Mortgage Services

Per the latest release from the Mortgage Bankers Association (MBA), both refinance and purchase indices decreased this week. In terms of the change from the previous week, it was the biggest drop so far this year, but not remotely as big as last week of 2024.  Here is the refi index in terms of week-over-week change: And here is the exact same data, but expressed in terms of the outright index: If we're just focusing on 2025, the chart above doesn't look too bad for refi demand.  But in case anyone needed to be reminded, the farther back one looks into the past, the more sobering the current levels become--even those seen at last year's peak. Purchase activity struggled as well, down 6% weekly, just barely beating the drop seen in the first week of the year in terms of week-over-week change. In outright terms, this brings purchase activity back near the middle of its recent range. The following bullet points offer a few highlights of changes in the % share of total activity for various categories: ● FHA Share increased from 16 to 16.6 ● VA Share decreased from 14.6 to 14.2 ● Refi Share decreased from 40.2 to 38.7

The Census Bureau released its New Residential Construction report this week, frequently referred to by its principal component "housing starts" (a term for the start of the first phase of new home construction). In addition to housing starts, the data also logs building permits as well as completions.  There's not always a perfectly linear correlation between the various metrics for a variety of reasons. Some permits never turn into construction, for instance.  Sometimes there's a backlog of permits waiting on materials, labor, or weather before construction can begin.  In general, building permits remain more even-keeled while housing starts gyrate.  The past three reports have been a good example of this.  During that time, building permits have barely budged at an annualized pace of 1.49m, 1.48m, and 1.48m in Nov, Dec, and Jan respectively. Meanwhile, housing starts have whipsawed from 1.305m to 1.515m and now back down to 1.366m.   Using "millions" as a unit number makes it easy to overlook the fact that we're talking about a swing in this year's national housing availability of a whopping 149k units.  But even then, such a swing doesn't necessarily look too troubling in the bigger picture. Housing completions suggest an even lower cause for concern of the trajectory of construction. Regionally, the biggest decline in percentage terms was in the Northeast (-27.6%). But in terms of outright units, the South led the decline with a drop of 207k.  Contrast that to the Northeast's unit count only declining by 40k.

The National Association of Homebuilders (NAHB) along with Wells Fargo released the monthly builder confidence index this week, and it came out much weaker than expected. With tariff and immigration news rapidly evolving, it's tempting to conclude that any major changes in homebuilder sentiment would be directly related.  For instance, if builders think that building materials could be harder to obtain or more expensive, it generally hits the confidence index.  This would be a particularly big problem with something like lumber as the U.S. imports roughly a third of its framing lumber from Canada. While it's easier to agree with this narrative based purely on concepts and words, the actual numbers tell a different story when you see them on a chart.  Builder confidence has been strongly locked into what market watchers would call a "consolidation pattern."  On charts, this takes the shape of converging lines marking recent highs and lows.   Some technical analysts (market watchers who infer significance or movement cues based on chart patterns) believe that momentum will continue in the direction of a breakout--something that inevitably must happen this year as far as this consolidation is concerned.  Just as often, however, a consolidation breakout can give way to broadly sideways momentum until underlying economic fundamentals change in a big way. In the current case, it would be hard to argue that elevated interest rates are anything but the key factor depressing home sales and builder confidence.