Monthly Archives: March 2020

Pending Home Sales Up Nearly 10% From Last Year

The number of signed contracts to buy homes was up 2.4 percent in February from the month before, according to new numbers from the National Association of Realtors. The improvement puts pending sales 9.4 percent higher than they were at the same time last year. An important indicator for the housing market, pending home sales refer to sales that are under contract but not yet closed. They’re a good predictor of future home sales, since contract signings typically take place weeks before closings. Lawrence Yun, NAR’s chief economist, says the improvement is evidence that the housing market was strong heading into the coronavirus shutdown. “February’s pending sales figures show the housing market had been very healthy prior to the coronavirus-induced shutdown,” Yun said. “Numbers in the coming weeks will show just how hard the housing market was hit, but I am optimistic that the upcoming stimulus package will lessen the economic damage and we may get a V-shaped robust recovery later in the year.” In short, Yun believes buyer demand will bounce back and home sales missed during the spring will simply be pushed to late summer or fall.

Mortgage Rates Increase For 2nd Straight Week

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were up last week for the second consecutive week. Rates for 30-year fixed-rate loans with both conforming and jumbo balances rose from one week earlier, as did rates for 15-year fixed-rate loans. Mortgage rates for loans backed by the Federal Housing Administration declined. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said the increases led to a big drop in refinance activity week-over-week. “The 30-year fixed mortgage rate reached its highest level since mid-January last week, even as Treasury yields remained at relatively low levels,” Kan said. “Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges. With these higher rates, refinance activity fell 34 percent, and both the conventional and government indices dropped to their lowest level in a month.” Kan believes actions taken by the Federal Reserve this week will help put downward pressure on rates in the week ahead.

New Home Sales Slip From January’s High

Sales of newly built, single family homes in February fell 4.4 percent from the month before, according to new numbers from the U.S. Census Bureau and the Department of Housing and Urban Development. The decline comes a month after sales hit a 13-year high in January. January’s numbers were also revised upward to reflect more sales than previously reported, which means February’s number – even after the month-over-month decline – is still 14.3 percent higher than last year at the same time. But while the strong sales numbers would normally be a hopeful sign for the housing market heading into its busiest season, economists are forecasting fewer sales in the weeks ahead due to the coronavirus. There is reason to believe, however, that, while sales may slow, the housing market’s fundamentals are strong enough to allow it to absorb some of the virus’ impact on the economy. Also in the report, the median sales price of new homes sold in February was $345,900. The average sales price was $403,800. (source)

What Might Be Ahead For Home Prices?

Home prices have been rising for several years now. A combination of increasing buyer demand and a lower-than-normal number of homes for sale led to more competition among home shoppers and put upward pressure on prices. That’s why most of the discussion about where the housing market was headed this year focused on the number of available homes for sale. If more homes became available, it would help keep prices from climbing too quickly. If inventory stayed low or fell further, price increases might begin to accelerate. Now, due to the coronavirus, there is more uncertainty. But, according to some analysts, the housing market – and home prices – are well positioned to withstand the effects of any upcoming volatility. Mostly, this is because the market’s main challenge was there not being enough homes to keep up with demand from buyers. If demand were to temporarily decline, price increases may slow but something similar to the crashing values seen during the financial crisis would be unlikely. Naturally, there are still a lot of unknowns but the strength of the market and the balance of supply vs. demand should help provide the real-estate market with some stability in the days ahead. (source)

February Home Sales Highest Since 2007

Sales of previously owned homes spiked in February, rising 6.5 percent over month-before numbers, according to new data released by the National Association of Realtors. The improvement made for the strongest month since 2007. “February’s sales of over 5 million homes were the strongest since February 2007,” Lawrence Yun, NAR’s chief economist, said. “I would attribute that to the incredibly low mortgage rates and the steady release of a sizable pent-up housing demand that was built over recent years.” Home prices and for-sale inventory were also up. But while the gains show the housing market poised for further improvement, current events are expected to slow that progress in the weeks to come. Still, Yun expects demand to bounce back. “For the past couple of months, we have seen the number of buyers grow as more people enter the market,” Yun said. “Once the social-distancing and quarantine measures are relaxed, we should see this temporary pause evaporate, and will have potential buyers return with the same enthusiasm.”

