2% a year ago.
“Sellers are coming to the realization that what we saw last year and the year before may not happen again in a while,” Farner said. He said home prices will remain steady. “Maybe in certain areas, we’ll see an additional 2% or 3% decrease,” he added.
But that doesn’t necessarily mean the ball is firmly in the buyer’s court, as inventory remains low. Existing-home sales have fallen for 11 months in a row, per the National Realtors Association. Redfin said that new listings of homes fell 16.7% year-over-year.
Farner’s prediction for the housing market: “It’s starting to get back into what I’ll call equilibrium, meaning that it’s not a seller’s market [and] it’s not necessarily a buyers market.”