Monthly Archives: March 2022

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased again last week, moving higher 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. The increases continue the recent upward trend that has rates headed higher just as the spring home buying season gets underway. Fortunately, though, it doesn’t seem to have slowed buyers. Mike Fratantoni, MBA’s senior vice president and chief economist, says demand for loans to buy homes has held steady. “Even with the ongoing climb in rates, purchase application volumes were little changed last week,” Fratantoni said. “This is particularly auspicious, as we are now in the beginning of the spring home buying season, and those shopping for homes are struggling with not only higher and more volatile mortgage rates, but also an ongoing shortage of homes on the market.” The MBA’s report found buyer demand for purchase loans increased 1 percent last week from the week before. (source)

In order to buy a house, you have to be approved to borrow enough money to pay for it. After all, not many of us have a couple hundred thousands dollars in cash lying around. So most buyers, before they start their home search, will have to talk to a lender to see whether they qualify for a mortgage. But the standards used to determine whether or not a buyer’s qualified aren’t fixed. There are times when getting a mortgage is harder and others when it’s easier. Because of this, the Mortgage Bankers Association’s Mortgage Credit Availability Index tracks whether standards are tightening or loosening from month to month. According to their most recent report, getting a mortgage got easier in February. In fact, Joel Kan, MBA’s associate vice president of economic and industry forecasting, says credit availability is at its highest point in months. “Credit availability increased to its highest level since May 2021, driven by growth in jumbo loan programs, as well as those that include allowances for ARMs and expanded credit score and LTV requirements,” Kan said. “In a period of rising mortgage rates, affordability challenges, and declining volume, lenders have made efforts to slightly broaden their product offerings.”

Last year’s housing market was fast-paced and competitive. Buyer demand was elevated, and available listings often had multiple offers after hosting a steady stream of interested home shoppers. So what should we expect this spring, as the sales season kicks into gear? According to one recent analysis of home showings, maybe more of the same. The analysis – which looked at the number of home tours per available listing in markets across the country – found that the number of markets averaging double-digit showings per listing was up 45 percent in February from last year at the same time. Cities with double-digit showing activity increased from 75 last year to 109 this year. The gains were widespread. Among the busiest markets, Nashville led the way, with a 43 percent year-over-year increase. Other busy markets included Orlando, Bridgeport, Conn., Dallas, Hartford, Sarasota, and Charlotte. Fortunately for buyers, relief may be on the way, as the number of homes for sale is expected to rise, which should help reduce competition for available homes. (source)

The National Association of Realtors’ Pending Home Sales Index measures the number of contracts to buy homes signed each month. Because it tracks signings and not closings, the index is a good indicator of future sales of existing homes. In February, it was down 4.1 percent, marking the fourth consecutive month transactions fell. Lawrence Yun, NAR’s chief economist, says the reason for the decline is simple. “Pending transactions diminished in February mainly due to the low number of homes for sale,” Yun said. “Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale.’” Fortunately, there are expectations that the inventory of homes for sale will improve this year, which will help slow price increases and offer buyers more options. However, those improvements will be gradual and home buyers in the coming months should still be prepared for a competitive market, where good listings attract multiple interested buyers.

