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Mortgage Rate Drop Stirs Up Loan Demand

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week, dropping to new survey lows. Rates were down across all loan categories, including 30-year fixed-rate loans with conforming loan balances, jumbo loans, 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, said favorable rates helped push demand for mortgage applications higher. “Refi activity responded to these lower rates, with the refi share reaching almost 66 percent of all applications, its highest level since May,” Kan said. “Home purchase activity continued its strong run with a 2 percent increase over the week and was up around 22 percent compared to the same week a year ago.” However, though low rates and rising demand are positive signs for the market, challenges remain. Among them, low housing inventory, the coronavirus’ spread, and the job market are lingering concerns that will continue in the week ahead. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

How Lumber Costs Affect The Price Of Homes

Housing conditions are largely dictated by supply and demand. Take a look at the balance of interested buyers to available homes and you can get a good idea where the market is headed. But while that seems simple enough, the underlying factors that cause shifts in supply and demand are less clear cut. That’s because there are an almost infinite number of things that might play a role. Everything from the global economy to the time of year can affect the balance of buyers and homes for sale. For example, the typical home buyer likely doesn’t think a lot about how the cost of lumber affects how much they’ll pay for a home. It does, though. In fact, according to the National Association of Home Builders, lumber prices have been high for a while now and, since mid-April, have moved even higher. The reasons have to do with a lack of domestic production and tariffs on Canadian lumber. However, the affect is that home builders have to add that cost to the price of new homes. That can slow the number of homes being built and drive the price up on the ones that are. Ultimately, that means high lumber costs hinder home building, which contributes to a lack of affordable inventory and higher home prices across the board. (source)

Americans Say Now Is A Good Time To Sell

Fannie Mae’s Home Purchase Sentiment Index surveys Americans about their feelings toward the housing market, buying and selling a home, job expectations, and their personal financial situation. The monthly survey aims to get a general sense of how optimistic Americans are about their money and the real estate market. In July, the index fell 2.3 points, following two consecutive months of gains. The decline was mostly due to a drop in the number of respondents who said it was a good time to buy a home. However, there was an uptick in participants who said it was a good time to sell. In fact, the net share of those who say it’s a good time to sell was up 4 percent. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says that’s mostly due to home price expectations. “Supply constraints appear to be applying upward pressure to consumers’ home price expectations, which in turn has contributed to both a sharp reversal in optimism about whether it is a good time to buy a home and further improvement in home-selling sentiment,” Duncan said. Also in the report, the number of respondents who said they weren’t concerned about losing their job in the next year was up 5 percent – potentially a good sign for future housing sentiment. (source)

 

Number Of Equity Rich Homeowners Grows

Simply put, having equity means your home is worth more than the amount you owe on it. And, according to ATTOM Data Solutions’ second-quarter 2020 U.S. Home Equity & Underwater Report, there are an increasing number of American homeowners who have it. The report looked at the number of mortgaged properties that could be considered equity rich, which was defined as homes whose estimated market value is at least 50 percent more than the amount owed on them. During the second quarter, 27.5 percent of the 55.2 million mortgaged homes in the country qualified as equity rich. That’s up from 26.5 percent during the first quarter. Todd Teta, chief product officer with ATTOM, says the improvement is another sign of the market’s strength despite a challenging environment. “Homeowners saw their equity rise far and wide throughout the United States during the second quarter of this year in yet another sign of the housing market punching back against the coronavirus pandemic,” Teta said. “More property owners rose into equity-rich territory and escaped the seriously underwater lane, putting more money into the average household.” (source)

What Are The Top Challenges For Today’s Buyers?

Everybody’s home search is different. Where one buyer may fall in love, make an offer, and sign a contract after seeing a single house, another may spend weeks without finding a home that fits their needs and lifestyle. In short, how long it takes to locate and close on a house depends on a long list of factors, personal preferences, and conditions. So what do buyers who’ve been searching say is the number one thing making it difficult to find a home? Well, according to a new report from the National Association of Home Builders, it’s finding a home in their price range. In fact, 39 percent of respondents who have been actively searching for a home said that finding one at a price they could afford was the biggest obstacle. Another common factor was finding a house that had all of the buyer’s desired features. Among participants, 36 percent said they were having trouble finding a home that checked off the items on their wish list. Being outbid by another buyer and finding a home in the right neighborhood were also popular answers, with both being named by around 30 percent of survey participants. (source)

