Mortgage News

Mixed Signals in New Home Construction Data
Fri, 18 Oct 2024 19:01:00 GMT
While this technically signals some cooling in new construction potential, it wasn't much more of a drop than investors expected.  Moreover, there has been a gradual cooling trend intact for more than 2 years.  That's not as ominous as it sounds considering construction activity is still higher than it was in mid-2019.   Housing starts, which measure groundbreakings for new home construction, actually came in just slightly higher than forecasts, barely declining month-over-month.  Here too, there is a general cooling trend over the past few years, but a flatter trend over the past few months. Housing completions are a different story.  They never experienced the same correction as starts and permits.  They may have dropped from last month's high (highest level since 2007), but completions have been in a decisive uptrend since the middle of 2023 and a broad uptrend since 2011.  Here's the bigger-picture context for construction:

Purchase Applications Respond to Another Small Rate Dip
Wed, 04 Sep 2024 12:14:26 GMT
Interest rates continued their slow decline last week while application volume is inching up almost as slowly. The Mortgage Bankers Association (MBA) reports a 1.6 percent increase in its seasonally adjusted Market Composite Index , a measure of mortgage loan application volume. On an unadjusted basis, the Index gained 0.2 percent over the prior week. Applications for home purchase financing took the lead, rising 3.0 percent on a seasonally adjusted basis and was up 1.0 percent before adjustment. The Purchase Index has now narrowed what was once a double-digit deficit to a -4.0 percent year-over-year gap. [purchaseappschart] The Refinance Index decreased 0.3 percent from the previous week and was 94 percent higher than the same week one year ago. Refinance applications made up 46.4 percent of the total, down from 46.6 percent the previous week. [refiappschart] “Most mortgage rates moved lower last week, with the 30-year fixed rate edging down slightly to 6.43 percent. Purchase applications increased more than 3 percent over the week and are inching closer to last year’s levels, with government purchase applications leading the increase,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “ Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments. Similar to purchase activity, refinance activity has picked up across the various loan types.” 

Pending Home Sales Set a New Record, but not in a Good Way
Thu, 29 Aug 2024 15:54:04 GMT
Home sale numbers continue to retreat and in July the National Association of Realtors’® (NAR) Pending Home Sales Index (PHSI) fell to its lowest level…. Ever! Based on signed sales contracts for existing single-family houses, townhomes, condos, and cooperative apartments, the PHSI was down 5.5 percent from June to 70.2. This is 8.5 percent lower than the index for July 2023. [pendinghomesdata] The PBHSI is considered a leading indicator of home sales over the next one to two months. NAR cautions, however, that the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues. The index was benchmarked at 100 in 2001, a year in which contract activity was considered average.     “A sales recovery did not occur in midsummer,” said NAR Chief Economist Lawrence Yun. “The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election.” The index fell month-over-month in all four major regions. The Northeast slid 1.4 percent to 64.6 but did pull off a 2.4 percent gain from the previous July. In terms of home sales and prices, the New England region has performed relatively better than other regions in recent months ,” added Yun. “Current lower, falling mortgage rates will no doubt bring buyers into market.”

Mortgage Apps Stall as Borrowers Seem to be Waiting on Fed
Wed, 28 Aug 2024 12:04:33 GMT
The mortgage market seemed to be in a wait-and-see mode last week as the Federal Reserve signaled a might, maybe, we are thinking about it, approach to a September rate cut. In the interim, most interest rates inched lower. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, increased 0.5 percent on a seasonally adjusted basis from one week earlier and fell 1.0 percent on an unadjusted basis.   The Refinance Index dipped 0.1 percent from the previous week but has now climbed to an  85 percent lead over the same week one year ago. The refinance share of applications increased to 46.6 percent of the total, up from 46.3 percent the prior week. [refiappschart] The seasonally adjusted Purchase Index increased 1.0 percent but was 1.0 percent lower before adjustment. Purchase applications were 9.0 percent lower than the same week one year ago. [purchaseappschart] “Mortgage rates declined for the fourth consecutive week, with the 30-year fixed rate at 6.44 percent, the lowest since April 2023. Rates have now come down more than 80 basis points from a year ago,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications were slightly higher, driven by marginally stronger purchase activity. Refinance applications were essentially unchanged but are still 85 percent higher than last year as borrowers continue to act – particularly FHA and VA borrowers. As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase.”

