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Home prices plateau as high mortgage rates chill market

Home prices plateau as high mortgage rates chill market
PR Newswire
SEATTLE, Nov. 17, 2022

A new, slower equilibrium may be settling in after years of imbalance
High mortgage rates stifled sales, now down 24% year over year and 17% from October 201…

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Home prices plateau as high mortgage rates chill market

PR Newswire

A new, slower equilibrium may be settling in after years of imbalance

  • High mortgage rates stifled sales, now down 24% year over year and 17% from October 2019
  • Rates are also stymieing sellers. New listings dropped by more than 12% since September. 
  • Typical rent in the U.S. fell for the first time in two years.

SEATTLE, Nov. 17, 2022 /PRNewswire/ -- Buyers and sellers are both stepping away as skyrocketing mortgage rates have settled the housing market into a more balanced state, according to the latest Zillow® market report1. Home values remained nearly flat in October as new inventory waned and sales continued to fall from the pandemic frenzy.

"Home prices in October remained in suspended animation as more buyers, but especially sellers, took a wait-and-see approach to market conditions," said Skylar Olsen, chief economist at Zillow. "Fewer home sales is the hallmark of a housing market lull, but right now potential sellers sensitive to losing their historically low mortgage rates have as much, if not more, of a reason to wait for a robust spring season and hope for mortgage rate relief. With some renewed competition, buyers hoping for aggressive price declines may be disappointed in all but the frothiest pandemic-era markets." 

Rapidly rising mortgage rates coupled with stubbornly high home prices are driving drastic drops in affordability. The share of income spent on monthly mortgage payments has risen from 27.7% in February to 37.3% in October — well above a previous peak of 35% in 2006. Housing payments are considered to be a financial burden when they exceed 30% of a household's income. 

The monthly mortgage payment on the purchase of a typical house in the U.S., even when putting 20% down, was $1,910 in October. That's a 77% jump year over year and a 107% increase — nearly $1,000 — from 2019. Monthly payment figures are even higher when including taxes and insurance and when putting less than 20% down, as more than half of borrowers do.

Affordability challenges are weighing heavily on sales. Sales counts, nowcast for the most recent month due to latency, show significant slowing in recent months and standing 16% to 17% below pre-pandemic October norms. 

While it's tempting to focus on buyers, mortgage-rate-driven affordability changes are highly impactful on seller behavior, keeping more existing homes out of the market. While first-time buyers have experienced continued pressure on rent as well, homeowners who bought or refinanced when rates were near record lows in 2020 and 2021 are sitting on substantial home value gains and have little incentive to take out a new home loan, deciding instead to enjoy their current monthly payment. 

To that point, the number of new for-sale listings dropped by more than 12% month over month, bringing the flow of listings to the market 24% lower than in 2021 and 21% below 2019. The steepest drops in new listings from September came in Seattle (-28.5%), Denver (-26%) and Washington, D.C. (-24.2%). New inventory increased month over month in two major metros — Jacksonville (3.1%) and Tampa (1.3%) — while the smallest declines took place in other Florida cities and across relatively affordable metros in the Midwest. 

The drastic pullback of new listings has stalled out the recovery in total inventory that began in March. There are slightly more (1.8%) for-sale listings on Zillow than a year ago, but still far fewer (-36.1%) than in October 2019. 

With both supply and demand drying up, U.S. home values held steady, rising 0.1% since September, marking the fourth consecutive month of muted movement. Typical home values are $358,458, up nearly 12% over 2021 and 43% higher than before the pandemic. Major metros with the largest home value appreciation since 2019 are Tampa (72%), Austin (64%), Jacksonville (62%) and Phoenix (60%). 

Some expensive Western markets, including Los Angeles (+0.8%) and Riverside (+0.4%), abruptly snapped steep value-losing streaks; time will tell if September marked the bottom for price declines in these cities. Las Vegas (-2.3%) and Austin (-2.2%) saw the sharpest home value declines among major metro areas.

The Zillow Observed Rent Index showed a slight 0.1% decrease from September to October, ending a two-year streak in rent growth. The decline is a small step toward normalcy, harking back to October declines seen from 2017 through 2020. Typical U.S. rent is now $2,040, up 9.6% since last October and nearly 27% since 2019.

