August 2022

Housing Starts Slow As Completions Rise

The U.S. Census Bureau and the Department of Housing and Urban Development’s monthly New Residential Construction report tracks the number of new homes that began construction during the month, the number of homes that were finished, and how many building permits were authorized. In July, the report found the number of housing starts down significantly from the month before. In fact, the number of new homes that began construction In July fell 9.6 percent. But while some of that decline is due to slower demand from home buyers, a closer look at the housing completions numbers tells the other half of the story. Put simply, home builders have a lot of homes in the pipeline. Backed up by labor shortages and supply issues, builders are playing catch up right now. That’s why, despite falling housing starts, completions actually rose in July. Housing completions were up 1.1 percent from the month before and 3.5 percent higher than last year at the same time. That means, at least part of July’s slowdown was caused by home builders finishing the homes that had already begun construction. (source)

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Home Builders Cut Prices On New Homes

New homes are generally more expensive than previously owned homes. That’s not surprising. Anything brand new typically costs more than something used. But if you’re a prospective home buyer who’s been reluctant to consider buying a new house because of the price tag, the latest Housing Market Index from the National Association of Home Builders has good news for you. The index – which is based on a monthly survey of home builders – found one in five say they’ve reduced their prices in the past month. Of course, the reason they’ve cut their prices is because affordability conditions have gotten more challenging this year. Elevated prices and rising mortgage rates reduced the number of buyers active in the market. However, for buyers who’ve remained active, price cuts could be an opportunity. Robert Dietz, NAHB’s chief economist, says buyers may see more stability in the months ahead. “As signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in the coming months,” Dietz says. (source)

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Is Relief Ahead For Home Buyers?

A new quarterly report from the National Association of Realtors found the median home price reached a new record high during the second quarter. By the end of June, it was up to $413,500. That’s after the vast majority of metro areas saw double-digit price gains from the year before. Put simply, it got more expensive to buy a home this spring. But though buying got more costly during the first half of the year, could the second half of the year bring buyers some relief? Maybe, according to Lawrence Yun, NAR’s chief economist. Yun says buyers may begin to see affordability conditions improve soon, as the market finds better balance. In fact, prices and rates have both gotten more favorable in recent days. “Overall, the national price deceleration inevitably followed the softening sales, providing well-positioned buyers a small measure of welcomed relief,” Yun said. “The recent dips in mortgage rates will bring additional buyers to the market, especially in those places where home prices are still relatively affordable and where jobs are being added.” In other words, home price increases have already begun to slow and, with mortgage rates down from where they were earlier this year, home buyers may begin to see a little relief, after a challenging first half of the year. (source)

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Credit Availability Tightens In July

Before you can buy a house, you need to secure financing. That means getting a mortgage. But the standards used to determine whether or not – or how much – a potential buyer is approved to borrow aren’t fixed. There are times when the mortgage approval process is more difficult and times when it’s easier. Because of this, the Mortgage Bankers Association keeps a monthly measure of whether lending standards are loosening or tightening. Any increase in their Mortgage Credit Availability Index means standards are loosening and it’s getting easier for prospective borrowers. A decrease indicates standards have tightened. In July, credit availability tightened. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says the decline was due to slowing demand. “The 9 percent decline in the July index was the largest monthly decrease since April 2020,” Kan said. “Lenders have responded accordingly to the decrease in demand for refinance and purchase loans by reducing loan offerings, including for ARMs, cash-out refinances, and investment properties.” (source)

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Mortgage Rates Mostly Calm Last Week

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were mostly calm last week, after two consecutive weeks of declines. There was only slight movement among different loan types. For example, rates increased for 30-year fixed-rate loans with both conforming and jumbo balances but were down for loans backed by the Federal Housing Administration. Rates for 15-year fixed-rate mortgages were unchanged from the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says mortgage applications were mostly flat as a result. “Mortgage applications were relatively flat, with a decline in purchase activity offset by an increase in refinance applications,” Kan said. “The purchase market continues to experience a slowdown, despite the strong job market. Activity has now fallen in five of the last six weeks.” Demand for loans to buy homes fell 1 percent from the week before. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Active Listings Are Growing At Record Pace

