Minnesota Housing Market Forecast 2022


I have a lot to share with you, including an update regarding pending home sales in Minnesota This is a leading indicator of what to expect with our housing market in the next one to two months. In addition, I have an update for you regarding mortgage interest rates, because those have been increasing greatly lately as of last week. They just posted this a couple of days ago or a few days ago, September 29th to be exact.  The pending home contract signings increased 8% in August from July after two consecutive months of declines. The pending home sale index decreased in the last two months. But more recently it increased by eight percent. So we’re going to talk about why this is I’m going to be diving into a lot of this data here. In addition, contract signings Increased in all regions from one month ago, led by the Midwest and the south. In contrast, though, contract signings, which again are pending home sales, were 8.3 lower this time compared to last year. So that’s a no-brainer because the housing market was absolutely on steroids last year, but I have some data to share with you regarding how this compares to 2019 and 2018, which are more normal, real estate markets.


So they talk about a rising inventory and moderating price conditions are bringing buyers back to the market according to Lawrence Yun who’s, NAR’s. Chief economist, he also said. Affordability, however, remains challenging as home price gains are roughly three times wage growth. I feel that housing affordability is getting worse and worse, because home prices are increasing greatly, but not at the same rate that wage growth.Inventory and moderating price conditions here in just a little bit there`s such an imbalance in the market, meaning an imbalance of affordability is unsustainable over the long term. According to Yun, I agree 100% with him on that. You can’t have home prices increase 20 every single year and not have wage growth increase at the same rate all right. So let me give you a breakdown on a regional level here, the index increased eight percent compared to from July to August of this year, but each region varied pretty greatly, though so, on a month-to-month basis. The Midwest increased with the most by 10.4 percent and the west increased by 7.2. In addition, the south increased by  86%, northeast only increased by 4.6% so about half the rate in the south....

So the index has kind of been all over the place this year, but we’re still at higher level compared to February all the way through February of last year, the index was just very, very high because we had such high housing demand last year. So compared to now or any really reading over the past year, we’re way higher compared to 2019 or 2018.. I know you guys always ask you, know how’s this all compared to those years, because comparing to 2021 is like comparing apples to oranges right. The housing market was on fire, but let’s go back to Yun’s statement here that we have rising inventory and moderating price conditions. That’s bringing back home buyers to the market because, after all, the contract signs rose eight percent from July to August of this year right. This is the housing inventory, and this is over the past year and the source of this. So this is according to the national association of realtors, we look at housing inventory compared to one year ago, in August 2021, we had a 1.5 million now we’re down to 1.3 million approximately. We have been increasing the housing inventory so far this year. So right in January of this year about a million in February as well, but ever since February or ever since march, housing inventory has been increasing greatly. So it did decrease in august, but not by very much. It was 1.3 million houses available for sale, and this. These are existing houses for sale and then in August it was 1.3 Million, so a difference of only 20,000 of a decrease. When you compare this to January – let’s say: 1 million. Now it’s 1.3 million, that’s a 30% increase of housing inventory. What that means for home buyers.  If you have 30 percent more houses available for sale in the u.s as a home buyer, you have more options. That’s really what we need. We actually need this number to increase quite a bit more than this, but it’s a step in the right direction.


In regards to home prices, home prices have been decreasing for two straight months in the united states for the median home price median sold price, and that was not mentioned in NARS report right. I didn’t mention that in my video, though, in any case we’re looking at the median sales price of existing houses in the u.s, it was at 303, 000 in January 2021 and they’ve been increasing greatly every single month, except for the past two months. So one thing i want to point out is that yeah home prices reach all-time record highs of 362 800in June of 2021 right. I did mention that home prices have decreased for two straight months, but look at the price decreases. They didn’t like fall off a cliff, it’s 363 000, basically in June, and then now we’re at 356 000 What’s that a difference of what six thousand dollars, so it’s not a big decrease, but it is a step in the right direction if you’re looking for, if you’re a home buyer looking for prices to decrease, want to see. If this could this trend continues. Another thing that a lot of you guys point out is that, even though it home prices decrease for two straight months, we’re still at very elevated levels right, so three hundred and fifty six thousand seven hundred dollars in august compare that to January of this year. I think it’s about almost a 20 percent increase in just eight months so and prices have increased greatly..


