The housing market is riding an unseasonable fall homebuying push to a 15-year high in existing home sales. What that means for 2022.
Homebuyers were hungry for more than turkey and mashed potatoes in the week prior to Thanksgiving.
Driven largely by purchase activity, mortgage applications increased by 1.8% week-over-week during a time when homebuying usually slows down, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 19.
The MBA’s seasonally-adjusted purchase index increased 5% and the refinance index increased 0.4%.
"Purchase activity increased for the third straight week, as housing demand remains robust, even as the housing market approaches the typically slower holiday season,” said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
The MBA mortgage activity data aligns with data from the National Association of Realtors® (NAR) that showed pending sales jump 7.5% in October. Since finalizing a home sale can take a month or more, pending sales data from October is a forward-looking indicator of purchase activity that was completed in November.
What's driving the fall homebuying push?
With the fall homebuying push, the market is on pace for 6 million existing-home sales in 2021, which would be the highest mark in 15 years. This unseasonable increase in sales suggests homebuyers are taking advantage of a window of relative calm between the fierce competition of early 2021 and the diminishing affordability forecasted for 2022.
"Motivated by fast-rising rents and the anticipated increase in mortgage rates, consumers that are on strong financial footing are signing contracts to purchase a home sooner rather than later," said Lawrence Yun, NAR's chief economist. "This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low.”
Both mortgage rates and home prices are expected to rise in 2022, making homes less affordable after a year of record price growth. Most housing authorities are forecasting rates to stay below 4% – which, historically, is still very low – while price growth forecasts range from 1.9% to 16%.
The other key factor to watch is inventory. Already at record-lows throughout 2021, the housing supply hasn’t had a chance to recover due to sustained demand during the housing market “offseason.” In a typical market, supply recovers during the fall and peaks in January.
Homebuyers seem poised to bust that seasonal pattern, too.
According to national real estate brokerage Redfin, there was just 7.6 weeks of supply during the four week period ending on November 21. Six months of supply is considered balanced.
It seems homebuyers are reading the tea leaves for 2022 and jumping on low mortgage rates and relatively low prices while they can. In doing so, they’re propelling the market to a 15-year high for existing home sales and setting the table for another hectic year of homebuying.