Best Winning Streak For Mortgage Rates in 2 Years

Mortgage rates had their biggest drop in 2 years, and one of the biggest and fastest drops EVER. Was that in the news?

November 8, mortgage rates were at 7.3% and the real estate press suggested the possibility of runaway hyperinflation. News organizations dusted off the housing crash headlines, and  they did their best to scare buyers into a full-scale panic.

Yet, homes continued to sell, and rates have since come down in the biggest 6-week decline in history.

Part of the challenge of evaluating data is making sure it is in context.

Let me walk you through a recent presentation by the Chief Economist of the National Association of Realtors Lawrence Yun.

His 1st chart shows the drop in sales in 2022. Now, notice the range of the data is from 3 million to 7 million in sales, not down to 0, this makes the differences seem more significant. Also, what he leaves out is that the increase in sales experienced in the record years of 2020 and 2021 would naturally lead to a drop in 2022 unless that demand was sustained.

His next graph shows the decline on a monthly basis, again with the distortion starting at 3.5 million to exaggerate the differences, but notice how the period July 2020 through April 2022 had increased sales during the pandemic period that most economists would at least suggest the possibility that future sales were already taken.

I think the graph that shows the ultimate strength of the economy is the median home price, which has continued its seasonal increase almost non-stop for the last 10 years. 

Where the bad news is lacking is the number of delinquencies. Notice that the numbers, since the pandemic, have returned to the normal market range, nowhere near the numbers of the housing crash of 2008.

As a result, distressed home sales are almost non-existent. We have seen stories about a coming wave of foreclosure sales over the last 3 years, but that wave is nowhere to be seen from here.

Equally telling is the increased home equity. Homeowners with equity can decide simply not to sell, rather than being forced to sell as a foreclosure. 

In the end, he is projecting an actual decrease in prices ONLY for the 2nd quarter of 2023, and a year of 0% increase for 2023 overall, and an increase of 5% in 2024.

At the end of the day, I think while we are experiencing a significant reduction in sales from the red-hot market of the past 2 years, the overall level of equity and demand for sales will limit the correction to a few percentage points, and after that correction, the long-term factors of insufficient housing stock and a growing population will turn the market back to its historical reasonable increases.
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Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents nationally probate experts.

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