Slowing Home Price Gains Still Outstrip Inflation
Tue, 27 Aug 2024 15:51:06 GMT
Two major home price indices show home price appreciation is still running well above historical norms. However, increases in the S&P CoreLogic Case-Shiller indices and the Federal Housing Finance Agency’s (FHFA’s)Housing Price Index (HMI) were all slightly smaller than the prior month. The Case-Shiller National Home Price Index, covering all nine U.S. census divisions, reported a 5.4 percent annual gain for June, down from a 5.9 percent increase in May.   The 10-City Composite was 7.4 percent higher compared to a 7.8 percent annual increase in the previous month. The 20-City Composite gained 6.5 percent dropping from the earlier +6.9 percent.  New York reported 9.0 percent annual growth, the highest among the 20 cities, followed by San Diego and Las Vegas with annual increases of 8.7 percent and 8.5 percent, respectively. Portland once again held the lowest spot for year-over-year growth, 0.8 percent. The U.S. National Index, the 20-City Composite, and the 10-City Composite upward trends continued to decelerate from last month. Their pre-seasonal adjusted increases were 0.5 percent, 0.6 percent, and 0.6 percent, respectively. The seasonally adjusted changes were 0.2 percent for the National Index and 0.4 percent and 0.5 percent for the 20-City and 10-City Composites. "The S&P CoreLogic Case-Shiller Indices continue to show above-trend real price performance when accounting for inflation," says Brian D. Luke, CFA, Head of Commodities, Real & Digital Assets. "Home prices and inflation continue to factor into the political agenda coming into the election season. While both housing and inflation have slowed, the gap between the two is larger than historical norms, with our National Index averaging 2.8 percent more than the Consumer Price Index. That is a full percentage point above the 50-year average. Before accounting for inflation, home prices have risen over 1,100 percent since 1974, but have slightly more than doubled (111 percent) after accounting for inflation.

Are Existing Home Sales Done Sliding?
Thu, 22 Aug 2024 18:39:00 GMT
Existing Homes (the jargon word for a home that has already been owned and occupied) represent a much larger piece of the home sales pie compared to new homes, but the series has  been flagging at historically low levels. When rates dropped at the end of 2023, existing sales perked up a bit, but had been moving back toward the long term lows recently. As of the last report, the annualized pace of sales had fallen from just under 4.4m to 3.9m--very close to October 2023's 3.85m--the lowest reading in more than a decade. With today's update, we're suddenly back in business!  OK, that's an exaggeration, but we're at least suddenly surviving for one more month without sliding to deeper depths. The official annualized tally for July was 3.95m which was a hair higher than the 3.93m forecast. Other highlights: Inventory up 0.8% m/m and up 19.8% y/y Median price: $422,600, up 4.2% y/y Average time on market: 24 days, up from 22 days in June First time buyers accounted for 29% of sales, same as last month Cash sales accounted for 27%, down from 28% last month, but up from 26% last year Investors accounted for 13%, down sharply from 16% last month and last year Regional sales breakdown: Northeast, up 4.3% from June and up 2.1% annually Midwest unchanged from June and down 5.2% annually South up 1.1% from June and down 3.8% annually West up 1.4% from June and also up 1.4% annually

Last Week's Refinancing Surge Quickly Fades
Wed, 21 Aug 2024 12:21:01 GMT
Two weeks ago, we saw a sudden surge in refinancing activity. The Mortgage Bankers Association (MBA) reported that, during the week ended August 9, its Refinancing Index soared by almost 35 percent, reaching its highest level in over two years, and refinancing represented nearly half of all mortgage applications that week. A bubble? Perhaps, but a short-lived one. The “bubble” didn’t pop this week, but it did deflate.  Even as mortgage rates eased for the third week, the volume of refinancing applications, as well as mortgage activity in general, retreated. The Market Composite Index, MBA’s measure of m application volume, decreased 10.1 percent on a seasonally adjusted basis.  On an unadjusted basis, the Index was down 11.0 percent compared with the previous week.   The Refinance Index plunged by 15.0 percent compared to the previous week but was still 90 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 46.3 percent of total applications from 48.6 percent. [refiappschart] The seasonally adjusted Purchase Index was 5.0 percent lower than the prior week and was down 7.0 percent on an unadjusted basis. Purchase applications were 8.0 percent below those in the same week in 2023. [purchaseappschart] “Both mortgage rates and mortgage applications have now stabilized after a few weeks of financial market volatility, which led to a quick drop in mortgage rates. The 30-year fixed mortgage rate declin(ed) for the third consecutive week to 6.5 percent, the lowest since May 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The level of refinance applications remains 23 percent higher than a month ago and the past two weeks have seen the strongest weekly readings since 2022, as borrowers have sought lower rates . FHA refinance applications bucked the trend and increased for the sixth straight week.” 

