Monthly Archives: September 2021

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased last week from the week before. Rates were up for 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says rates moved higher due to increasing optimism in the economy. “Increased optimism about the strength of the economy pushed Treasury yields higher following last week’s FOMC meeting,” Kan said. “Mortgage rates in response rose across all loan types with the benchmark 30-year fixed rate reaching its highest level since early July 2021.” Rates remain low, however, and last week’s increases barely slowed demand for loans to buy homes. In fact, demand for home purchase loans only fell 1 percent from one week earlier. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications.

Home prices have been increasing for more than just the past few months. But, according to newly released numbers from the S&P Case-Shiller Home Price Indices, the increases seen this summer were widespread, consistent, and, in some cases, record setting. S&P’s index, which is among the leading measures of U.S. home prices, shows that prices were up nearly 20 percent over year-before levels in July. Craig J. Lazzara, managing director and global head of index investment strategy at S&P, says the increases have been extraordinary. “The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country,” Lazzara said. “Home prices in 19 of our 20 cities now stand at all-time highs, with the sole outlier (Chicago) only 0.3 percent below its 2006 peak.” While increasing prices are good for home sellers, they have put pressure on affordability levels. Fortunately, the rate of increases is expected to slow somewhat as the market begins to cool this fall. (source)

Sales of newly built single-family homes rose more than economists expected in August, marking the second-consecutive month of gains. The 1.5 percent increase pushed sales to a 740,000-unit annual rate and included spikes of 26 percent in the Northeast and 6 percent in the West. But while the sales gains are positive news for the housing market, they continue to lag behind last year’s levels – with sales 24.3 percent lower than they were at the same time one year earlier. The numbers, from the U.S. Census Bureau and the Department of Housing and Urban Development, also showed that the supply of available new homes for sale has now risen to the highest level in 13 years. In fact, there is now a 6.1-month supply of new homes for sale at the current sales pace. And, with the market starved for supply, the growing number of available new homes is encouraging, as it should help slow price increases and provide home buyers with more choices. (source)

New numbers from the National Association of Realtors show that, even as the summer market looked to be slowing down, homes for sale were still selling quickly. In fact, the typical property was only on the market 17 days in August and 87 percent of homes sold during the month were available less than 30 days. It’s yet another sign that inventory remains the market’s biggest issue. Lawrence Yun, NAR’s chief economist, says home buyers are still looking, despite challenging conditions. “Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory,” Yun said. The lack of homes for sale has made for a competitive and fast-paced summer. It’s also held back sales. In August, sales of previously owned homes fell 2 percent from the month before. The decline came after two consecutive months of gains.

If you’re a prospective home buyer, the pace of new home construction should matter to you. Today’s hot market and rapidly rising prices are largely due to the fact that there are fewer homes for sale these days. Combined with a high level of buyer demand, the lack of inventory has caused a competitive market where homes sell quickly and well over the seller’s asking price. So what’s the answer to this problem? Well, adding to the supply of available homes would help alleviate some of the pressure home buyers are currently feeling. And that’s why the latest New Residential Construction report from the U.S. Census Bureau and the Department of Housing and Urban Development is encouraging news. The report found that the number of new homes that began construction in August was 3.9 percent higher than the month before and 17.4 percent higher than last year at the same time. Additionally, the number of permits to build new homes was also up, rising 6 percent from July. The gains mean more homes for sale and, potentially, less stress for home shoppers. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes reached its highest point since April during the week following Labor Day. Home buyers returned and pushed purchase application demand 2 percent higher than the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says demand remains strong. “Housing demand is strong heading into fall, despite fast-rising home prices and low inventory,” Kan said. “The inventory situation is improving, with more new homes under construction and more homeowners listing their home for sale.” Also in the report, average mortgage rates remain low, with little change seen for 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the FHA, and 15-year fixed-rate loans. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications.

Each month, Fannie Mae’s Economic and Strategic Research Group releases a forecast detailing their outlook for the economy and housing market. According to their most recent release, the group sees some potential challenges ahead that may affect home buyers. Specifically, they believe buyer demand could begin to slow if affordability conditions worsen. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says there are a few factors that will determine whether or not that happens. “Affordability remains a challenge, even with mortgage rates near historic lows; if the pace of income growth doesn’t keep up with inflation and interest rates rise more than expected, we’d expect housing activity to slow from our current projections,” Duncan said. But while their outlook is cautious, they’re still projecting a significant increase in demand next year. In fact, they forecast a 6.3 percent jump in demand for loans to buy homes in 2022. (source)

Builders have to be able to read the market in order to be successful. So it’s no surprise their perspective is closely followed. One measure of how home builders are feeling about the housing market is the National Association of Home Builders’ Housing Market Index. It surveys builders and scores their responses on a scale where any number above 50 indicates more builders view conditions as good than poor. In September, the index moved up one point to 76, ending three months of consecutive declines. Chuck Fowke, NAHB’s chairman, says the improvement is evidence of stability in the market. “The September data show stability as some building material cost challenges ease, particularly for softwood lumber,” Fowke said. “However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers.” Despite those challenges, builders remain optimistic about the market. In fact, the index component measuring expectations for the next six months held steady at 81 and the gauge of current sales conditions rose to 82.

The number of rooms a house has – and how they’re distributed – is even more important than the overall size of the home. A huge home that packs all the bedrooms and bathrooms into one cramped corner of the house may not serve its owners as well as a smaller house with a better layout. But while determining the number of bedrooms you need is a fairly simple calculation, how many bathrooms you need can be less clear. An analysis of data from the Census Bureau’s latest Survey of Construction offers some insight into what most home shoppers want. The numbers show – based on new homes that began construction in 2020 – the vast majority of newly built single-family homes had two bathrooms. In fact, 65 percent of homes built last year had two full bathrooms. Twenty-five percent of homes had three bathrooms, while 7 percent had four or more. Less than 3 percent had one bathroom. Based on those numbers, it’s pretty clear that most home buyers want, at least, two bathrooms in their house. (source)

Your mortgage lender is the first person you should talk to once you’ve decided to buy a home. After a preliminary review of your finances, they can tell you, not only whether you’re qualified to borrow, but also what your potential price range will be. In short, they’re your first step toward buying a house. That’s why Fannie Mae conducts their quarterly Mortgage Lender Sentiment Survey. Positioned at the start of the buying process, lenders are able to get a good read on the market and where it may be headed. So what do they expect in the months ahead? Well, according to the most recent survey, lenders expect buyer demand to continue to grow, though at a slower pace than before. “More lenders than not reported expectations that purchase mortgage demand will continue to grow, though the total share expecting such growth fell substantially compared to the previous quarter,” Mark Palim, Fannie Mae’s deputy chief economist said. In other words, while buyer demand will remain high, the market should be a bit calmer than it’s been in recent months. (source)