Housing Market Still at an All-time Low, Could see an increase this Spring

Another month draws to an end with bad news for the housing market in the US.

On Thursday, the National Association of Realtors (NAR) released January’s numbers for the current home sales. The sales fell 8.5% from last year to 4.95 million.

This level is the lowest it’s been in over three years. This drop follows a series of poor results in the last few months of 2018.

Existing US home sales dropped to 4.99 million this past December, 10.3% below the mark from one year ago.

NAR also released date in Early February that shows pending home sales fell by 2.2% in December, reaching its lowest mark in 5 years.

UBS analysts wrote a note back in January saying that the weakening in housing, as well as its intensification since the mid-year, raises the potential of an underlying weakness in the household sector.

How the Housing Market Took Such a Deep Dive

Reasons for the slowdown are many; however, experts put most the blame on home prices and higher interest rates. The median home price rose to $247,500 this past January. This month is the 83rd in a row of year-over-year gains as told by the NAR.

And the rising prices are less than stellar, especially for debt-burdened, struggling millennials.

However, the chief economist of NAR, Lawrence Yun, says that since there is such an extensive drought in home-sales, there could be a rebound in prices very soon.

According to Yun, moderating home prices along with gains in household income should boost the affordability of housing. This boost, in turn, could entice other buyers to the market further down the road.

In loosening standards by mortgage, lenders could contribute to a turn in sales. Although, lower credit standards also risk ramping up loan delinquencies.

The housing ordeal has taken its toll on mortgage companies while revenues were hit in 2018. Meanwhile, profit outlooks for this year remain bleak.

Last year, the profitability of residential mortgage loans had dropped significantly while loan margins and originations have fallen due to the higher interest rates. Refinance originations have also taken a beating.

The Rating agency looks towards residential mortgage originators, crunched by the economic headwinds so they can loosen underwriting standards for purchase loans. This change, in turn, should lead to decent growth in the balances of residential mortgage.