Monthly Archives: April 2021

Each month, the National Association of Home Builders conducts a survey to gauge how confident builders are in the market for new homes. Their answers are then scored on a scale where any number above 50 indicates more of them view conditions as good than poor. In April, the NAHB’s Housing Market Index scored an 83. The results are an indication that builders are optimistic in the market, despite ongoing supply-side challenges like the skyrocketing price of lumber. Robert Dietz, NAHB’s chief economist, said the reason is the amount of interest they’re seeing from buyers. “While mortgage interest rates have trended higher since February and home prices continue to outstrip inflation, housing demand appears to be unwavering for now as buyer traffic reached its highest level since November,” Dietz said. But while good for builders, elevated buyer demand also puts a lot of pressure on the pace of construction. After all, home building is the quickest way to add inventory to the market and, right now, the supply of homes available for sale is low. That means, the pace of construction has a lot to do with how fast prices rise and how much buyer competition there is this summer. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week from one week earlier. Rates were down across all loan categories, including 30-year fixed-rate mortgages with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. But despite decreasing rates, demand for mortgage applications fell as well. In fact, refinance activity was down 5 percent week-over-week and demand for loans to buy homes dropped 1 percent. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says purchase activity has slowed because of a lack of homes for sale. “The third straight week of declining purchase activity is a sign that rising home prices and tight supply are constraining home sales – especially in the lower price tiers,” Kan said. “Purchase applications were still above last year’s pandemic-impacted low point, but fell behind the level of activity seen the same week of 2019.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Among the costs of homeownership, property tax may be the easiest to overlook. Prospective home buyers already have to think about their down payment, closing costs, and monthly mortgage payment. So, checking into what their potential property-tax bill might be can end up an afterthought. But it shouldn’t be. Mostly because it can be a fairly significant amount, depending on where you’re buying. So what should you expect? Well, according to ATTOM Data Solutions’ most recent analysis, the average property tax for a single-family home was $3,719 in 2020 – a 4.4 percent increase over the year before. That’s the biggest annual increase in four years. Todd Teta, ATTOM’s chief product officer, says today’s home buyers are lucky, since low mortgage rates offset some of the increase. “Fortunately for recent home buyers, they have mortgages with super-low interest rates that somewhat contain the cost of homeownership,” Teta said. “But the latest tax numbers speak loud and clear about the continuing pressure on both recent and longtime homeowners to support the rising cost of public services.” It also speaks to the importance of checking local property tax rates when calculating the cost of buying a home. (source)

The number of Americans working remotely skyrocketed after the coronavirus took hold last March. And with newfound freedom to work from anywhere, how and where we live began to change. For one, home buyers began looking for properties in suburbs and exurbs, further from city centers. Another example can be found in recent data showing that the number of home buyers locking in mortgage rates for second homes has risen 128 percent since last year at the same time. That’s almost four times the increase primary homes have seen. Of course, one reason for the dramatic spike is the fact that the pandemic began last March, which led to a drop in home buying activity. So, naturally, year-over-year comparisons are going to be skewed. But the fact that it’s the tenth-consecutive month that annual growth rates have been 80 percent or higher means there’s more to it than just that. One theory is that part of the spike is coming from remote workers, who are both looking for an investment property they can rent out and somewhere beautiful to spend, at least, part of the year. But while interest has surged, so have prices. In seasonal towns, home prices are up 19 percent from last year. (source)

The Mortgage Bankers Association’s Mortgage Credit Availability Index measures how easy or difficult it is for prospective borrowers to get approved for a mortgage. When credit availability is tight, it is harder to get a mortgage. When credit loosens, it means lending standards have eased. In March, the index rose 0.6 percent, indicating that mortgage credit has become more available. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says the economy and job market are making it easier for buyers to qualify. “Credit availability inched higher in March, driven by the ongoing economic and job market recovery,” Kan said. “This has increased the amount of of low credit score and high LTV products.” That means, home buyers with less-than-perfect credit scores and smaller down payments will have a better chance at getting approved for a loan. That’s good news, especially since first-time home buyers are expected to make up a significant share of this year’s demand for homes. (source)

