A number of economists have predicted the real estate sector will improve later this year, so any indications those predictions are on track are welcome. Here’s some recent news that show some positive signs of improvement in the market.
According to Black Knight, overall mortgage rate lock activity increased in January by 32% compared to December, the first increase in nine months. Black Knight's Market Volume Index, which measures rate lock activity indexed to 100 for January 2018, increased from 62 in December to 82 in January for overall rate lock dollar volume. The purchase component of the index increased 32% month over month, the rate/term component increased 37%, and the cash-out component increased 25%. Refinance locks only accounted for 15% of activity in January, reflecting disincentives for refinancing in the current market.
Fannie Mae’s monthly consumer homebuying sentiment survey increased for the third straight month in January, which is welcome news, but it’s still well below pre-pandemic highs that reflected positive consumer outlook for the housing market. Three of the survey’s six components, associated with home-selling conditions, home price outlook and household income, improved month over month. Only 17% of respondents believe it’s a good time to buy, given continued affordability constraints, but the percentage of respondents who say it is a good time to sell increased from 51% to 59% from December to January.
According to the survey, the percentage of respondents who say home prices will go up in the next 12 months increased from 30% to 32%, and the share of those who say their household income is significantly higher than it was 12 months ago increased 2 percentage points.
In housing stock news, Zillow, which accounts for more than half of all online real-estate-related traffic, has seen its shares increase 33% so far this year, significantly above the S&P 500 increase of 7%. Analysts have taken note. Evercore’s Mark Mahaney sees Zillow’s positive trajectory continuing and called the first quarter of 2023 as the possible bottom for sales of existing residential homes. Likewise, BofA Securities analyst Curtis Nagle is also bullish on Zillow’s prospects for growth. He recently wrote in a research note that while current demand for housing is historically low as home prices have soared and mortgage rates have risen, he predicts a bottom to the housing market this year.
Homebuilder sentiment is rising, according to the recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index. The report is a monthly survey of NAHB members that measures their confidence in market conditions for the next six months. Any number greater than 50 indicates a majority of homebuilders believe conditions are more favorable.
While still cautious and below historical highs, builder confidence for newly built single-family homes rose 7% in February, the second consecutive month of gains, with an index value of 42. It’s the strongest index value since September of 2022.
“While the HMI remains below the breakeven level of 50, the increase from 31 to 42 from December to February is a positive sign for the market,” Robert Dietz, the NAHB’s chief economist, said in a statement. “Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle. And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.”