Metropolitan
Area*

October
Zillow
Home
Value
Index
(ZHVI)
(Raw)

October
ZHVI
Year-
Over-
Year
(YoY)
Change 

Monthly
Mortgage
Cost (20%
Down)

Monthly
Mortgage
Cost
Change,
YoY

New For-
Sale
Listings
Change,
Month
Over
Month
(MoM) 

Zillow
Observed
Rent
Index
(ZORI)

Zillow
Observed
Rent
Index
Change,
YoY

United States

$358,458

11.9 %

$1,910

77.0 %

27.0 %

$2,040

9.6 %

New York, NY

$618,741

7.9 %

$3,303

69.7 %

17.8 %

$3,212

13.2 %

Los Angeles, CA

$904,367

5.4 %

$4,826

66.5 %

27.1 %

$2,979

8.9 %

Chicago, IL

$312,194

8.2 %

$1,663

70.8 %

29.0 %

$1,869

8.7 %

Dallas–Fort Worth, TX

$391,640

16.1 %

$2,082

84.3 %

36.1 %

$1,855

9.8 %

Philadelphia, PA

$341,929

9.8 %

$1,813

71.5 %

26.0 %

$1,793

6.8 %

Houston, TX

$315,089

13.0 %

$1,678

78.8 %

31.0 %

$1,613

5.8 %

Washington, DC

$552,639

6.0 %

$2,939

65.9 %

29.8 %

$2,257

6.5 %

Miami–Fort Lauderdale, FL

$473,630

23.3 %

$2,526

96.8 %

23.1 %

$2,827

16.4 %

Atlanta, GA

$380,542

14.2 %

$2,038

84.6 %

32.9 %

$2,002

7.2 %

Boston, MA

$646,045

6.9 %

$3,457

69.0 %

24.0 %

$2,806

10.1 %

San Francisco, CA

$1,369,586

1.9 %

$7,340

61.2 %

27.5 %

$3,199

5.8 %

Detroit, MI

$239,563

6.9 %

$1,276

68.2 %

27.7 %

$1,460

7.5 %

Riverside, CA

$571,380

8.3 %

$3,052

72.1 %

30.7 %

$2,584

7.1 %

Phoenix, AZ

$449,590

6.4 %

$2,418

70.7 %

44.2 %

$1,938

4.8 %

Seattle, WA

$757,177

7.9 %

$4,042

71.5 %

37.9 %

$2,285

6.8 %

Minneapolis–St. Paul, MN

$371,658

5.6 %

$1,979

65.7 %

30.4 %

$1,632

4.3 %

San Diego, CA

$876,288

7.6 %

$4,711

71.3 %

32.4 %

$3,105

12.8 %

St. Louis, MO

$246,368

10.1 %

$1,308

72.0 %

25.3 %

$1,273

9.8 %

Tampa, FL

$391,409

21.2 %

$2,090

94.0 %

34.8 %

$2,135

9.8 %

Baltimore, MD

$378,548

7.6 %

$2,014

68.4 %

27.9 %

$1,798

4.1 %

Denver, CO

$621,003

8.0 %

$3,319

71.8 %

39.1 %

$2,028

6.3 %

Pittsburgh, PA

$209,221

3.4 %

$1,117

62.4 %

28.3 %

$1,338

6.6 %

Portland, OR

$562,754

5.4 %

$3,008

66.5 %

33.7 %

$1,949

7.6 %

Charlotte, NC

$386,769

16.4 %

$2,072

86.9 %

35.0 %

$1,824

10.4 %

Sacramento, CA

$590,167

4.4 %

$3,153

64.3 %

36.9 %

$2,326

4.9 %

San Antonio, TX

$339,669

12.9 %

$1,818

80.2 %

34.2 %

$1,518

6.0 %

Orlando, FL

$402,170

20.9 %

$2,148

94.0 %

29.3 %

$2,045

11.7 %

Cincinnati, OH

$265,208

10.2 %

$1,412

73.3 %

26.8 %

$1,505

11.5 %

Cleveland, OH

$219,237

9.7 %

$1,171

72.3 %

27.0 %

$1,370

8.8 %

Kansas City, MO

$291,747

10.4 %

$1,548

73.6 %

30.1 %

$1,364

11.0 %

Las Vegas, NV

$422,503

8.3 %

$2,304

77.6 %

39.7 %

$1,832

1.6 %

Columbus, OH

$302,536

10.7 %

$1,622

76.4 %

30.2 %

$1,509

9.0 %

Indianapolis, IN

$275,638

14.0 %

$1,466

80.9 %

32.9 %

$1,483

10.4 %

San Jose, CA

$1,568,484

6.2 %

$8,287

65.8 %

27.2 %

$3,341

8.3 %

Austin, TX

$541,125

2.3 %

$2,934

65.8 %

37.2 %

$1,912

6.0 %

Virginia Beach, VA

$335,691

10.6 %

$1,786

73.7 %

21.9 %

$1,648

5.3 %

Nashville, TN

$451,005

17.5 %

$2,420

90.2 %

37.9 %

$1,906

9.5 %

Providence, RI

$449,220

8.4 %

$2,398

71.2 %

24.7 %

$1,986

10.1 %

Milwaukee, WI

$271,085

8.5 %

$1,436

68.5 %

18.6 %

$1,243

6.8 %

Jacksonville, FL

$378,695

19.8 %

$2,024

92.4 %

33.8 %

$1,810

8.3 %

Memphis, TN

$236,600

13.2 %

$1,261

80.4 %

25.3 %

$1,501

7.6 %

Oklahoma City, OK

$223,762

13.5 %