The number of homes for sale is growing at a record pace, according to new numbers from the National Association of Realtors’ consumer website. Their Monthly Housing Trends Report shows active listings increased 30.7 percent year-over-year in July. It was the third month of gains, and a good sign for home buyers. Why? Because low inventory has been the main thing driving home prices higher and more available homes for sale will help slow future increases. Danielle Hale, the website’s chief economist, says the market is balancing. “The U.S. housing market continues to move toward more evenly balanced supply and demand compared to the 2021 frenzy,” Hale said. “Our July data shows elevated mortgage rates left many buyers tightening their budget and sellers responding with price reductions, while home shoppers who kept searching saw more available options.” More available options is good news but there’s still a ways to go before the market is properly balanced. In fact, the report shows that the number of active listings is still 44.4 percent lower than it was in July 2019. (source)

Americans Have Mixed Feelings About Market

The housing market has shifted and Americans are still adjusting to the change, according to the results of Fannie Mae’s most recent Home Purchase Sentiment Index. The index is based on a survey of Americans which asks them for their perception of the current housing market and their personal financial situation. In July, survey respondents were less optimistic than they’ve been in months past, with fewer participants saying they feel now is a good time to buy or sell a house. But while market sentiment has fallen, respondents say their household income is up from last year and they feel affordability conditions will improve over the next year. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says Americans have mixed feelings about the market. “We believe consumer reaction to current housing conditions is likely to be increasingly mixed: Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential home buyers may choose to postpone their purchase decision believing that home prices may drop,” Duncan said. (source)

Nearly Half Of All Homes Are Equity Rich

Equity is the difference between what your home is worth and what you owe on your mortgage. Which means, it’s a good thing to have – and, these days, nearly half of all homeowners do. In fact, according to ATTOM Data Solutions’ second-quarter 2022 U.S Home Equity & Underwater Report, 48.1 percent of mortgaged residential properties are now considered equity rich – meaning the amount homeowners owe on their home is less than 50 percent of the home’s market value. The share of equity-rich homes is up from 34.4 percent last year at the same time and 44.9 percent during the first quarter of this year. Rick Sharga, executive vice president of market intelligence at ATTOM, says homeowners will continue to make gains, even as the market slows. “While home price appreciation appears to be slowing down due to higher interest rates on mortgage loans, it seems likely that homeowners will continue to build on the record amount of equity they have for the rest of 2022,” Sharga said. As it is, the percentage of equity rich homes is now the highest it’s ever been. (source)

How Competitive Is Today’s Housing Market?

A competitive housing market can be stressful for home buyers. When there are more buyers than homes for sale, available homes sell quickly and for more than their asking price. It can put pressure on buyers and their budgets. So how competitive is today’s market? Well, one good measure of competitiveness is showing activity. The higher the number of average showings per listing, the more competition there likely is between buyers. Fortunately for today’s home shoppers, showing activity has been slowing. In fact, the number of housing markets averaging double-digit showings per listing fell to three in June. That’s down from a record high of 121 in March. But while that’s a huge improvement and good news for summer home buyers, showing activity is still higher than its pre-pandemic level. Which means, though competition for available homes has calmed from where it was over the past two years, prospective home buyers should still be prepared to move quickly. (source)

Mortgage Rates See Biggest Decline Since 2020

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates saw their biggest decline in two years last week. Rates fell 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. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says lower rates could help spark more buying activity. “The drop in rates led to increases in both refinance and purchase applications, but compared to a year ago, activity is still depressed,” Kan said. “Lower mortgage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity.” Last week, mortgage application demand was up 1.2 percent, with a 2 percent increase in refinance activity and a 1 percent bump in demand for loans to buy homes. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)