There are a couple of reasons new home sales are important to watch. First, they account for just over 11 percent of all home sales. Secondly, they’re a leading indicator, since they are counted when a contract to buy is signed, rather than at closing. In other words, you can get a good feel for what’s ahead for the housing market by paying attention to new home sales. In February, according to numbers from the U.S. Census Bureau and the Department of Housing and Urban Development, sales slowed, dropping 2 percent from the month before and 6.2 percent from where they were last year at the same time. That’s a sign that the housing market may be cooling off after a hot and competitive 2021. With mortgage rates edging higher and prices up significantly, there may be fewer buyers active in the market this year. But that may be good news for buyers who are still active, as fewer buyers means less competition and slower price increases. Along with an expected increase in new home construction this year, reduced buyer demand could mean a better balanced market for home buyers still looking for a home to purchase. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates moved higher last week. 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. Mike Fratantoni, MBA’s senior vice president and chief economist, says he expects rates to trend higher throughout 2022. “MBA’s new March forecast expects mortgage rates to continue to trend higher through the course of 2022,” Fratantoni said. “Purchase application volume was down slightly for the week, with a larger drop in FHA and VA purchase volume, and a small decline in conventional purchase loans. First-time home buyers, who rely on these government programs, are increasingly challenged by both the rapid increase in home prices and higher mortgage rates.” Overall, demand for mortgage applications was down 8.1 percent from the week before. Most of that decline, however, was due to a drop in refinance activity, which is typically more sensitive to rate fluctuations. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Homeownership has its perks. Among them, it’s a financial investment. When home prices rise, homeowners benefit. And last year, homeowners benefited in a big way. In fact, according to one new analysis, home values rose higher than the median income in 25 of 38 of the metropolitan areas included in the study. In other words, homeowners gained more in equity than the median worker made in income. Home appreciation even topped $100,000 in 11 of those cities. In San Jose, for example, the typical home grew $229,277 in value, while the median income was $93,000. Even in cities with lower rates of appreciation, like St. Louis, homes still increased nearly $30,000 over the year. Naturally, last year’s home price growth was atypical. But while most years don’t see the equity gains that 2021 did, values do rise more often than not. That means, home buyers this spring will most likely financially benefit from owning a home by next year at this time. (source)

In an interconnected world, events in other countries have an effect on our economy. That’s certainly the case these days, according to Fannie Mae’s Economic and Strategic Research Group’s latest monthly outlook. According to the group, the Russian invasion of Ukraine, along with existing supply-chain issues, has caused considerable downside risks to the U.S. economy and housing market. Fortunately for home buyers and sellers, though, Doug Duncan, Fannie Mae’s senior vice president and chief economist, says the housing market should weather those risks more easily than other markets. “Housing is currently acting as support to an otherwise slowing economy, although it is adding significantly to inflation,” Duncan says. “Even as interest rates are rising and reducing affordability, demographics are still strong supports for demand, and the paucity of existing home supply is supporting new construction and sales.” Duncan believes demand for home purchase loans should hold up well in the current environment and adds that, even with rates rising, they’re still well below what’s been considered normal historically. (source)

Sales of previously owned homes fell in February, according to the National Association of Realtors. Sales were down 7.2 percent from the month before and 2.4 percent from last year at the same time. There were a number of factors that likely contributed to the decline, including higher mortgage rates and a lower than normal number of homes for sale. But while challenges remain, there are signs a better balanced market may be on the way. Lawrence Yun, NAR’s chief economist, says inventory is beginning to improve. “The sharp jump in mortgage rates and increasing inflation is taking a heavy toll on consumers’ savings,” Yun said. “However, I expect the pace of price appreciation to slow as demand cools and supply improves somewhat due to more home construction.” He may be right. Recent data shows that not only has the pace of new home construction increased so far this year, but the number of existing homes for sale in February rose as well. Still, the typical property was only on the market 18 days during the month, down a day from January. That means buyers still need to be prepared for a fast-moving market. (source)

The housing market needs more homes. They are plenty of buyers but not enough houses for sale. That leads to higher prices and more competition for available listings. Fortunately, though, new home construction is expected to increase this year and, according to newly released numbers from the U.S. Census Bureau and the Department of Housing and Urban Development, it already has. Their February new residential construction report shows the number of homes that began construction during the month was 22 percent higher than last year. Additionally, the number of single-family homes that completed construction was 12 percent higher than the month before. That’s good news for the market and potential home buyers, as new home construction is the quickest solution to the market’s inventory problem. If the trend continues, and more new homes become available for sale, it’ll help relieve upward pressure on home prices and give buyers more options when shopping for a home to buy. (source)