Rates, supply, and home affordability: A recap of our February Housing Market Webinar with Steven Thomas

This month, we hosted a housing market webinar to help our members navigate the changing market and understand trends as we continue in 2022. Steven Thomas—local economics expert, real estate executive, and Reports on Housing author—joined Nuvision’s mortgage expert, Mike Sternquist, to break down the data.

The full recording can be found on our Facebook page here. If you missed the webinar or just need a quick refresher, we have also highlighted some of the most important questions and answers below.

Where are rates going?

Rates rose drastically during the first weeks of 2022. A strong inflation index and higher job market numbers pushed U.S. 10 Year Treasury rates beyond 2%, mirroring interest rates.

According to the Freddie Mac Primary Mortgage Market Survey, mortgage rates have not been at this level since before the pandemic in May 2019. On January 6th, they were at 3.22%. When Steven spoke on February 17th, they were at 3.92%.

The Federal Reserve is driving the change by doing what is known as “hurry up offense.” In other words, they are trying everything to slow down inflation, including a federal short-term rate hike in March. This rate hike applies to short-term debt like auto loans, equity lines of credit, and credit card debt, not 30-year mortgages.

Steven expects mortgage rates to continue rising, reaching as high as 4%.

When will the market slow down?

Last year, Steven referred to the unprecedented market landscape as a supply crisis. Lately, he’s taken to calling it a supply catastrophe.

“It was like at the beginning of this year we had an empty gas tank, and we were crossing our fingers that we would even make it to the gas station,” Steven said during the webinar. “That was how low the inventory got—there was no fuel in the tank. It’s like that across the country.”

Part of the problem is the season—winter always comes with low inventory and increased demand. The current Expected Market Time of 23 days is intense. During a typical year, the Expected Market Time would only be 70 days in February. New listings in spring and rising rates should slow the market down, helping supply catch up to demand.

The insane Expected Market Times and steep appreciation in home values will also start to drop back to normal as rates rise.  

Will homes be affordable?

With homes often selling above the asking price after receiving multiple offers, some buyers are concerned about affordability.

Multiple factors contribute to affordability. It’s not just the raw price; you also must account for average income and mortgage rates.

We have to look back on recent decades to put this in perspective. In 1970, the median home price was $23,000, but the median income was $9,870 and the 30-year fixed rate was 8.5%. In 2006, the median price was $732,000, with a $70,000 average income and a 6.4% fixed rate. Today, the average price is higher at $1,180,000, but so is the income at $105,000. Fixed rates are significantly lower, too, at under 4%.  

Check out the entire webinar on our Facebook page to learn more.

The full webinar recording can be found on our Facebook page here. In the video, you’ll find more in-depth responses to the questions above and answers to others like:

• Will home values hold for the next year, or are they expected to change?
• What does the second home or investment market look like?
• Do the current demand statistics apply to new construction?
• Are more home loans FHA or conventional?

Thank you to everyone who attended the webinar. If you missed it, we hope you will join us next time and view the replay here. Housing webinars are a unique opportunity to ask questions to the best local experts and hear the most up-to-date information.