Mortgage News

Homebuilder Confidence Consolidation Continues
Fri, 17 Jan 2025 20:40:00 GMT
While it would be technically accurate to point out a slight increase in January's homebuilder confidence (officially the National Association of Homebuilders Housing Market Index or HMI ), the type of movement we've seen in the past 2 years is better characterized as "incidental" in the bigger picture. As with most housing-related metrics, HMI plummeted in 2022 as interest rates skyrocketed.  It's been broadly sideways ever since with the swings between highs and lows getting smaller and smaller. In market jargon, this is a textbook example of "consolidation"--something that can signal an eventual reversal back toward higher levels or a renewed slide to lower lows.  Absent another catastrophic episode like the Great Financial Crisis, it's not clear what would make builders feel incrementally more gloomy than the post-pandemic lows.  As such, this consolidation is widely viewed as representing some sort of lower boundary.  Time is the key variable, and one that's likely to be determined by economic factors such as interest rates and inflation. Other highlights from this month's NAHB data: 30% of builders lowered prices in January, which is in line with the average of the past 6 months Average price reduction: 5%, unchanged from last month Sales incentives were used in 61% of transactions, also in line with norms

Housing Construction Bounced Back in December Thanks to Multifamily Sector
Fri, 17 Jan 2025 20:16:00 GMT
The US Census Bureau released its New Residential Construction report for December today.  The report measures building permits, the start of the construction process (housing starts), and housing completions. While construction has definitely been running well below the highs seen 3 years ago, it continues to operate just above pre-pandemic levels.  That's something that can't be said for many other housing and mortgage market metrics. Last month's data showed housing starts closer to the low end of 2024's range.  Today's report shows a bounce back to the highest levels since February. The multifamily sector played the biggest role in the rebound--especially in the South which accounted for 128k additional units.  Nationally, multifamily housing starts increased by 155k units to a 12 month high of 418k and single family starts rose 34k to a total of 1.05 million.

Mortgage Applications Improved Even as Rates Moved Higher
Wed, 15 Jan 2025 20:13:00 GMT
There hasn't been meaningful change in economic data that measures activity in the housing and mortgage markets. In a nutshell, activity has been drifting along at long-term lows.  The weekly survey of mortgage application activity from the Mortgage Bankers Association (MBA) is no exception, for the most part.  Refinancing picked up in the summer months as rates fell, but not to historically strong levels, by any means. Purchase applications appear to be more volatile, but that's a factor of a narrower overall range.  They've been even more sideways. As of last week, both purchase and refi applications were effectively at the lowest levels of the year.  We knew the application landscape would be challenging due to the big jump in rates that hadn't yet been captured in last week's data.  The saving grace was the potential for seasonal distortions surrounding the New Year holiday.   Holidays that fall on specific dates can create inconsistencies in seasonal adjustments in economic reports. Last year saw New Year's Day fall on a Monday, which was less of a disruption to the business week compared to this year's Wednesday holiday. Perhaps the applications that tend to come in after the holiday were delayed by few days as a result, thus helping explain why applications rose for both purchases and refis despite the higher rates. Purchase activity was actually the highest in nearly a year.

Mortgage Applications Don't Have Much to Lose
Fri, 10 Jan 2025 22:09:00 GMT
2024 has been one of those "it is what it is" sort of years for activity in the mortgage market.  There were signs of hope over the summer months as rates fell enough to make for a noticeable spike in refinance activity.  But with the rapid reversal starting in October, refi demand is right back in line with long term lows according to the Mortgage Bankers Association's (MBA) refinancing index. It's hard to see in the chart, but this week's survey actually showed a modest increase over last week, the difference is inconsequential as both are effectively the lowest levels since late 2023. The purchase side of the market has been less eventful, but no less depressing. This application data was collected well before this week's jobs report and subsequent rate spike.  As such, we wouldn't expect any resilience in next week's numbers.  On the brighter side, present levels are so repressed that we also wouldn't expect much more of a contraction.

Home Prices Remain The Housing Market's Biggest Mixed Blessing
Fri, 03 Jan 2025 20:49:00 GMT
Blessings, curses, enigmas, paradoxes, etc... The state of home price appreciation in the U.S. is all of the above.  The positive case for home prices is as simple as glancing at the most recent update on the two major home price indices (HPIs) released this week by FHFA and Case Shiller.  Both agree that homes continue to appreciate at a historically elevated pace. Note the extreme difference between the price correction seen in early 2023 and the outright price depression associated with the Great Recession more than a decade earlier.  It goes without saying that if appreciation is going to decline (or even briefly turn negative, in the case of Case Shiller), this is what we'd want things to look like if we're interested in maintaining healthy levels of demand among buyers. The counterpoint is that 4-7% annual growth in home prices significantly outpaces growth in income.  In other words, it's not sustainable.  Combine that with mortgage rates over 7% and it's an easy recipe for extremely poor affordability.  What can help affordability?  Here's a list: Home prices could fall Rates could fall Homes could get smaller (this would effectively make prices lower, but not in a way that would show up in the home price indices due to what's known as "repeat sales" methodology) Builders could build more homes/apartments/etc, and at a faster pace Multiple roommates/families under one roof sharing expenses The balance of other expenses could go lower

Mortgage Application Activity Evaporates as Data Catches Up With Rates
Fri, 03 Jan 2025 20:22:00 GMT
The Mortgage Bankers Association (MBA) didn't publish updated weekly application numbers last week, which meant that this week's data had to play catch up with any changes in market conditions.  Even as early as December 18th--the last time the application data came out--the writing was already on the wall due to the rate spike that followed the Fed announcement. If the index had been updated last week, we can safely assume that the index would have already been well on its way lower.  Either way, the most recent tally shows refi demand at the lowest levels since early 2024. Keep in mind, this data is seasonally adjusted, so we're not merely witnessing a drop in application activity due to the holidays.  It's a genuine response to the moderate-but-quick rate spike seen in the 2nd half of December.  There are a few silver linings, or at least a few qualifications.  First off, the rate spike leveled off by last week and we haven't broken to new highs since then. Additionally, there's no need to worry too much about volatility in refi demand in this range because the overall level of activity is still effectively bouncing along historical lows in the bigger picture.  Only two things will change this: time and/or a much bigger drop in rates than we saw in 2024. Purchase demand keeps chugging along.  Although it also dropped over the past 2 weeks, that drop represented a smaller proportion of the prevailing range--one that's been relatively narrow and uneventful since bottoming out more than a year ago.

