Refinacing numbers drop, fixed rates rose, home price growth to moderate and add to inflation

July 21, 2021

Home borrowing costs were essentially unchanged last week and remain at historically low levels. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose two basis points to 3.11% with 0.43 in points for the week ending July 16, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 4%, the Purchase Index declined 6% while the Refinance Index decreased by 3%. Spokesperson Joel Kan said, “Refinance activity fell over the week, but because rates have stayed relatively low, the pace of applications was close to its highest level since early May.”

Fannie Mae released its July Commentary revealing that historically high home price growth is expected to moderate but add to overall inflation pressure. The GSE was expecting home price growth to increase by 8% in 2021 but now it has surged to near 5% this year. However, home price growth will cool in 2022 increasing by 5.1%. Fannie Mae reports that 2021 mortgage originations are now forecast at $4.2 trillion, up from last month’s forecast of $4.1 trillion, with both purchase and refinance origination activity projected to be higher. On the economic front, Gross Domestic Product this year is estimated to rise 7%.

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Home borrowing costs, housing market low supply

June 02, 2021

Home borrowing costs were essentially unchanged last week and remain at historically low levels. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage was at 3.17% with 0.39 in points for the week ending May 28, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 4%, the Purchase Index declined by 3.1% while the Refinance Index declined by 4.6% and was 6% higher from a year ago. Spokesperson Joel Kan said, “Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continue to hold back purchase activity.”

The housing market continues to heat up as low supply and high demand continues to push up home prices and the amount of homes that sold above listing prices. The report shows that a bit more than half of homes (51%) have sold above their listing price in the four week period ending May 23, 2021, up from 26% one year ago. Also, many other sales records were hit which include the median home sale price of $354,250 and the number of days on the market, 17, from 36 a year ago. Asking prices also reached an average of $361,875, another record high.

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April Single Family House Sales, May Consumer Confidence, March Home Price Index

May 25, 2021

Sales of new single‐family houses in April 2021 were at a seasonally adjusted annual rate of 863,000, according to estimates released today by the U.S. Census Bureau. That was down nearly 6% monthly and below the 980,000 expected. Due to the lock downs last year and with little activity seen in April 2020, sales are up a whopping 48.3% year over year. The four major regions across the country saw losses on a monthly basis with big gains seen annually. The median sales price of new houses sold in April 2021 was $372,400. The average sales price was $435,400. Supply of homes for sale on the market is at 4.4 months at the current sales rate.

After the big rebound seen over the past four months, the Consumer Confidence Index was unchanged in May at 117.2 from 117.5 in April. Consumers’ appraisal of current conditions improved in May while optimism regarding the short-term outlook edged lower in May. Consumers were also less upbeat about the job market as the proportion expecting more jobs in the months ahead fell. On the income front, some consumers expect their incomes to increase in the next six months. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said, “Overall, consumers remain optimistic, and confidence should remain resilient in the short term, as vaccination rates climb, COVID-19 cases decline further, and the economy fully reopens.”

The sort of backward looking Case-Shiller 20-City Home Price Index for March saw prices surge 13.3% from March 2020, the largest annual increase since December 2013. The National Home Price Index, covering all nine U.S. census divisions, jumped 13.2% annually, up from 12.0% in the previous month. The same ongoing problems continue to hit the housing industry … the lack of supply along with rising material costs and constrained supply chains.

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Home Building Market Experiencing Rising Costs,Lumber Prices coming down

May 17, 2021

The home building market continues to experience pains as rising costs continue to plague the market. Despite rising costs, the NAHB Housing Market Index remained at 83 this month and near record highs for newly built single-family homes. Any number over 50 indicates that more builders view conditions as good than poor. The component measuring traffic of prospective buyers fell one point to 73. “Low interest rates are supporting housing affordability in a market where the cost of most materials is rising,” said NAHB Chief Economist Robert Dietz. “In recent months, aggregate residential construction material costs were up 12 percent year-over-year, and our surveys suggest those costs are rising further.

