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This year\u2019s spring selling season wasn\u2019t a typical one, and while it seems to be better than last year, there was an air of melancholy surrounding it.\u00a0<\/p>\n
As the season winds down, mortgage applications, pending home sales, existing home sales, and listings for the last few months have all generally reflected that sentiment.\u00a0<\/p>\n
It\u2019s another reminder that buying and selling homes hasn\u2019t been the same since the pandemic. It\u2019s hard to sell your home if your mortgage rate is much lower than the current rate. And it\u2019s hard to buy when the salary needed<\/a> for a starter home has almost doubled and the cost of owning a home is the highest on record<\/a>.\u00a0<\/p>\n Mortgage applications for home purchases dropped 3.3% in May from the previous month, which saw a 2.3% dip, according to Capital Economics, a research firm. The second consecutive monthly fall showed March\u2019s uptick was short-lived. Meanwhile, May applications are only 6.5% higher than they were in October last year, when they hit a 28-year low. If you remember, mortgage rates hit a more than two-decade high of just above 8% last October. They\u2019ve come down to the 7% range, or 6.99% according to Freddie Mac\u2019s weekly reading<\/a>; daily mortgage rates are higher.\u00a0<\/p>\n \u201cThe fall in May happened despite mortgage rates easing to 7.07% last month, from 7.17%, supporting our view that mortgage demand and sales activity won\u2019t recover until rates fall meaningfully below 7%,\u201d Capital Economics\u2019 economist Thomas Ryan wrote<\/a> last week, suggesting June might not be any better. \u201cWe only expect that to happen later in the year.\u201d<\/p>\n Refinancing activity is near all-time lows, too, because the average rate of all outstanding mortgages is about 4% since so many people either purchased during the pandemic, when mortgage rates<\/a> were historically low, or refinanced.\u00a0<\/p>\n Realtor.com\u2019s recently released monthly housing analysis<\/a> found there were more homes for sale on a typical day in May compared with the same time last year, but there\u2019s still fewer homes for sale than what was typical from 2017 to 2019; it was a similar story in April and March.<\/p>\n Separate data shows pending home sales plummeted<\/a> 7.7% in April on a monthly basis and 7.4% on an annual basis; contract signings fell in all regions compared to the month before and a year earlier. And existing home sales dropped<\/a> 1.9% in April month-over-month and year-over-year. In March, existing home sales fell <\/a>4.3% on a monthly basis and 3.7% on an annual basis. All the while, home prices continued to rise; they hit their ninth all-time high<\/a> within the past year in March.\u00a0<\/p>\n Combining the latest mortgage applications data with the weak April pending home sales number puts existing home sales in May on course to dip below an annualized rate of 4 million, well below the average from the past 10 years of around 5.2 million, Ryan wrote, and his team isn\u2019t seeing a recovery until the end of next year, at which point it\u2019ll be a muted one.<\/p>\n For activity to really rise, mortgage rates have to fall, and the only hope for mortgage rates is interest rate cuts from the Federal Reserve.\u00a0<\/p>\n \u201cHome sales are stuck because interest rates have not made any major moves,\u201d National Association of Realtors\u2019 chief economist Lawrence Yun said, alongside a prior existing home sales release.<\/p>\n The consumer price index, an inflation measure, for May is scheduled to be released Wednesday morning, ahead of the Federal Open Market Committee meeting. It seems as though the Fed will leave rates unchanged. So for now, it\u2019s hard to imagine mortgage rates falling meaningfully and actually staying there, rather than momentary dips or fluctuations.\u00a0<\/p>\n<\/div>\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n