$1,188

78.5 %

26.8 %

$1,316

6.4 %

Louisville, KY

$244,522

9.2 %

$1,302

72.4 %

31.1 %

$1,293

11.5 %

Hartford, CT

$324,546

10.3 %

$1,724

72.2 %

21.8 %

$1,707

9.1 %

Richmond, VA

$344,784

11.9 %

$1,834

75.5 %

24.8 %

$1,613

10.5 %

New Orleans, LA

$269,678

7.8 %

$1,442

70.6 %

28.6 %

$1,527

6.8 %

Buffalo, NY

$244,383

8.1 %

$1,303

69.9 %

21.3 %

$1,255

8.3 %

Raleigh, NC

$445,853

13.7 %

$2,396

84.5 %

41.7 %

$1,793

9.5 %

Birmingham, AL

$250,650

11.9 %

$1,335

76.6 %

23.3 %

$1,326

7.7 %

Salt Lake City, UT

$583,074

6.1 %

$3,110

69.0 %

43.4 %

$1,764

10.6 %

*Table ordered by market size 

1 The Zillow Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Research. For more information, visit www.zillow.com/research.

About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting, or financing with transparency and ease. 

Zillow Group's affiliates and subsidiaries include Zillow®; Zillow Premier Agent®; Zillow Home Loans™; Zillow Closing Services™; Trulia®; Out East®; StreetEasy®; HotPads®; and ShowingTime+™, which houses ShowingTime®, Bridge Interactive®, and dotloop®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). 

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/home-prices-plateau-as-high-mortgage-rates-chill-market-301681207.html

SOURCE Zillow

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Schedule for Week of January 29, 2023

The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.The FOMC meets this week, and the FO…

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The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.

Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.

The FOMC meets this week, and the FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

----- Monday, January 30th -----

10:30 AM: Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed manufacturing surveys for January.

----- Tuesday, January 31st -----

9:00 AM: FHFA House Price Index for November. This was originally a GSE only repeat sales, however there is also an expanded index.

9:00 AM ET: S&P/Case-Shiller House Price Index for November.

This graph shows the Year over year change in the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 6.9% year-over-year increase in the Comp 20 index.

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 44.9, down from 45.1 in December.

10:00 AM: The Q4 Housing Vacancies and Homeownership report from the Census Bureau.

----- Wednesday, February 1st -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in January, down from 235,000 added in December.

10:00 AM: Construction Spending for December. The consensus is for a 0.1% decrease in construction spending.

Job Openings and Labor Turnover Survey10:00 AM ET: Job Openings and Labor Turnover Survey for December from the BLS.

This graph shows job openings (black line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Job openings decreased in November to 10.458 million from 10.512 million in October

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 48.0, down from 48.4 in December.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

Vehicle SalesAll day: Light vehicle sales for January. The consensus is for light vehicle sales to be 14.3 million SAAR in January, up from 13.3 million in December (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate.

