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Real Estate Market Forecast Analyzing Mortgage Rate Trends – June 5th 2023

Limited Supply Drives Up Home Prices in March – S&P Case-Shiller Report

In March, the housing market faced a significant challenge due to limited supplies of available homes. The S&P Case-Shiller Home Price Indices revealed a notable increase in home prices, with a month-to-month rise of 0.40 percent and a year-over-year growth of 0.70 percent. The cities experiencing the highest rates of home price growth were Miami, Florida, with a remarkable 7.70 percent increase year-over-year, followed by Tampa, Florida, at 4.80 percent, and Charlotte, North Carolina, at 4.70 percent.

Impact of High Mortgage Rates on Buyers and Sellers

The housing market was affected by high mortgage rates, which posed challenges for both homebuyers and sellers. Average mortgage rates reached close to 7 percent, leading to higher monthly payments for homeowners. Additionally, these elevated rates made it more difficult for potential buyers to qualify for mortgage loans. Consequently, homeowners who had previously refinanced their mortgages at lower rates during the pandemic chose to remain in their current homes, avoiding the prospect of purchasing new properties or refinancing at higher interest rates.

Construction Spending Shows Positive Growth, Single-Family Homes Decline

The Commerce Department reported positive growth in construction spending. Year-over-year, construction spending increased by 7.2 percent, and month-to-month, it saw a rise of 1.2 percent in April. However, the private residential construction sector witnessed only a modest increase of 0.50 percent. Notably, single-family home construction experienced a decline of -0.8 percent during the same period.

Rise in Mortgage Rates and Jobless Claims – Freddie Mac Report

Freddie Mac’s report highlighted a rise in average mortgage rates. The rate for 30-year fixed-rate mortgages increased by 22 basis points to reach 6.79 percent, while 15-year fixed-rate mortgages saw a 21 basis point rise, averaging at 6.18 percent.

Simultaneously, there was an increase in jobless claims. Last week, 232,000 new claims were filed, slightly lower than the projected figure of 235,000. This followed the previous week’s reading of 230,000 initial jobless claims filed. The national unemployment rate also witnessed an uptick in May, rising to 3.7 percent, surpassing the expected rate of 3.5 percent.

Strong Employment Growth Surpasses Expectations

The employment sector demonstrated robust growth, exceeding expectations. In May, the United States added 339,000 jobs, far surpassing the anticipated figure of 190,000. Additionally, April experienced notable job growth with the addition of 294,000 new jobs.

Upcoming Economic Outlook – Mortgage Rates and Jobless Claims

Looking ahead, this week’s economic reporting will provide further insights into mortgage rates and jobless claims through the release of their respective weekly readings. These indicators will continue to shape the economic landscape, providing valuable information on the housing market, employment trends, and financial conditions.

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