In early spring, when coronavirus shutdowns began, few would’ve predicted that the summer housing market would be as hot as it turned out to be. Buyer demand rebounded quickly and home sales numbers surpassed year-before levels sooner than anyone could’ve expected. However, though the housing market’s rebound is undoubtedly good news, there is another side to the story. Put simply, home buyers returned to the market before sellers and the resulting imbalance drove already low inventory levels even lower. And naturally, fewer homes for sale combined with an increasing number of interested buyers put upward pressure on home prices. In fact, according to one recent analysis, the shortage of homes for sale caused a 0.7 percent price increase month-over-month in August. That might not seem like much, but it’s actually the largest monthly gain in seven years. It was also pretty evenly spread, with 48 of the 50 largest markets showing accelerating home prices during the month. Fortunately for home buyers, mortgage rates remain near record lows, which helps to counteract the spike in prices. Also, home builders have begun to ramp up construction, which should help bring some relief to markets suffering from a lack of homes for sale. (source)

New residential construction is vital to keeping the housing market balanced. After all, there’s no easier way to increase the number of homes for sale than to build more homes. And, in today’s market, where inventory is low and demand is high, new home construction is more important than ever. If home builders build enough homes to narrow the gap between supply and demand, it’ll help give buyers more choices and keep prices from rising too quickly. That’s why the National Association of Home Builders’ monthly measure of home builder confidence is a closely watched barometer. In September, their Housing Market Index hit its highest point in the survey’s 35-year history. The index scored an 83 on a scale where any number above 50 indicates more builders view conditions as good than poor. Robert Dietz, NAHB’s chief economist, says demand is high and moving to the suburbs. “The suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates,†Dietz said. If the current trend continues, it could lead to a better balanced market and improved affordability conditions for buyers. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were mostly flat last week, with little change seen for 30-year fixed-rate mortgages with conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. But though rates remain near record lows, overall mortgage demand fell, with most of the decline due to a drop in refinance activity. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said refinance demand may be slowing but purchase applications are still strong. “With the flurry of refinance activity reported over the past several months, demand may be slowing as remaining borrowers in the market potentially wait for another sizeable drop in rates,†Kan said. “Applications to buy a home also decreased last week, but the underlying trend remains strong. Purchase activity has outpaced year-ago levels for 17 consecutive weeks, with a stronger growth in loans with higher balances pushing MBA’s average loan size to a new survey high of $370,200.†The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. Last week’s results contained an adjustment for the Labor Day holiday. (source)

Lending standards change. That’s why the Mortgage Bankers Association’s monthly Mortgage Credit Availability Index tracks how easy or difficult it currently is for borrowers to secure financing. Any increase in the index indicates that credit has become more available, while decreases mean standards have tightened. In August, the index fell 4.7 percent. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says economic uncertainty continues to affect lending standards. “Credit continues to tighten because of uncertainty still looming around the health of the job market, even as other data on loan applications and home sales show a sharp rebound,†Kan said. “A further reduction in loan programs with low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability.†The index was benchmarked to 100 in March 2012. Currently, it is at 120.9, which is its lowest level since March 2014. (source)

There’s currently an imbalance in the housing market. The number of interested home buyers far exceeds the inventory of homes for sale. That means, listings sell quickly, home prices rise, and prospective home buyers have to compete with other buyers for available homes. The lack of homes for sale also holds back home sales and makes things more difficult for first-time buyers looking for an affordable house to purchase. In short, low inventory is the housing market’s primary issue, and it’s only gotten worse since the coronavirus pandemic began in March. However, there is some good news, and it could mean a better balanced market is on the horizon. That’s because, according to one recent analysis, new for-sale inventory is up 16.2 percent month-over-month and is now at its highest level since March 22. The improvement is an indication that more homeowners now feel that it’s a good time to sell. And, if the trend continues, it could mean some relief for buyers, as it would lead to better affordability conditions, a slower market, and more chances to find a home that suits their needs. (source)

