Mortgage Rates Pause Their Climb and Worries of Housing Crash Eases

For months now, the real estate press has been screaming about a pending real estate market crash. And as of today, mid-May 2022, unlike the stock market the bond market, and the crypto markets, there has not been a major correction in real estate, and, in fact, it continues to be a hot market.

Now, that is as of today, and everything can change if the news changes, and with so many potential disasters (Ukraine, Iran, China, COVID, the list seems endless), the market can change, but so far, despite all that, it continues to be a hot seller's market.

Now, last week, for the 1st time this year, mortgage rates actually went DOWN, but slightly. Is that the peak? Who knows, but despite everything else in turmoil., the mortgage market seems to be a place that investors want to lend to get good rates in this time of uncertainty.

Search Youtube under the term Housing Crisis in the last month and you will see millions of videos about becoming crash, with lots of worries faces in the thumbnails. Catchy stuff, gets lots of views.

But the professionals are predicting a higher than normal home appreciation rate of 5% or more. Now, while historically that is great, it is below the rate of inflation and is cause for concern, but is clearly not a crisis or crash.

The statistic that will predict any arrival of a crisis is the inventory of homes for sale. Until homes for sale dramatically increase, there will not be a pool of sellers dropping their prices to cause a crash or concern. The rise in mortgage rates has pulled out a portion of sellers who were looking to sell and buy with a mortgage as that mortgage payment has not gone up with the market, so we see a DROP in inventory despite the mortgage rates of the past few months which seems to defy the effect of the mortgage rates and the seasonal pattern of homes coming on the market for Spring.

The "wave of foreclosures" that has been predicted for over 2 years is till not anywhere near in sight, and buyers are still anxious to buy homes.

Zillow Research summarizes it as follows: "The Housing Market Is Passing an Inflection Point This Spring, on the Way to More Balanced Conditions." Again, we are in the peak buying season with limited inventory, but otherwise, it remains a hot market.

I found a great analysis on the market in one of my favorite sources, Calculated Risk Blog, where he explains that the current market is NOT like 2008-2009 but more like 1978-1979 when there was pent up demand that cause homes to go up in value despite the rise in rates.

Another factor that is helping the market is lenders, who have been non-stop preoccupied with refinancing their past customers for the past decade now are pivoting to service home buyers. The Fed Survey explains that lenders are lowing the credit standards required for lending, which, when you read the details, explains that rather than just cherry-picking the easiest loans now lenders have to roll up their sleeves and help customers buy homes. Great, welcome to the party!

False Claim of the Week:
So, without a pending housing crisis, what will the real estate news industry write about to get attention. Will they cover the actual market, or search for new exciting claims that confuse the market.

Well, this week's example is a Zillow article titled "Listings Highlighting Eco-Friendly Features Sell up to 10 Days Faster." Below the headline is a picture of an electric car being charged, and the 3 bullet points are topped by "Electric vehicle chargers and drought-resistant landscaping can help a home sell more than nine days faster than similar homes." Note that the charger in the photo is merely a wall adapter, easily installed for under $2,000.

OK, let's dig into their "data." For one, in the table provided, the EV charging station adds $0 value to the property. Now, they claim that it will cause the home to sell 10 days faster So, that would be the 2nd most important item surveyed, and it has NO economic effect, but homes sell 10 days faster. Could it be homes that have a hard or area for charging have more space and are more desirable otherwise? Could sellers offer an EV charger when there is one just to sell the home faster? 
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