Monthly Archives: September 2019

Interest in buying a home never seems to fade too much. Most Americans want to own a home. But despite having a desire to become homeowners, prospective buyers will sometimes postpone their plans due to their financial situation, the economy, market conditions, etc. There are many factors that can influence someone’s decision to buy. This year, mortgage rates may have played a role. At the beginning of the year, rates were increasing and the effect it had on affordability meant some otherwise interested home buyers decided to wait. But now, after rates declined throughout the spring and summer, home buyers are returning to the market. And Lawrence Yun, the National Association of Realtors’ chief economist, thinks the trend will continue into next year. “With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020,” Yun said. “Unfortunately, so far in 2019, new home construction is down 2 percent. The hope is that housing starts quickly move into higher gear to meet the higher demand.” In other words, Americans are increasingly feeling like now is a good time to buy.

In another sign that the housing market has regained momentum, new numbers from the U.S Census Bureau and the Department of Housing and Urban Development show sales of new single-family homes rose 7.1 percent in August, putting them 18 percent above where they were one year earlier. The improvement includes a 16.5 percent sales spike in the West and a 6 percent increase in the South. It also follows an upward revision of July’s sales estimate. In short, it appears declining mortgage rates have led to a surge in buyer demand. This is good news for home buyers, as it may push builders to build more homes. And, if increasing interest in new homes leads to more new homes being built, it’ll help relieve upward pressure on home prices, give buyers more choices, and reduce competition for all homes, both new and previously owned. Also in the report, the median sales price of new homes sold in August was $328,400. The average sales price was $404,200. More here.

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates rose slightly last week from the previous week. Rates were up for 30-year fixed-rate loans with conforming loan balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. But though it marked the second straight week of increases, rates remain just above historic lows. Still, the increase led to a drop in mortgage demand. In fact, refinance activity fell 15 percent from one week earlier. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says purchase demand was also down though the market for buyers remains strong. “Purchase applications also decreased, likely related to the two-week jump in rates, but still remained 9 percent higher than last year,” Kan said. “The recent data on increased existing-home sales and new residential construction points to the underlying strength in the purchase market this fall.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications.

The most recent results of the S&P Case-Shiller Home Price Indices – considered to be the leading measure of U.S. home prices – show home values are up 3.2 percent over where they were last year at the same time. That’s encouraging news for prospective home buyers and a significant drop from where price growth was just a few years ago. But the news comes with a word of caution. That’s because price growth is slowing at the same time mortgage rates have been declining. And the improvement in affordability levels may already be boosting demand for homes. That could have an affect on price trends in the weeks ahead. Philip Murphy, managing director and global head of index governance at S&P Dow Jones Indices, says recent data shows an uptick in buyer demand. “Home price gains remained positive in low single digits in most cities, and other fundamentals indicate renewed housing demand,” Murphy said. “According to the National Association of Realtors, the YOY change in existing home sales was positive in July for the first time in a number of months, and housing supply tightened since peaking in June.” So what does that mean? It means, if buyer demand increases, competition for available homes could lead slowing prices to speed up once again. More here.

These days, the imbalance between the number of Americans who want to buy a home and the number of homes available for sale is the housing market’s main challenge. With mortgage rates low and the job market strong, there are more people thinking about making a move. But a lack of available homes has held sales back and put upward pressure on prices. There is a solution to this problem, though. And it’s new home construction. That’s why news that home builders are beginning to build smaller, more affordable homes is encouraging. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says there was a particularly strong improvement during the second quarter of this year. “Both our consumer and lender attitudinal surveys hit new highs this month due to near-historically low mortgage rates and generally favorable household balance sheets, but inventory constraints, particularly in the affordable space, continue to hold back housing market sales volume,” Duncan said. “Refreshingly, in the absence of existing stock, home builders appear to be increasingly focused on entry-level homes, as the median square footage of new single-family construction fell 4.3 percent in the second quarter.” More here.

