Housing Market Roundup Nov. 30, 2021

Here’s a quick summary of housing/economic reports that came across the MBA NewsLink desk over the Thanksgiving holidays:

RE/MAX: October Home Sales Down 6.4%

RE/MAX, Denver, said October home sales fell by 6.4 percent from September—nearly double the typical seasonal decline—pinched between a steep median sales price of $336,000 and record low inventory.

The company’s monthly National Housing Report said housing inventory fell by nearly 13 percent from September—the fifth-lowest level in the report’s 14 year history—and the 1.3 months’ supply of inventory tied for the second-lowest in report history, matching July and August of this year.

“We’re seeing the effects of a long, sustained run-up in prices and month-over-month home sales and the market may be moving past the days of immediate sales, multiple offers and bidding wars on virtually every property,” said Nick Bailey, President of RE/MAX LLC. “That’s OK. The October dip in sales, especially after such a busy September, is a step toward a more balanced market and was somewhat overdue.”

The median home price rose by 0.8% in October from September to $336,000, tying the record set in June. Home prices have increased year over year for 34 consecutive months. This also marks the first median home price increase in an October since 2014; on average, home prices fell by 1.3 percent in October from 2015-2019.

Of the 51 metro areas surveyed in October, the overall average number of home sales fell by 6.4% from September and by 10.2% from a year ago. Markets with the biggest decrease in year-over-year sales percentage were Birmingham, Ala. at -32.1%; Billings, Mont. at -30.0%, and Providence, R.I. at -21.5%.  Leading the year-over-year sales percentage increase were Honolulu at +16.7% and Wilmington/Dover, Del. at +1.4.

Average Days on Market for homes sold in October 2021 rose to 27, up one day from September but down 11 days from the average a year ago. Of the 51 metro areas surveyed, no metro areas reported a months’ supply at or over six, which is typically considered a buyer’s market.

Redfin: Bidding Wars Remain Off Earlier Peak

Redfin, Seattle, reported 60.3% of home offers written by Redfin agents faced competition, unchanged from September but down from a pandemic peak of 74.5% in April.

The bidding-war rate has fallen from its peak in recent months amid a typical seasonal cooling in the housing market, but has begun to plateau as a second wind of homebuyer demand has fueled competition, according to Redfin Chief Economist Daryl Fairweather.

“While the housing market slowed in October, the latest homebuying demand data indicates it may be heating back up this month—a sign that bidding wars could start to tick up again,” Fairweather said. “Homebuyers who dropped out of the housing market in the spring have returned under the assumption there will be less competition. They may be surprised to discover that bidding wars are still common because so many house hunters are looking to take advantage of low mortgage rates before they rise.”

Redfin also reported home prices hit a record-high $359,975 in the four-week period ending November 21, up 14% year over year, the largest increase since early September.

The report said prices have risen in the past month nearly four times faster than they did at the same time last year. The unseasonable surge in home prices appears to be drawing in more sellers, as the number of homes listed for sale was down less than 3% from 2020, and up 11% from 2019.

“Rising rents and rising prices on everything from gas to groceries may be motivating more people to buy homes now,” Fairweather said. “Buying a home is a type of hedge against inflation, especially with mortgage rates still near historic lows. If high inflation

The report said asking prices of newly listed homes rose by 12% from a year ago and by 26% from 2019 to a median of $352,250. Pending home sales rose by 8% year over year and by 51% compared to 2019. New listings of homes for sale fell by 2.7% from a year earlier, but up 12% from 2019. Since the four-week period ending October 3, new listings are down 16%, a smaller decline than over the same period in 2019 (-21%) and in 2020 (-18%).

The report said 45% of homes that went under contract had an accepted offer within the first two weeks on the market, above the 39% rate of a year earlier and the 28% rate in 2019. Since the four-week period ending September 19, the share of homes under contract within two weeks rose by 1.6 percentage points. During the same time in 2019, the share fell 2.9 points. Additionally, 32% of homes that went under contract had an accepted offer within one week of hitting the market, up from 27% during the same period a year earlier and 18% in 2019.

Redfin said homes that sold were on the market for a median of 24 days, down from 31 days a year earlier and 46 days in 2019; 43% of homes sold above list price, up from 35% a year earlier and 21% in 2019. On average, 4.3% of homes for sale each week had a price drop, up 0.8 percentage points from the same time in 2020 and up 0.2 points from this time in 2019.

FHFA Announces 2022 Deemed-Issuance Ratio

The Federal Housing Finance Agency on Monday announced the deemed-issuance ratio for the 2022 calendar year in accordance with Internal Revenue Service guidelines on trading the Uniform Mortgage-Backed Security.

The deemed-issuance-ratio will be used for diversification reporting on bonds ultimately delivered to the purchaser until the bonds have been disposed of, regardless of the issuing Enterprise on the underlying bonds.

The IRS Revenue Procedure 2018-54 provides that the ratio may be rounded as long as the rounded ratio is further from 50/50 than the actual observed data. This year, the deemed-issuance ratio is 56 percent Fannie Mae and 44 percent Freddie Mac.

The IRS procedure provides guidance on section 817(h) of the Internal Revenue Code diversification requirements for variable annuity, endowment and life insurance contracts. The IRS has provided a deemed-issuance-ratio to allocate issuer exposure for TBA trades between Fannie Mae and Freddie Mac. Compliance with these requirements is affected by implementation of and trading in UMBS.