Housing Starts and Permits Stalling as Builders Face Headwinds
Fri, 16 Aug 2024 16:12:07 GMT
Residential construction slowed in July. Both the rate of permitting and of housing starts were down from the prior month and starts were the worst in more than four years. The U.S. Census Bureau and the Department of Housing and Urban Development said overall starts declined 6.8 percent from June levels and, at a seasonally adjusted annual rate of 1.238 million, were 16.0 percent lower than in July 2023. Single-family starts dropped by 14.1 percent to a rate of 851,000, a 14.8 percent annual decrease. Multifamily starts, at the rate of 363,000, represented an 11.7 percent increase from the prior month but a 21.8 percent year-over-year decline. On a non-adjusted basis, construction started on 113,000 residential units in July, 79,800 of which were single-family dwellings. In June, the corresponding numbers were 124,000 and 94,400. [housingchartall] Permitting was only slightly better. They were issued at an annual rate of 1.396 million during the month, down from 1.454 million in June. That was a -4.0 percent change for the month and -7.0 percent on an annual basis. Single-family permits were virtually unchanged from the previous month at 7938,000 and 1.6 percent lower than the same period last year while permits for construction in buildings of five or more units dropped to 408,000 from 466,000. This is 12.4 and 18.2 percent lower than in the two earlier periods. On an unadjusted basis, permits were issued for 125,600 units, including 85,600 single-family houses. Both numbers were nearly identical to those in June. [housingpermitschart]

Builder Confidence Languishing, But Timing is Partly to Blame
Thu, 15 Aug 2024 14:31:00 GMT
The record will show that today's Housing Market Index (aka "builder confidence") from the National Association of Homebuilders (NAHB)/Wells Fargo fell to 39 from 41 last month.  That's the 4th straight month of declines and the lowest level of the year.  On the other hand, it's also part of a broad, sideways pattern that's been intact since late 2022. While we are well aware that the lockdowns caused the big drop in early-to-mid-2020, what's up with the equally big drop in 2022?  This is almost exclusively a factor of interest rates. If we invert the red line (such that higher interest rates are at the bottom of the chart), we can see just how strong the correlation is. This isn't the construction industry's only problem, but it's definitely the biggest.  Understanding this helps us understand why timing is partly to blame for this month's lower-than-expected reading.  A vast majority of the survey responses arrived in the first week of the month, which means the recent drop in rates hadn't yet had time to stir up new buyer traffic. To be clear, even if the survey were taken today, it wouldn't make a huge difference in the big picture.  First off, the data tends to lag mortgage rate movement by roughly 2 months.  Even if it didn't, the present level of rate movement won't be enough to get confidence numbers out of the sideways bigger picture trend. For that, rates would need to drop into the 5% range and material/labor costs would have to remain in check.  

Mortgage Application Volume Soars, Refi Index Up 35%
Wed, 14 Aug 2024 12:06:53 GMT
A second week of lower interest rates appeared to send homeowners scrambling to refinance their higher-rate mortgages assumed over the last few years. The Mortgage Bankers Association said its Market Composite Index, a measure of mortgage loan application volume, increased 16.8 percent on a seasonally adjusted basis. On an unadjusted basis, the Index increased 15.0 percent compared with the previous week. The Refinance Index soared by 35.0 percent compared to the prior week and was 118 percent higher than the same week one year ago. The refinance share of applications rose to 48.6 percent from 41.7 percent. [refiappschart] The seasonally adjusted Purchase Index was 3.0 percent higher than a week earlier, and the unadjusted Index was up 2.0 percent. It trailed the Index from the same week in 2023 by 8.0 percent. [purchaseappschart] “Rates on both 30- and 15-year fixed-rate mortgages decreased for the second consecutive week, and combined with the previous week’s rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “ Overall applications increased almost 17 percent to the highest level since January 2023 , driven by a 35 percent increase in refinance applications. The refinance index also saw its strongest week since May 2022 and was 117 percent higher than a year ago, driven by gains in conventional, FHA, and VA applications. Additionally, purchase applications increased by 3 percent, with small gains seen across the various loan types, indicating that prospective homebuyers are slowly reentering the market.”