Single Family Starts And Permits Up In February

Newly released figures from the U.S. Census Bureau and the Department of Housing and Urban Development show that the number of single-family homes that were started or completed in February rose from the month before. The number of building permits also increased. However, though the gains are welcome news for a housing market suffering from low for-sale inventory, new residential construction is likely to slow in the coming months due to the impact of the coronavirus. Economist Matthew Speakman says, while that may be true, demand will bounce back. “This presents a conundrum for builders who will undoubtedly be trying to determine the best time to apply for new permits and/or resume construction so that homes are ready to sell once the market comes back,” Speakman said. “The coming months will very likely be tough sledding for builders, but longer-term market dynamics might result in some better-than-expected readings on the other side of this crisis.” (source)

Mortgage Rate Increase Slows Demand

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were up last week across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. The increase caused a 10 percent decline in refinance activity, though it remains 402 percent higher than last year at the same time. Demand for home purchase loans is now 10 percent higher than year before levels. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said mortgage rates should remain low, despite last week’s increase. “The Federal Reserve’s rate cut and other monetary policy measures to help the economy should help to bring down mortgage rates in the coming weeks, spurring more refinancing,” Kan said. “Amidst these challenging times, the savings that households can gain from refinancing will help bolster their own financial circumstances and support the broader economy.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications.

Builders Confident In New Home Market

The National Association of Home Builders’ Housing Market Index surveys home builders in an effort to measure confidence in the market for newly built single family homes. The survey asks builders for their perceptions of current traffic, sales conditions, and expectations for the next six months. Their responses are scored on a scale where any number above 50 indicates that more builders view conditions as good than poor. In March, the index fell two points to 72. Dean Mon, NAHB’s chairman, says confidence is still high, though uncertainty is rising. “Builder confidence remains solid, although sales expectations for the next six months dropped four points on economic uncertainty stemming from the coronavirus,” Mon said. “Interest rates remain low, and a lack of inventory creates market opportunities for single-family builders.” Because the survey was largely conducted before March 4, NAHB’s chief economist, Robert Dietz, cautioned that next month’s survey may more fully reflect the coronavirus’ impact on sentiment. (source)

Market Conditions May Help Offset Uncertainty

Naturally, when world events cause economic uncertainty, markets react. However, the housing market has some things going for it that may help offset any upcoming volatility. For example, there have been a lower than normal number of homes for sale in many markets for a while now. Combined with a high level of home buyer demand, that lack of inventory meant more competition, increasing prices, and fewer choices for buyers. But it may also mean the market is well positioned to absorb any changes to the current balance of supply and demand. Additionally, historically low mortgage rates are expected to help support housing activity. That’s the opinion of Fannie Mae’s Economic and Strategic Research Group. “While uncertainty and heightened financial volatility may soften demand for ‘big ticket’ items including home purchases, the ESR Group expects historically low mortgage rates to provide some offsetting relief,” their most recent release says. “The lower interest rate environment is likely to continue to support housing and fuel a surge in refinance activity, even as macroeconomic growth slows.” In other words, though the current environment is uncertain, housing market conditions may help offset the effects of that uncertainty. (source)

Lenders Expect Low Rates To Spur Activity

Fannie Mae’s quarterly Mortgage Lender Sentiment Survey tracks the views and outlook of senior mortgage executives. And, according to their first quarter survey results, those executives feel good about the mortgage market. Why? Well, mostly because mortgage rates are at, or hovering just above, historic lows. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says lenders are expecting strong consumer demand for mortgage loans. “Lenders’ expectations of consumer demand for purchase and refinance mortgages hit survey highs this quarter, with many lenders pointing to favorable interest rates as the engine driving the demand,” Duncan said. “The first quarter survey data, which were collected during the first two weeks of February, do not reflect the potential impact of the decline in the 10-year Treasury rate seen in recent weeks.” In short, Duncan expects mortgage rates to stay low this year, providing current homeowners a chance to refinance their loans and prospective home buyers the opportunity to buy while rates are lower than they’ve been in years. (source)

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