When there are more home buyers than homes for sale, that’s a seller’s market. Homeowners can get top dollar for their homes, since buyers have fewer options to choose from. That’s the case in today’s market. And, according to Fannie Mae’s most recent Home Purchase Sentiment Index, Americans are noticing. In fact, the survey component measuring whether respondents think it’s a good or bad time to sell a house saw a 13 percent increase in participants who said now is the right time to sell. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says Americans are becoming more optimistic and it’s pushing home-selling sentiment higher. “The significant increase in the HPSI in March reflects consumer optimism toward the housing market and larger economy as vaccinations continue to roll out, a third round of stimulus checks was distributed, and the spring home buying season began – perhaps with even more intensity this year, since 2020’s spring home buying season was limited by virus-related lockdowns,” Duncan said. “Home-selling sentiment experienced positive momentum across most consumer segments – nearly reaching pre-pandemic levels and generally indicative of a strong seller’s market.” (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased last week from the week before. Rates were up 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 brought rates to their highest point since last June. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said rising rates led to a slowdown in mortgage application demand. “The return of rates to the highest level since last June contributed to a slowdown in applications for both purchases and refinances,” Kan said. “The rapidly recovering economy and improving job market is generating sizeable home buying demand, but activity in recent weeks is constrained by quicker home-price growth and extremely low inventory.” Overall, application demand was down 5.1 percent week-over-week. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

When shopping for a home to buy, most buyers look at multiple options before making an offer. It’s not likely that the very first house you see will check every box on your wishlist. Which is why the current market’s inventory problem is an issue for buyers. In addition to higher prices, bidding wars, and competition, a lower-than-normal number of homes for sale also means fewer options for home shoppers. And, according to one new report from the National Association of Realtors’ consumer website, homes for sale fell even further in March. In fact, the number of homes available for sale was down 52 percent from last year at the same time. Danielle Hale, the website’s chief economist, says inventory is low but more sellers should be on the way soon. “In many areas of the country, there are half as many available homes for sale than a year ago – and in some markets that number increases to less than one third,” Hale said. “We expect to see more sellers emerge in the weeks ahead, which should give buyers more options.” (source)

Home prices have been increasing for a while now. But that doesn’t necessarily mean homeownership is unaffordable. In fact, according to a recent report from ATTOM Data Solutions, buying a home in today’s market is still more affordable than historical averages in 52 percent of counties. That means, a majority of the country’s housing stock is within reach. Todd Teta, ATTOM’s chief product officer, says low mortgage rates have helped. “The past year certainly has been an odd one for the U.S. housing market,” Teta said. “Home prices surged at a remarkable pace even as the virus pandemic damaged the U.S. economy, which dropped historical affordability levels. But average workers untarnished by the pandemic were still able to afford the typical home because wages and rock-bottom interest rates worked to their favor in a big way.” The report determined affordability by calculating the amount of income needed to pay homeownership expenses on a median-priced home and comparing it to average wage data. Among the 552 counties included in the report, counties in the Chicago, Houston, Dallas, San Antonio, and Detroit area were the most affordable. (source)

The National Association of Realtors’ Pending Home Sales Index measures the number of contracts to buy homes that are signed each month. Because contract signings precede closings by several weeks, the index can be a good predictor of future home sales numbers. In February, the NAR found pending home sales down 10.6 percent from the month before but virtually unchanged from where they were one year earlier. Lawrence Yun, NAR’s chief economist, says the month-over-month decline is mostly due to the fact that there are too few homes for sale. “The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory,” Yun said. “Potential buyers may have to enlarge their geographic search areas, given the current tight market.” Fortunately, Yun says recent mortgage-rate increases don’t appear to have affected prospective home buyers. And, with the spring market just beginning, homes for sale should start to pick up, which will help bring balance to the market and slow price increases. (source)