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The Week Ahead: Just How Much Has the Market Cooled?

On Wednesday, June 30, the National Association of Realtors (NAR) will release its Pending Home Sales for May 2021. With the market currently in a seemingly slowdown mode, what will NAR’s PHS say about the current state of the marketplace?

NAR’s PHS is an indicator of housing activity, measuring housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. Because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads existing-home sales by a month or two.

After weeks of decline, this week Freddie Mac reported mortgage rates rising above the 3% mark, as the 30-year fixed-rate mortgage (FRM) hit 3.02%, up from last week’s average of 2.93%.

In a still-rate-friendly environment, mortgage application volume also rose this week, as the Mortgage Bankers Association (MBA) reported 2.1% growth over the previous week, the first increase in app volume in three weeks.

Low rates and a rise in apps would give the impression that the hot housing market is rolling along, but the primary barrier remaining in the path is a lack of available homes on the market. NAR recently reported that the median home prices nationwide saw a record year-over-year increase of 23.6% in May to $350,300. On average during the month, properties sold at 17 days on the market. An increase of that magnitude brings the affordability factor into the equation as well, as more interested homebuyers are simply being priced out of the market.

The rising cost of materials and lack of skilled laborers concerned new home builders in Q1, as data from the National Association of Home Builders (NAHB) found that the price of lumber nearly tripled over the past year, forcing the price of a new single-family home to rise an average $35,872 per home. Will these setbacks be amended as we get set to enter Q3?

Here's what else is happening in The Week Ahead:

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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