Spring and summer are the busiest seasons for the housing market. Home buyer demand ramps up in March and doesn’t typically start falling until after Labor Day. But this year is far from typical. And with buyer demand running well above last year’s pace, it’s natural to wonder what the fall housing market will look like. Will it be as competitive as the summer market or will it cool off like it usually does? Well, according to a new report from the National Association of Realtors’ consumer website, it may be more normal than you’d think. That’s because their most recent Housing Market Recovery Index – which tracks the market’s rebound since the coronavirus’ onset – found a slight dip in home buyer demand at the beginning of September. At the same time, the index found the inventory of homes for sale improved. The data is a hopeful sign for buyers that things may be trending in a more normal direction. If buyer demand continues to cool, it could mean a slower fall market with less competition and more homes to choose from. However, though encouraging, it’s too soon to say whether or not the numbers are anything more than a small bump in the long-term trend. (source)

When the coronavirus took hold in March it required a lot of adjustments. Everything from how we shop for groceries to how we socialize underwent an instant change. The way we work was among the biggest changes. Many Americans, who once commuted to-and-from the office every day, transitioned to working from home full-time. Now, six months later, it seems likely that remote work is here to stay, at least for some. But what might that mean for the housing market? Well, according to one new analysis, it could mean an opportunity for millions of renters to become homeowners. That’s because, in many markets, renters can’t afford to buy. In fact, priced-out renters make up 4.5 percent of all renting households. But, if those renters could live further from their workplace, they’d have an opportunity to buy a home in a more affordable area outside the city. The analysis found that this could apply to as many as 2 million current renters. However, since work isn’t the only factor deciding where we live, only time will tell how many Americans will actually make the move. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes is now 40 percent higher than it was at the same time last year. Typically, year-over-year gains are in the single digits. The improvement is also noteworthy, as it comes at a time of year when the housing market is usually starting to slow down. This year, however, is atypical. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says, the year-over-year comparison is a bit skewed because of Labor Day. “Purchase applications were 40 percent higher than the same week last year, but the increase is skewed higher by being compared to Labor Day 2019,†Kan said. “Nevertheless, there continues to be resiliency in the purchase market. Applications were up almost 3 percent on a weekly basis and the average loan size continued to increase, hitting a survey high at $368,600.†Also in the report, average mortgage rates fell across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the FHA, and 15-year fixed-rate loans. The rate for 15-year mortgages hit a new record low. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Fannie Mae’s Home Purchase Sentiment Index is a monthly measure of how Americans view the housing market and their personal financial situation. The survey asks respondents for their feelings about whether it’s a good time to buy or sell a home, home prices, mortgage rates, job security, income, etc. In August, the index found Americans’ optimism rebounded after a drop in July. Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the recovery was driven, in part, by record low mortgage rates. “The HPSI rose modestly in August, recovering the ground it lost in July,†Duncan said. “The HPSI’s recovery was driven by near-record low mortgage rates that helped restore much of consumers’ positivity on whether it is a good time to buy a home, while also improving the good-time-to-sell sentiment.†According to the survey, the number of participant who said they felt now was a good time to buy a home rose from 53 percent to 59 percent in August, while the net share of those who said it’s a good time to sell increased 7 percent. The number of respondents who said their income was significantly higher than one year ago also rose, climbing 3 percent month-over-month. (source)

If you know nothing else about how financing works, you know a lower mortgage rate is better than a higher one. You don’t need to be an expert to have figured that out. But calculating exactly how a good rate affects how much house you can afford is a little more complicated. After all, there a lot of moving parts. One recent analysis might help. The report looked at how much purchasing power home buyers have gained over the past year – since mortgage rates have dropped by almost a full point during that time. The results help explain why buyer demand is so high right now. They also help illustrate just how much more house you can afford with rates near record lows. So how much is it? Well, according to the numbers, a home buyer with a monthly budget of $2,500 can afford a home $33,250 more expensive than what they could buy last year at the same time. That’s a nearly 7 percent increase year-over-year. Put another way, that buyer, in August 2019, could afford a $483,250 house. Now, they could comfortably buy a $516,500 house. That’s a significant upgrade and good news for hopeful home buyers looking to make a move as the summer winds down. (source)