----- Thursday, February 2nd -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 200 thousand initial claims, up from 186 thousand last week.
----- Friday, February 3rd -----

Employment Recessions, Scariest Job Chart8:30 AM: Employment Report for December.   The consensus is for 185,000 jobs added, and for the unemployment rate to increase to 3.6%.

There were 223,000 jobs added in December, and the unemployment rate was at 3.5%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The pandemic employment recession was by far the worst recession since WWII in percentage terms. However, as of August 2022, the total number of jobs had returned and are now 1.24 million above pre-pandemic levels.

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 50.3, up from 49.6 in December.

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US gov’t $1.5T debt interest will be equal 3X Bitcoin market cap in 2023

The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

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The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

Commentators believe that Bitcoin (BTC) bulls do not need to wait long for the United States to start printing money again.

The latest analysis of U.S. macroeconomic data has led one market strategist to predict quantitative tightening (QT) ending to avoid a “catastrophic debt crisis.”

Analyst: Fed will have “no choice” with rate cuts

The U.S. Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing years of COVID-19-era money printing.

While interest rate hikes look set to continue declining in scope, some now believe that the Fed will soon have only one option — to halt the process altogether.

“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized on Jan. 27.

“Higher for longer is a fantasy not rooted in math reality.”

Henrich uploaded a chart showing interest payments on current U.S. government expenditure, now hurtling toward $1 trillion a year.

A dizzying number, the interest comes from U.S. government debt being over $31 trillion, with the Fed printing trillions of dollars since March 2020. Since then, interest payments have increased by 42%, Henrich noted.

The phenomenon has not gone unnoticed elsewhere in crypto circles. Popular Twitter account Wall Street Silver compared the interest payments as a portion of U.S. tax revenue.

“US paid $853 Billion in Interest for $31 Trillion Debt in 2022; More than Defense Budget in 2023. If the Fed keeps rates at these levels (or higher) we will be at $1.2 trillion to $1.5 trillion in interest paid on the debt,” it wrote.

“The US govt collects about $4.9 trillion in taxes.”
Interest rates on U.S. government debt chart (screenshot). Source: Wall Street Silver/ Twitter

Such a scenario might be music to the ears of those with significant Bitcoin exposure. Periods of “easy” liquidity have corresponded with increased appetite for risk assets across the mainstream investment world.

The Fed’s unwinding of that policy accompanied Bitcoin’s 2022 bear market, and a “pivot” in interest rate hikes is thus seen by many as the first sign of the “good” times returning.

Crypto pain before pleasure?

Not everyone, however, agrees that the impact on risk assets, including crypto, will be all-out positive prior to that.

Related: Bitcoin ‘so bullish’ at $23K as analyst reveals new BTC price metrics

As Cointelegraph reported, ex-BitMEX CEO Arthur Hayes believes that chaos will come first, tanking Bitcoin and altcoins to new lows before any sort of long-term renaissance kicks in.

If the Fed faces a complete lack of options to avoid a meltdown, Hayes believes that the damage will have already been done before QT gives way to quantitative easing.

“This scenario is less ideal because it would mean that everyone who is buying risky assets now would be in store for massive drawdowns in performance. 2023 could be just as bad as 2022 until the Fed pivots,” he wrote in a blog post this month.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Stay Ahead of GDP: 3 Charts to Become a Smarter Trader

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report…

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When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report showed the U.S. economy grew by 2.9% in the quarter, and Wall Street wasn't disappointed. The day the report was released, the market closed higher, with the Dow Jones Industrial Average ($DJIA) up 0.61%, the S&P 500 index ($SPX) up 1.1%, and the Nasdaq Composite ($COMPQ) up 1.76%. Consumer Discretionary, Technology, and Energy were the top-performing S&P sectors.

Add to the GDP report strong earnings from Tesla, Inc. (TSLA) and a mega announcement from Chevron Corp. (CVX)—raising dividends and a $75 billion buyback round—and you get a strong day in the stock markets.

Why is the GDP Report Important?

