Monthly Archives: January 2023

There’s increasing evidence that we may have already past the housing market’s low point. Recent data shows mortgage rates falling and buyer activity rising as we approach the spring home-buying season. The latest evidence is the National Association of Realtors’ Pending Home Sales Index. The Index – which measures the number of contracts to buy homes signed during the month – showed a 2.5 percent improvement in December over the month before. It was the first increase following six months of declines. Lawrence Yun, NAR’s chief economist, says the market is stabilizing. “This recent low point in home sales activity is likely over,” Yun said. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.” Regionally, index results were mixed, with the West and South showing significant improvement, while the Northeast and Midwest still saw falling contract activity. (source)

New home construction is an important part of balancing the housing market. When inventory is low and prices are rising, building more new homes can help level the imbalance and provide better affordability conditions for buyers of all types of homes. But builders don’t build more homes unless there are interested buyers. That’s why keeping an eye on new home sales can help buyers get a feel for what’s happening in the overall market. If new home sales are rising, builders are more likely to build more homes, which helps inventory and ultimately home buyers. So what’s happening now in the new home market? Well, according to the latest numbers released by the U.S. Census Bureau and the Department of Housing and Urban Development, new home sales rose 2.3 percent in December, matching economists’ expectations for the month. But while the month-over-month improvement is encouraging, sales are still down significantly from year-before levels, mostly due to the increase in mortgage rates that slowed buyer demand last year. (source)

Buying a house isn’t a short-term living arrangement. Typically, if you’re buying, you’re planning to stay a while. But how long should home buyers expect to live in the house they purchase? Well, conventional wisdom says you should expect to live in the house you buy for at least five years. Recently, though, Americans have been staying in their homes longer before selling and moving somewhere new. In fact, between 2019 and 2021, the typical homeownership tenure was cited as being somewhere between eight and 13 years. For comparison, in the early 2000s, it got as low as four and a half years. These days, it’s getting shorter again. In fact, according to ATTOM Data Solutions, home sellers who sold during the fourth quarter of 2022 had owned their homes an average of 5.85 years. That’s the third shortest tenure since 2012 and represents a growing trend, with a majority of metro areas showing tenures down. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week from one week earlier. Rates were down 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 vice president and deputy chief economist, says rates have been trending downward lately. “Mortgage rates declined for the third straight week, which is good news for potential home buyers looking ahead to the spring home buying season,” Kan said. “Home buying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market. Many have been waiting for affordability challenges to subside.” Last week, demand for loans to buy homes was up 3 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)

Saving enough money for a down payment can be a hurdle for some home buyers, especially first-time buyers. After all, unlike move-up buyers who can use the proceeds of their previous home’s sale, first-time buyers have to come up with a down payment largely through savings. But saving money’s not always easy. In fact, among recently surveyed millennial home buyers, 41 percent said saving for a down payment was the biggest barrier to buying a home – only mortgage rates and home prices ranked higher. The good news, though, is you don’t have to have a 20 percent down payment saved before you can buy a house. And, according to the survey, most younger buyers won’t. The survey found 62 percent of respondents said they plan to have a smaller down payment when they buy. That’s a big change from last year, when just 34 percent of millennial buyers planned to put down less than 20 percent. (source)

Each month, Fannie Mae’s Economic and Strategic Research Group releases an outlook detailing what it thinks is ahead for the economy and housing market. The forecast covers the group’s expectations for economic growth, home sales, prices, mortgage rates, and other economic factors. According to the most recent release, the group sees a rebound ahead for the housing market but can’t say for sure when it’ll begin. That’s largely due to the fact that where mortgage rates go from here is dependent on the Federal Reserve. The Fed began raising interest rates in 2022 to fight inflation. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says there’s some speculation that the Fed will slow those efforts during the second half of this year. “The market sees the Federal Reserve easing in the second half of the year, which can be interpreted either as a view that the recession is forthcoming or that the slowdown in inflation will lead to a less restrictive monetary posture,” Duncan said. “If the latter occurs, the lower accompanying rates will likely set the stage for a pickup in housing activity going into 2024.” (source)

The National Association of Home Builders conducts a monthly survey of builders to gauge their confidence in the current market and their expectations for the future. The index is a closely watched housing market metric because a builder’s business depends on being able to accurately read what home buyers want, and when. In January, the index saw its first improvement after 12 consecutive months of declines. It could signal a turning point for the market. Robert Dietz, NAHB’s chief economist, thinks so. “While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” Dietz said. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability.” Naturally, home builders are focused on the new home market, but rising inventory, lower rates, and improved affordability will benefit buyers of both new and existing homes. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week. In fact, rates were down from the week before across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, 15-year fixed-rate loans, and 5/1 ARMs. Mike Fratantoni, MBA’s SVP and chief economist, says rates are now at their lowest level since last September. “Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall,” Fratantoni said. “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time home buyers.” As it is, lower rates spurred demand for mortgage applications, with overall demand up nearly 30 percent and demand for home purchase loans up 25 percent week-over-week. The MBA’s survey has been conducted weekly since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

A lot changed when the COVID-19 pandemic began in early 2020. But while some of those changes – like remote work or the rise of grocery delivery services – made perfect sense, others weren’t as clear. Take the housing market, for example. Home buying demand skyrocketed during the pandemic. But why? What about a global pandemic would lead Americans to become more interested in buying a home? The initial explanation offered was that the pandemic caused us to spend more time at home, which resulted in people wanting more space. But was that really it? Well, a new study from Fannie Mae looks at what drove the pandemic-era home buying boom. The study surveyed recent home buyers and asked if they accelerated their home purchase because of the pandemic. What they found was that the majority of home buyers who moved during the pandemic bought when they did because of historically low mortgage rates, not COVID. In fact, 56 percent of respondents said the pandemic neither accelerated nor slowed their home purchase timeline. (source)

Lending standards aren’t fixed. That means, depending on market conditions, getting approved for a mortgage can be easier at times and more difficult at others. Because of this, the Mortgage Bankers Association tracks mortgage credit availability each month. Any increase in its Mortgage Credit Availability Index indicates that standards are loosening and potential borrowers will have an easier time obtaining a mortgage. A decline means the opposite and indicates lenders are tightening standards. In December, the index was relatively unchanged from the month before. Joel Kan, MBA’s vice president and deputy chief economist, says higher rates have been affecting access to credit. “Mortgage credit availability was mostly unchanged in December as mortgage rates remained significantly higher than the prior two years and both refinance and purchase activity slowed dramatically,” Kan said. “The doubling of mortgage rates over the past year caused credit availability to shrink 18 percent during the same period.” (source)