Despite lingering affordability concerns, Americans remain interested in buying a home. In fact, according to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes is now 7 percent higher than at the same time last year. That means, potential home shoppers still see buying opportunities even while for-sale inventory remains low and home prices continue to rise. Joel Kan, MBA’s associate vice president of economic and industry forecasting, credits some of that interest to mortgage rates that remain well below this year’s average. And though rates did increase last week – rising 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 – their recent downward trend has kept them well below where they were even a few months ago. That has helped affordability and boosted buyer interest. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
The new home market isn’t only important to new home buyers. After all, the number of homes being built plays a part in meeting buyer demand, moderating competition, and keeping prices in check. In other words, if the market for newly-built homes isn’t doing well, there’s a good chance the overall housing market isn’t either. That’s why the National Association of Home Builders’ Housing Market Index is a closely followed indicator. The index measures home builder confidence on a scale where any number above 50 indicates more builders view conditions as good than poor. In July, the index scored a 65, with the individual components measuring sales conditions, traffic, and expectations for the next six months all up from the month before. Greg Ugalde, NAHB’s chairman, says builders remain optimistic, despite some challenges. “Builders report solid demand for single-family homes,” Ugalde said. “However, they continue to grapple with labor shortages, a dearth of buildable lots, and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes.” More here.
If you’ve never been through the buying process before, you might think you get the keys to your new house right after having your offer accepted. After all, you’ve been approved to borrow the money and the home seller has agreed to sell you their house. So, what could be the holdup? Well, there are a number of things. First off, there’s the paperwork that needs to be done. The details of the home’s sale have to be documented before all of the parties involved can be assured that the necessary requirements have been met. Additionally, the home needs to be inspected and appraised to make sure that the house is valued correctly and has no hidden issues. Put simply, your finances, the home, and the specifics of the transaction all have to be thoroughly verified before the loan can be closed. This, of course, takes time. The good news is the amount of time it takes has been declining. In fact, according to one recent analysis, average closing times have fallen from 74 days to just 38 days since 2017. Most of that improvement is due to the digitization of the process. But some other factors that affect closing time are credit scores and the amount of the loan. Higher credit scores and bigger loans are associated with quicker closing times. More here.
There are many steps along the way to buying a house. But qualifying for a mortgage is where it all begins. Until you’ve been approved to borrow, you can’t really start looking for a house and you certainly can’t make an offer on one. That’s why the most recent Mortgage Credit Availability Index from the Mortgage Bankers Association is good news for hopeful home buyers. According to the index – which measures whether lending standards are tightening or loosening – credit became more available in June. That means, home buyers should have an easier time getting approved for a loan. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says credit availability has been increasing this year. “Credit availability has generally increased in 2019 as lenders have worked to meet affordability challenges,” Kan said. “Because mortgage rates have recently fallen and home price growth has decelerated in many markets, credit availability may stabilize at its current levels.” More here.
The cost of buying a house gets a lot of attention these days. After all, home prices have been rising for years now and there’s plenty of reporting on the lack of available for-sale inventory. So it’d be easy to get the impression that homeownership is now out of reach for most Americans. But, according to one recent study that looked at affordability based on household income and education level, mortgage payments are actually still affordable in the majority of cities. In fact, the typical mortgage payment is within reach for households where at least one person has a high school diploma in 36 of the nation’s 50 largest metropolitan areas. But though that seems to buck the conventional wisdom about affordability conditions these days, it doesn’t take into account the challenge of coming up with a suitable down payment. And, since nearly 50 percent of first-time home buyers use savings to cover the upfront costs of buying a home, that can be a struggle for many buyers – especially those doings so for the first time. Still, the fact that the typical mortgage payment remains within reach in the majority of markets is encouraging news for anyone thinking of buying a home in the near future. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell slightly last week. Rates for jumbo loans increased, while rates for 15-year and FHA loans were steady from the week before. Overall, mortgage rates remain well below where they were at the same time last year. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says low rates didn’t result in a significant increase in mortgage demand, however. Mostly because refinance applications were down week-over-week. “Mortgage applications were down slightly, even after adjusting for the July 4th holiday, as we saw opposing moves in purchase and refinance applications over the week,” Kan said. “Purchase applications increased from the previous week and were up 5 percent from a year ago, a continuation of the strong annual growth that we saw in the first of half of 2019.” Refinance activity was down 7 percent from the previous week, though it’s 88 percent higher than the same week one year ago. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
Naturally, for home buyers, affordability is a top concern. That’s not a surprise. Anyone thinking about buying a home in the near future is likely going to first try to figure out how much house they can afford. That means, keeping an eye on mortgage-rate fluctuations and where home prices are headed. But there are other, less obvious, factors that can affect the cost of housing in your area. Construction, for example. The amount and type of housing that’s being built in the neighborhoods you’re interested in can have an impact on affordability. That’s because, as the number of homes available for sale increases, it reduces competition and helps relieve pressure on prices. So, if there are a lot of new homes being built in your area, chances are they’re helping to keep prices from spiking. That’s why there’s been a renewed focus on diversifying the housing stock and building smaller, more affordable new homes. Since much of the new residential construction taking place these days is of higher-end, more expensive homes, there’s a growing need for homes that will help meet demand from first-time buyers and slow entry-level home prices. More here.
Fannie Mae’s monthly Home Purchase Sentiment Index surveys Americans about the housing market, buying and selling a home, prices, mortgage rates, etc. According to the most recent release, consumers see stable conditions ahead. In fact, an 8 percent increase in the number of respondents who feel mortgage rates will go down over the next 12 months is an indication that prospective home buyers think affordability conditions are beginning to settle. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says optimism about mortgage rates has helped sentiment, though it depends on where you look. “Regional variations in housing optimism appear to be tied to a divergence in housing affordability; for example, home purchase sentiment is higher in the Midwest and South than in the West and, to a lesser extent, the Northeast, where the lack of entry-level inventory and the resultant strong price appreciation has had a more profound impact on affordability,” Duncan said. However, though affordability conditions will vary from location to location, declining mortgage rates have helped take the pressure off buyers everywhere, which is why the index remains near an all-time survey high. More here.
First-time home buyers are important to the health of the housing market. After all, historically, they’ve accounted for around 40 percent of total home sales. But who is the typical first time home buyer and what do they buy? Well, a recent study from Harvard’s Joint Center for Housing Studies, took a look at buyers over the past few years and broke down the profile of the average first timer. According to the study, the typical first-time home buyer is under the age of 35, married, and has children. Not surprisingly, the house they buy tends to be smaller and less expensive than those purchased by repeat buyers. According to the report, “43 percent of first-time buyers in 2017 purchased homes with less than 1,500 square feet of living space, compared with 27 percent of repeat buyers.” They generally buy a detached single-family home and pay less than $200,000 for it – just 12 percent pay $400,000 or more for their house. The report also points out the challenges ahead for younger buyers, specifically the lower-than-normal number of available homes in their price range and the need for more affordable housing options. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for home purchase loans is now 10 percent higher than the same week one year ago. The improvement comes after a 1 percent increase week-over-week. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says purchase applications have been gradually increasing since the beginning of the year. “Purchase applications picked up slightly last week, as conventional and government activity were each up around 1 percent. Furthermore, in continuation of the gradual growth trend seen throughout the first half of 2019, purchase activity was almost 10 percent higher than a year ago,” Kan said. “A still-strong job market, improving affordability, and lower mortgage rates continue to support growth.” Also in the report, average mortgage rates were mostly flat last week, showing little change across all loan categories. The 30-year fixed-rate was up slightly but remains just above lows last seen in 2016. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.