If a country's GDP is growing faster than expected, it could be a positive indication of economic strength. It means that consumer spending, business investment, and exports, among other factors, are going strong. But the GDP is just one indicator, and one indicator doesn't necessarily tell the whole story. It's a good idea to look at other indicators, such as the unemployment rate, inflation, and consumer sentiment, before making a conclusion.

Inflation appears to be cooling, but the labor market continues to be strong. The Fed has stated in many of its previous meetings that it'll be closely watching the labor market. So that'll be a sticky point as we get close to the next Fed meeting. Consumer spending is also strong, according to the GDP report. But that could have been because of increased auto sales and spending on services such as health care, personal care, and utilities. Retail sales released earlier in January indicated that holiday sales were lower.

There's a chance we could see retail sales slowing in Q1 2023 as some households run out of savings that were accumulated during the pandemic. This is something to keep an eye on going forward, as a slowdown in retail sales could mean increases in inventories. And this is something that could decrease economic activity.

Overall, the recent GDP report indicates the U.S. economy is strong, although some economists feel we'll probably see some downside in 2023, though not a recession. But the one drawback of the GDP report is that it's lagging. It comes out after the fact. Wouldn't it be great if you had known this ahead of time so you could position your trades to take advantage of the rally? While there's no way to know with 100% accuracy, there are ways to identify probable events.

3 Ways To Stay Ahead of the Curve

Instead of waiting for three months to get next quarter's GDP report, you can gauge the potential strength or weakness of the overall U.S. economy. Steven Sears, in his book The Indomitable Investor, suggested looking at these charts:

  • Copper prices
  • High-yield corporate bonds
  • Small-cap stocks

Copper: An Economic Indicator

You may not hear much about copper, but it's used in the manufacture of several goods and in construction. Given that manufacturing and construction make up a big chunk of economic activity, the red metal is more important than you may have thought. If you look at the chart of copper futures ($COPPER) you'll see that, in October 2022, the price of copper was trading sideways, but, in November, its price rose and trended quite a bit higher. This would have been an indication of a strengthening economy.

CHART 1: COPPER CONTINUOUS FUTURES CONTRACTS. Copper prices have been rising since November 2022. Chart source: StockCharts.com. For illustrative purposes only.

High-Yield Bonds: Risk On Indicator

The higher the risk, the higher the yield. That's the premise behind high-yield bonds. In short, companies that are leveraged, smaller, or just starting to grow may not have the solid balance sheets that more established companies are likely to have. If the economy slows down, investors are likely to sell the high-yield bonds and pick up the safer U.S. Treasury bonds.

Why the flight to safety? It's because when the economy is sluggish, the companies that issue the high-yield bonds tend to find it difficult to service their debts. When the economy is expanding, the opposite happens—they tend to perform better.

The chart below of the Dow Jones Corporate Bond Index ($DJCB) shows that, since the end of October 2022, the index trended higher. Similar to copper prices, high-yield corporate bond activity was also indicating economic expansion. You'll see similar action in charts of high-yield bond exchange-traded funds (ETFs) such as iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Barclays High Yield Bond ETF (JNK).

CHART 2: HIGH-YIELD BONDS TRENDING HIGHER. The Dow Jones Corporate Bond Index ($DJCB) has been trending higher since end of October 2022.Chart source: StockCharts.com. For illustrative purposes only.

Small-Cap Stocks: They're Sensitive

Pull up a chart of the iShares Russell 2000 ETF (IWM) and you'll see similar price action (see chart 3). Since mid-October, small-cap stocks (the Russell 2000 index is made up of 2000 small companies) have been moving higher.

CHART 3: SMALL-CAP STOCKS TRENDING HIGHER. When the economy is expanding, small-cap stocks trend higher.Chart source: StockCharts.com. For illustrative purposes only.

Three's Company

If all three of these indicators are showing strength, you can expect the GDP number to be strong. There are times when the GDP number may not impact the markets, but, when inflation is a problem and the Fed is trying to curb it by raising interest rates, the GDP number tends to impact the markets.

This scenario is likely to play out in 2023, so it would be worth your while to set up a GDP Tracker ChartList. Want a live link to the charts used in this article? They're all right here.


Jayanthi Gopalakrishnan

Director, Site Content

StockCharts.com

 

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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