Pending Home Sales at Highest Level in Almost 2 Years
Mon, 30 Dec 2024 20:11:00 GMT
The National Association of Realtors (NAR) releases monthly reports on both existing and pending home sales. The latter tracks signed purchase contracts that have not yet closed. As such, it's seen as a good early indicator of existing home sales in the following month.  The housing market would take any help it can get at the moment and November's pending sales numbers are actually legitimately encouraging, even if the overall level of activity remains historically low. This is the 4th consecutive month of improvement for the index and it brings it to the highest level since February 2023.  Contract signings were up 2.2% versus last month and 6.9% versus last year, even as mortgage rates remain elevated. That makes the past few months significant because this the first meaningful break into positive year-over-year territory since early 2022. “Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory,” said NAR Chief Economist Lawrence Yun. “Mortgage rates have averaged above 6% for the past 24 months. Buyers are no longer waiting for or expecting mortgage rates to fall substantially. Furthermore, buyers are in a better position to negotiate as the market shifts away from a seller’s market.” Regionally, the South led the charge with a 5.2% increase vs last month.  The Midwest and Western regions advanced less than 1% and the Northeast declined 1.3%.  All 4 regions are stronger in year over year terms.

New Homes Sales Bounce Back After Hurricane Season
Mon, 23 Dec 2024 20:08:00 GMT
Those who spend any time digging into home construction and home sales figures in the U.S. know that, of the 4 census divisions, the South accounts for about twice as much activity as the other 3 regions combined.  For example, in data released today for the month of November, the South accounted for an annual pace of 417k new home sales out of a nationwide total of 664k ( 62% of the total) Two months earlier, the South accounted for 472k out of 736k (64% of the total). But in October, it was only 366k versus a 627k (58% of the total). In other words, the South wasn't pulling its typical weight in bolstering new home sales. There's no need to overanalyze a simple phenomenon.  Major weather events and/or natural disasters routinely show up in housing market data.   The following table shows the regional breakdown with the obvious drop-off in October in the south.   While it was only a 13.9% improvement from October, the outright numbers are so large in the South that they more than made up for the 41% decline in the Northeast and the 7.5% decline in the West, ultimately helping the national numbers bump back up by 5.9%. In outright terms, the 664k annual pace matches the 2nd lowest level of the year seen in January.  October was the only month that was lower.  But even then, October and every other month of the past 1.5 years have fallen inside a narrow sideways range. This lukewarm bowl of porridge is emblematic of much of the data pertaining to new home construction and sales recently.  Activity is down from the post-pandemic peak, not making any moves for better or worse, but still in respectable territory relative to pre-pandemic levels.

Highest Existing Home Sales Since March
Thu, 19 Dec 2024 20:33:00 GMT
Just in time for the big jump in interest rates seen after yesterday's Fed announcement, the latest Existing Home Sales data from the National Association of Realtors (NAR) shows sales at the highest seasonally adjusted pace since March.  Compared to the same time last year, sales are up 6.1%--the best year over year improvement since June 2021. To be fair to the data, it is definitely looking better than most of the past year and a half. It's also true that adding 1 to 1 is a 100% increase while adding 1 to 100 is only a 1% increase. In other words, it's great that we're up 6.1% year over year--no objections there--but in broader context, we're really just muddling through home sales purgatory. Much like our assessment of things like mortgage applications, this sideways grind at long-term lows could also be seen as a "can't get any worse" moment.  Therefore, it can only get better. NAR's Yun agrees, saying "Home sales momentum is building. More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6% and 7%." It remains to be seen how home sales will react now that rates are back over 7%--a development is perhaps too recent to have been considered in Yun's assessment. 

Modest Refi Surge Was Fun While it Lasted
Wed, 18 Dec 2024 21:06:00 GMT
Heading into the first part of December, mortgage rates were at their lowest levels in a month and a half.  Much of the improvement from the recent highs occurred in a single week (the last week of November).  That made for an obvious and logical uptick in refinance applications the following week, according to the Mortgage Bankers Association's (MBA) application survey.  In the latest numbers reported this morning, the refinance index didn't change much after that, which is "good" at face value because it means refi activity remained at the modestly elevated levels reported last week.  But things start looking less than good when we add context from the September mini-refi-surge. As has been and continues to be the case, none of the recent activity amounts to much when compared to the true refi booms of the past. Unfortunately, that line will have an even harder time moving up in the coming weeks.  This afternoon's Fed announcement was not well received by the rate market.  Mortgage rates are moving up quickly even though the Fed cut its policy rate. The average lender is already back up to the recent highs seen in early November. Movement in purchase applications has been less interesting and less eventful by comparison.  Simply put, there hasn't been much movement for at least a year. Other highlights from today's data: Refi apps accounted for 46.7% of the total vs 46.8 last time FHA share of total apps increased to 17.6 from 16.5 VA share declined to 15.3 from 16.3 Rates rose to 6.75 from 6.67 (note: that refers to MBA's survey rate for last week.  Average daily rates are back over 7% as of this afternoon)