Volume 106  | August 25, 2022

Guardian Asset Management

Weekly Newsletter

Guardian endeavors to provide you with the latest in housing, industry and market news from Washington D.C. and around the country. It is our goal as your industry partner to be informative, relative and topical.

From the General

Counsel's Desk

Fannie Mae sees dark days ahead for the housing market

It will get worse for the housing market – and mortgage industry – before it gets better. That’s the takeaway from a group of economists at Fannie Mae who slashed their forecast for 2022 home sales this week.

“Housing remains clearly on the downtrend — and has been for several months now — due to the combined effects of outsized home price increases and the significant and rapid run-up in mortgage rates,” Fannie Mae’s Chief Economist Doug Duncan said in a statement.

Back in May, Moody’s Analytics chief economist Mark Zandi came to Fortune with a bold proclamation: The U.S. housing market was entering into a “housing correction.” Through the summer, Zandi said, U.S. housing activity would plummet. As it did, Zandi said home prices in bubbly markets like Phoenix and Boise would begin falling.

At the time, Zandi’s prediction was dismissed by many in the real estate industry. Housing bulls thought that tight supply and favorable millennial first-time homebuyer demographics would continue to propel the Pandemic Housing Boom forward despite spiked mortgage rates. They were wrong, and Zandi was right: This summer, housing activity contracted sharply across the board while bubbly markets, like Boise and Las Vegas, have already started to see price cuts.

Mortgage rates spike, hitting 2-month high

Mortgage rates rose sharply this week to their highest level since reaching a record near 6% in June, putting further pressure on the cooling housing market.

Freddie Mac said Thursday that its latest Primary Mortgage Market Survey shows the average rate for the benchmark 30-year fixed-rate mortgage is now at 5.55%, a nearly half-point jump from last week's reading of 5.13%. 

At this time last year, 30-year fixed-rate products averaged 2.87%.

The rate for a 15-year fixed-rate note also surged, averaging 4.85% after coming in at 4.55% last week. That is more than double the average rate at this time last year when 15-year products were at 2.17%.

July was another rough month for homebuilders, with mortgage applications for new home purchases dropping 16.1% from a year ago, according to the latest Mortgage Bankers Association‘s builder application survey.

Compared to June 2022, applications decreased by 7%.

“Mortgage applications to purchase newly built homes weakened in July, as prospective homebuyers continue to delay decisions because of economic uncertainty and still-high home prices and mortgage rates,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The slide in purchase applications for new homes – now down for the fourth consecutive month and 16% lower than a year ago – is consistent with data on declining homebuilder sentiment and slowing permitting activity for new construction.”