Homes For Sale Still Trailing Year Ago Levels

In a lot of ways, current housing market data looks almost unaffected by the coronavirus pandemic. Home sales have rebounded and are ahead of last year’s pace. Mortgage rates remain low, hovering just above, or at, all time lows. Buyer demand is up, competition is rising, and prices continue to climb. In short, from the numbers, the housing market is outpacing last year and in-line with forecasts from the beginning of the year. However, there is one housing stat that, more than the others, shows the coronavirus’ impact on the market. The number of homes available for sale is now, according to one analysis, 26.3 percent below where it was last year at the same time. Similarly, new for-sale listings are down 12.2 percent. In other words, low inventory – which was already the market’s main challenge – has been made worse by the pandemic. Homeowners aren’t putting their homes on the market and the imbalance could begin to dampen buyer demand and threaten affordability levels. Fortunately, since conditions are favorable for sellers right now, there’s reason to be optimistic that listings will increase and help bring better balance to the market. (source)

Remote Work Is Influencing Decisions To Buy

Typically, home shoppers would have to take their daily commute into consideration when weighing whether or not to buy a particular house. After all, no one likes sitting in traffic. So, generally speaking, the closer to work you live, the better. These days, though, the coronavirus has changed the way we work and it’s beginning to change how and where we live as well. In short, the fact that more Americans are able to work from home is starting to drive decisions about whether and where to buy a house. For example, a recent survey conducted on behalf of the National Association of Realtors’ consumer website found that 63 percent of respondents who were planning on buying a home in the next year indicated their decision was influenced by their ability to work remotely. George Ratiu, senior economist for the site, says the pandemic has given potential buyers options they didn’t previously have. “The ability to work remotely is expanding home shoppers’ geographic options and driving their motivation to buy, even if it means a longer commute, at least in the short term,” Ratiu said. “Although it’s too early to tell what long-term impact the COVID-era of remote work will have on housing, it’s clear that the pandemic is shaping how people live and work under the same roof.” (source)

Contracts To Buy Homes Spike 16.6% In June

The National Association of Realtors’ Pending Home Sales Index tracks the number of contracts to buy homes signed each month. Because it measures contract signings, and not closings, it’s a good predictor of future home sales numbers. In June, the index saw a 16.6 percent improvement. It is now 6.3 percent higher than last year at the same time. Lawrence Yun, NAR’s chief economist, says the gains are surprising. “It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” Yun said. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.” All four regional indices saw double-digit, month-over-month increases, with the Northeast leading all others with a 54.4 percent surge. Also in the report, the NAR has revised their 2020 forecast due to the strength of the housing market’s recent rebound. They now see home sales falling just 3 percent this year. (source)

Mortgage Rates Mostly Flat From Last Week

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were mostly flat last week. In fact, rates were virtually unchanged for 30-year fixed-rate mortgages with both conforming and jumbo balances, as well as 15-year fixed-rate loans. However, rates for loans backed by the Federal Housing Administration spiked, leading to a decline in application demand for FHA loans. Mike Fratantoni, MBA’s senior vice president and chief economist, said rates remain near record lows. “Mortgage rates remained near record lows for conventional loans last week, and refinances in the conventional sector continued to slightly increase,” Fratantoni said. “However, rates on FHA loans rose, leading to an almost 18 percent drop in FHA refinances.” The drop in refinance demand, combined with purchase activity falling 2 percent, led to a 0.8 percent decrease in overall mortgage application demand. Still, refinance activity remains 121 percent higher than it was at the same time last year, while demand for loans to buy homes is up 21 percent. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

 

Are Home Price Increases Beginning To Slow?

The S&P Case-Shiller Home Price Indices are considered the leading measure of U.S. home prices. According to their most recent release, which covers data through the end of May, national home prices are up 4.5 percent year-over-year – which is down from 4.6 percent in the previous month’s report. Craig J. Lazzara, managing director and global head of index investment strategy at S&P, says though home prices are still increasing, they may be rising at a slower rate than before. “In contrast with the past eight months, May’s gains were less than April’s,” Lazzara said. “Although prices increased in May, in other words, they did so at a decelerating rate. We observed an analogous development at the city level: prices increased in all 19 cities for which we have data, but accelerated in only 3 of them (in contrast with 12 cities last month and 18 the month before that).” Lazzara cautions that decelerating price increases are different than actual price declines. In short, home prices are still headed higher, even if they may be moving up less quickly than before. (source)