Markets have cycles. Sometimes they’re up, sometimes they’re down. The housing market is no different. There are years when homes are selling and years when they aren’t. Of course, prospective home buyers don’t necessarily decide when to move based on market cycles. But knowing where we are can help them make more informed decisions. For example, a recent analysis from Nationwide says that the housing market passed the peak of its current cycle in 2017. Since then, things have been slowing down. But what does that mean for buyers? Well, despite the sound of things, it’s actually good news. That’s because, though the market has passed a peak, it’s caused affordability conditions to improve. “While we may be past the peak, all signs are pointing to continued elevated sales despite the inventory of available homes remaining tight,” David Berson, Nationwide’s vice president and chief economist, says. “Slower house price gains and falling mortgage rates have significantly improved housing affordability while consumer incomes have accelerated – putting a home purchase within reach for more home buyers.” In short, the housing market has passed a sales peak but is becoming a better deal for buyers. More here.

The summer sales season is coming to a close. But that doesn’t mean it isn’t a good time to buy a house. In fact, new numbers from the National Association of Realtors show buying conditions have actually improved. For example, in August, homes for sale were on the market longer than they were the month before. According to the report, properties typically remained on the market for 31 days in August, up from 29 days in July. Additionally, mortgage rates are hovering near historic lows. Lawrence Yun, NAR’s chief economist, says home buyers are finding conditions tempting. “As expected, buyers are finding it hard to resist the current rates,” Yun said. “The desire to take advantage of these promising conditions is leading more buyers to the market.” It’s true. Buyers in August pushed sales 1.3 percent higher than the month before, with only the West suffering a month-over-month decline. The improvement put sales 2.6 percent higher than last year at the same time. Still, challenges remain. Though sales are up, the number of homes for sale fell. Yun says home builders need to build more homes to help alleviate upward pressure on prices.

Housing market conditions fluctuate. Home prices, mortgage rates, and inventory all rise and fall. For most home buyers, however, market conditions aren’t what motivates them to make a move. More often than not, buyers are shopping for a house because they’ve started a family, changed a job, retired, or just need more space. In other words, buyer demand sometimes doesn’t coincide with market fluctuations. Take the most recent Applications Survey from the Mortgage Bankers Association. The survey which tracks mortgage rates and demand for loans has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. According to the most recent release, mortgage rates rose last week. But, despite the increase, home buying demand was also up, climbing 6 percent from the week before and 15 percent over last year at the same time. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says market and economic volatility have yet to slow buyer demand. “The purchase index increased for the third straight week to its highest reading since July,” Kan said. “This is likely a sign that the underlying demand for buying a home remains strong, despite some of the recent volatility we have seen.”

If you want to know how the housing market’s doing, ask a builder. After all, it’s their business to sell homes. So they have to have a good feel for whether or not people are interested and ready to buy. That’s why the National Association of Home Builders conducts a monthly survey that asks builders for their view of the market, current buyer traffic, and expectations for the next six months. Their Housing Market Index is considered a good barometer of housing health and, in particular, interest in the market for newly built homes. In September, it rose to its highest level since last October. In short, builders are feeling confident in the market. “Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” Greg Ugalde, NAHB’s chairman said. In other words, despite affordability concerns, builders are optimistic that Americans are ready to buy. In fact, the index component measuring current sales conditions was up two points to 75 on a scale where any number above 50 indicates more builders view conditions as good than poor. More here.

Credit standards refer to how easy or difficult it is for a borrower to be approved for a loan. When credit standards loosen, it means borrowers with a less optimal financial situation have a better shot at securing financing. When they tighten, the opposite is true. Because standards fluctuate, there are a number of reports that track where they’re headed. Among the most recent, Fannie Mae’s Q3 2019 Mortgage Lender Sentiment Survey takes a look at what senior executives at lending institutions across the country have to say. According to the results, standards have been tightening recently. Despite the tightening, however, demand for loans is up. Doug Duncan, Fannie Mae’s senior vice president and chief economist says tightening standards have not outweighed the effect of lower interest rates. “Lender profitability sentiment hit a survey high this quarter, despite the movement of credit standards from net easing to net tightening,” Duncan said. “Lenders attributed their upbeat profitability outlook to consumer demand and operational efficiency. Many lenders pointed to declining interest rates as the engine behind consumer demand, particularly for refinance mortgages.” More here.