Monthly Archives: August 2023

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes was up for the first time in five weeks last week. In fact, the MBA’s purchase index improved 2 percent week -over-week. Increased demand from home buyers combined with a 3 percent gain in refinance activity to push overall mortgage application demand 2.3 percent higher than the week before. Joel Kan, MBA’s vice president and deputy chief economist, says application demand still remains lower than last year, despite the increases. “Mortgage applications for home purchases and refinances increased for the first time in five weeks but remained at low levels,” Kan said. “Purchase applications increased but were still 27 percent lower than a year ago, as elevated mortgage rates and tight housing inventory continue to weigh on home buying activity.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

The current housing market presents some challenges for home buyers. High home prices, too few homes for sale, and volatile mortgage rates mean buyers have to be prepared. That means setting a budget and knowing exactly what you can afford in terms of a monthly mortgage payment. Fortunately for buyers wondering what their prospective payment might look like, the Mortgage Bankers Association tracks the median mortgage payment each month with its Purchase Applications Payment Index. The index can give buyers, not only a good idea of what the typical mortgage payment is now, but also whether or not it’s headed higher or starting to fall. According to its most recent release, the MBA says the national median payment applied for by purchase applicants was $2,162 in July – $1,451 for lower-payment mortgages. That’s virtually unchanged from the previous month, though up significantly from where it was last year at the same time. It means buyers are still facing affordability challenges but haven’t seen a summer spike when it comes to monthly mortgage costs. (source)

A lot of what home buyers want is predictable. It doesn’t change much from year to year. Affordability, for example, is always a top priority for buyers. Everybody wants a good home that doesn’t break their budget. So it’s no surprise to find affordable markets topping a recent list of the country’s hottest ZIP codes. The list, released by the National Association of Realtors’ consumer website, found the country’s hottest markets concentrated in the Midwest and Northeast. In other words, markets where there are affordable homes for sale. They’re also in areas just outside major metropolitan areas. That, according to the website’s chief economist, Danielle Hale, is a more recent development. “As many companies continue to call employees back to the office, we’re seeing a surge in home shoppers who are seeking a desirable combination of cost and convenience within commuting distance of major metropolitan areas,” Hale said. Commuting distance was low priority for home buyers during the pandemic when many transitioned to remote work. Now, it appears, commutes are becoming a factor once again, as buyers hunt for homes with a combination of affordability and convenience. (source)

Fannie Mae’s Economic and Strategic Research Group releases a monthly outlook covering what they believe is ahead for the housing market and overall economy. According to its August commentary, the group still expects the economy to slow at some point in coming months, despite data continuing to show it stronger than expected. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says they expect a mild recession, though they don’t expect it will affect the housing market much. “Our base case forecast is a mild recession, and it looks as though the alternative is a soft landing, which is slow growth with only a small increase in unemployment,” Duncan explained. “The difference between those two alternative outcomes is not expected to make much difference to home sales.” The group believes that, whether or not the economy avoids a recession, housing market dynamics are unlikely to change due to offsetting issues of available inventory, affordability, wage growth, and consumer confidence. (source)

In a lot of ways, there are two housing markets. There’s the market for previously owned homes and the market for new homes. These days, the existing-home market is struggling with low inventory and slow sales, but the new home market is in the midst of a summer boom. In fact, new home sales in July, according to the most recent estimates from the U.S. Census Bureau and the Department of Housing and Urban Development, were up 31.5 percent from the same time last year and 4.4 percent higher month-over-month. The reason? Well, a lot of it has to do with the existing-home market’s recent struggles. Home buyers having trouble finding an older home are increasingly looking at new homes as an alternative. That’s spurred sales and also boosted new home construction. Now newly built homes are a growing share of the current inventory of available homes and sales are surging while, at the same time, existing home sales have stalled. (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, 15-year fixed-rate loans, and 5/1 ARMs. Joel Kan, MBA’s vice president and deputy chief economist, says last week’s increases drove interest in adjustable rate mortgages higher. “The ARM share of applications increased to 7.6 percent, the highest level in five months, and the number of ARM applications picked up by 4 percent last week,” Kan said. “Some home buyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed period.” Overall, higher mortgage rates led to a 4.2 percent decline in demand for mortgage applications last week, including a 5 percent drop 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)

Sales of previously owned homes slipped 2.2 percent in July from the month before, according to new numbers from the National Association of Realtors. It was the second consecutive monthly decline and put sales 16.6 percent below last year at the same time. Lawrence Yun, NAR’s chief economist, says there are two main factors slowing sales right now. “Two factors are driving current sales activity – inventory availability and mortgage rates,” Yun said. “Unfortunately, both have been unfavorable to buyers.” But while the inventory of homes for sale remains low, it did see improvement in July. In fact, total housing inventory was up 3.7 percent from June. That means more homes for sale and less upward pressure on home prices. Yun says now the market needs mortgage rates to moderate. Retreating rates will “bring more buyers and sellers to the market and get Americans moving again,” Yun said. (source)

The Mortgage Bankers Association’s monthly Mortgage Credit Availability Index measures how easy or difficult it is for borrowers to access credit. Any increase in the index indicates loosening credit while declines are a sign that credit is becoming tighter. There are a number of factors that affect whether availability has loosened or tightened, including current lending standards and available loan programs. In July, the MCAI was mostly flat, falling just 0.3 percent from the month before. Joel Kan, MBA’s vice president and deputy chief economist, says the decline was mostly due to fewer cash-out refi programs. “One key driver of this month’s decline was a drop in cash-out refinance loan programs,” Kan said. “The 30-year fixed mortgage rate averaged … more than a percentage point higher than July 2022, and this has significantly discouraged cash-out refinance activity, as borrowers turn to home equity and consumer loans instead.” Kan also noted a decline in the number of loan programs offered by jumbo lenders. (source)

When mortgage rates started to increase last year, there was fear that home prices might soon crash. The expectation was that buyers would retreat and declining demand would cause values to tumble. That fear, though, seems to have been unfounded. There were declines, of course – in some locations more than others – but prices overall held steady and even began climbing again earlier this year. But can we say for sure that home prices bottomed? According to one recent analysis, it looks that way but may be too soon to say. The lack of available homes for sale combined with continuing demand from buyers has largely kept prices afloat. That dynamic doesn’t seem likely to change in the near future. However, the analysis makes clear that mortgage rates have remained high and continue to cause affordability challenges for home buyers. Where affordability heads from here will determine whether or not prices adjust somewhere down the line. (source)

When there are too few homes for sale, the quickest solution is to build more homes. New home construction offers buyers more options and helps alleviate upward pressure on prices of existing homes. In other words, it’s exactly what the housing market needs right now, since the inventory of homes for sale remains well below its pre-pandemic norm. Fortunately, according to new numbers from the U.S. Census Bureau and the Department of Housing and Urban Development, it looks like home builders are on the case. In fact, new residential construction statistics show the number of new, single-family homes that began construction in July was 6.7 percent higher than the month before. That’s a significant mid-summer surge and an encouraging sign for shoppers of both new and existing homes. It also puts single-family housing starts nearly 10 percent above where they were last year at the same time. Regionally, the data shows home building strongest in the West and Midwest, with the Northeast and South both seeing month-over-month declines. (source)