They release it on their website really good resource, so they just released this about a week ago last week and they stated that the seasonally adjusted purchase index uh decreased one percent from one week earlier. What this basically means is that from one week ago, they have a index for purchases and also refinances, so this overall market composite index composed of purchase applications for loans and also refinance applications for loans, so uh it decreased by one percent from one week ago. Big deal right, but it was 12 percent lower from the same week, one week earlier. In any case, Joel Khan is the MBA’s associate vice president of economic and industry forecasting. He said the following. I thought it was a really good quote here, because i’m going to dive into this about why mortgage applications may be decreasing and, more importantly, why are mortgage interest rates increasing greatly as well increased optimism about the strength of the economy pushed treasury yields higher following last Week’S meeting – that’s the federal reserve’s meeting mortgage rates and response rose across all loan types, with a benchmark, 30-year fixed rate reaching its highest level since July of 2021.

The increase in rates mostly later in the week, led to a decrease in both purchase and refinance applications. So this is going to be really interesting to track this, because if interest rates continue to go up, one would assume that’s going to decrease the demand for housing.  So let’s go over this because they say that treasury yields have been going going up and they absolutely have. So i want to show you on how they have been affected by this meeting or the fed announcing they’re going to be tapering their purchases and mortgage-backed securities and potentially may do a interest rate increase towards the tail end of next year. So this is the 10-year us treasury note, which is tied very loosely to mortgage interest rates. So when the yield on the 10-year us treasury no increases mortgage, interest rates could increase as well and then, in contrast, when it decreases, rates could decrease as well. But it’s not tied directly, it’s indirectly loosely tied to it. So any case. The u.s treasury note, as you can see here this is year to date. When you look at this the uh in January this year, we were under one percent for the us, a treasury yield right. It increased to almost two percent. I think it was like. 1.75 percent was like the highest. It’s reached um so far this year, and that was in late march and then it would decrease quite a bit, and this is when mortgage interest rates dipped as well, but more recently it’s been increasing, especially when you look at a one month trend, for example, take A look at that 1.3 um last week on the 22nd of this of September.


Now it’s been increasing quite a bit right, so 1.3% now we’re at 1%-
5 percent so have a look at this. The  date of when the of fed  announced that they’re going to be tapering their mortgage-backed security purchases and may increase federal funds rate when the when they announce they may increase the federal funds rate um potentially late. Next year, that was in September 21st to September 22nd, that was around that time period and so have a look at what happened around then right. So when they announced it, it was 1% and when they announced it, that’s when the U.S. treasury yield absolutely skyrocketed. So it’s going to be interesting to see how this will affect mortgage interest rates. But when you have a look at the mortgage interest rates, let’s just have a look at them over the past one month, so the 21st 22nd mortgage interest rates, according to the mortgage news daily, was around three percent for the average 30-year fixed-rate mortgage right. But ever since they fed and made that announcement, the rates have absolutely skyrocketed right. So we’re at three percent increased to three point, almost three point: two percent in about a week they have been decreasing more recently. What to see this is trend continues, though, um, because it’s going to be very interesting to see how this affect our housing market if it increases greatly.


One thing i did want to point out, though, is that the mortgage interest rates have been all over the place. They tend to change and fluctuate every single day right, so they decrease um to the lowest levels of this year about 2.75% in late January of this year, but interest rates increased to almost 3 percent. But what happened to home prices during this time period in march of this year, home prices still increased to record levels, so an increase of almost  75 percent from 2.75 to 3.5% it didn’t have an effect on housing demand. It didn’t appear to have an effect on housing demand, so i would assume that we’d have to have a pretty large increase in order for it to negatively impact our housing market. I’M not a fortune teller though so, let’s see what happens . This is according to Freddie mac they announced this last week, but they had to they had a good quote here from Sam  who’s, Freddie, MAC’s, chief economist, he said mortgage rates rose across all loan types this week. As a 10-year us, treasury yield reached its highest point since June many factors led to this increase, including the federal reserve, communicating that it will taper its support of the capital markets, the broadening of inflation and emergency energy supply shortages, which compound other labor and material shortages.So again, they’re talking about the support of capital markets, that’s the the purchases of mortgage-backed securities and other bonds, and he also says that we expect mortgage rates to continue to rise modestly, which will likely have an impact on home prices, causing them to moderate.


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