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Is the housing market changing course? Seven signs of a possible slowdown

By Jeff Lazerson

7/12/18

What I think: Both startling and subtle evidence is emerging that our housing market is changing course. Let me count the ways:

1) California notice of default filings (step one of the foreclosure process) were up a staggering 24 percent (4,144) in June compared with one year ago. And, the state has experienced three straight months (April, May and June) of increased foreclosure activity according, to Daren Blomquist, Attom Data Solutions senior vice president.

2) Twenty-two states posted year-over-year increases in foreclosure starts for the first half of 2018. Normally solid metro areas like Las Vegas, Dallas-Fort Worth and Minneapolis-St. Paul experienced increases, also according to Blomquist.

3) Thirteen percent of Orange County home sellers reduced their asking prices in recent weeks, according to Steve Thomas of Reports On Housing. Orange County’s home-listing inventory hit 5,983 this time last year, Thomas reported. This week, there were  6,501 homes listed for sale, a 9 percent increase over this time last year.

4) After reaching a high in May, Fannie Mae’s Home Purchase Sentiment Index (consumer survey) fell 1.6 points in June. “After several years of steadily climbing, HPSI’s slowing upward trend suggests the index may be reaching a plateau,” said Doug Duncan, Fannie Mae’s chief economist.

5) Mortgage applications for new home purchases decreased 8.8 percent compared with June of last year, according the Mortgage Bankers Association Builder Application Survey.

6) The 10-year Treasury rate (which mortgage rates track) peaked on May 17 at 3.10 percent. Today, we are on hovering at 2.84 percent, 26 basis points lower. Certainly, the trend lines are moving down.

7) We are on the verge of the compounding effects of the tariffs and morphing trade war.

Sellers would be best served by prudence.

“We’ve hit the top of the market. Anybody new to the market better price their property at market rate or below,” said Dan Keller of EXP Realty in San Clemente.

In this current market, I see many buyers playing a fools game by way overbidding based upon actual closed comparable sales. You’ve got to get rid of that “got to have it no matter what” mentality.

Be patient. Be prudent. Be clear what your bottom line offer will be before you bid.

Regarding your home loan strategy for purchases and refinancing: You’d be best served by doing a no-cost loan right now. Your rate will be slightly higher than if you pay zero points or 1 point, for example.

Forget what most economists are saying right now about fixed rates moving much higher. The big idea is fixed rates will be coming down nicely before the end of the year. So, you can refinance into a lower rate soon enough.

We are just two Fed moves away from the dreaded inverted yield curve. Nine of the last 10 recessions occurred shortly after the 2-year and 10-year yield curves inverted.

If you have questions or comments, please contact Jeff Lazerson by clicking here. For more great insight make sure to check out Jeff Lazerson’s Mortgage Grader Radio Show on Sundays at 10 am on AM830 KLAA.