Lumber prices are retreating from record highs which is a positive sign for home builders who have been dealing with soaring prices over the past year. Prices have fallen to near $1,300 from the record high $1,700 seen in the past two weeks as production continues to ramp up and as commodity traders book some profits. “Rising materials prices are significantly driving up prices for single-family homes and apartments,” wrote NAHB Chief Economist Robert Dietz. “Combined with expectations of rising interest rates, these higher prices place additional pressure on housing affordability, which continued to decline in the first quarter.”

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New Construction Costs impact housing affordability, inflation

May 10, 2021

A host of costs contribute to the price of a new single-family but regulation costs are front and center. The NAHB reports that the cost of regulations imposed by all forms of government adds a whopping $93,000 to the cost. The NAHB says that $93,870 is made up of $41,330 is attributable to regulation during development while the $52,540 comes from regulation during construction. “This study illustrates how overregulation is exacerbating the nation’s housing affordability crisis and that policymakers need to take bold steps to reduce or eliminate unnecessary regulations that will help builders increase the production of quality, affordable housing to meet growing market demand,” said NAHB Chairman Chuck Fowke.

Inflation is the new buzzword on Wall Street as consumer prices push higher with most states now fully reopened. Prices for goods and services have been on the rise due in part to pent-up consumer demand. A recent survey conducted by the New York Federal Reserve showed that inflation expectations are to increase in the short-term, remain stable in the medium-term. The median year-ahead inflation expectations increased to 3.4% in April from 3.2% in March, while remaining unchanged at 3.1% at the three-year horizon. The one-year ahead measure is now at its highest level since September 2013. Fed Chair Powell has said that any rise in inflation will be transitory.

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30-Year fixed Rate rose, US Economy slipped, Labor market continues rebound

May 05, 2021

Home borrowing costs were essentially unchanged in the latest week and remain at historically low levels. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose to 3.18% from 3.17% with 0.34 in points for the week ended April 30, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 0.9%, while the Purchase Index declined by 2%. The Refinance Index was unchanged and is down 17% from a year ago. Spokesperson Joel Kan said, “Both conventional and government purchase applications declined, but average loan sizes increased for each loan type. This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity.”

Activity in the service sector of the U.S. economy slipped in April from March but remains at expansionary levels. The ISM Service Index fell to 62.7 in April from 63.7 in March. A reading above 50 indicates the services sector economy is generally expanding; below 50 indicates the services sector is generally contracting. Economic activity had expanded for 11 straight months and expanded for all but two of the last 135 months. The April reading is one point lower from the all-time high hit in March (63.7). Within the report, it showed that the employment component increased.

The U.S. labor market continues to rebound as the financial markets received a strong report from the private sector. ADP private payrolls rose by 742,000 in April, near estimates while March was revised higher to 565,000 from 517,000. Small business growth was 235,000, medium grew by 230,000 while large businesses were up 277,000. The labor market continues an upward trend of acceleration and growth, posting the strongest reading since September2020,” said Nela Richardson, chief economist, ADP.

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March Housing Starts Surge

April 16, 2021

March Housing Starts jumped nearly 20% from February to an annual rate of 1,739,000 versus the 1,621,000 expected. Single-family starts, which make up the bulk of the market, saw a jump of 15% to 1,238,000 units. Building Permits, a sign of future construction, saw a near 5% gain to an annual rate of 1,766,000. Multi-family units rose 30%. However, the market is still being plagued by low inventories and with the labor market continuing to improve, there could be more buyers on the scene in the months ahead. Remember, jobs buy houses.


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Home Mortgage, Interest Rates, Home Price growth

April 14, 2021

Home borrowing costs fell in the latest week and remain at historically low levels. The MBA reports that the 30-year fixed-rate mortgage declined nine basis points to 3.27% with 0.33 in points for the week ended April 9, 2021. The Market Composite Index, a measure of total mortgage loan application volume fell 3.7% while the Purchase Index declined by 1.4. The Refinance Index fell 5% and is down 31% from a year ago. Spokesperson Joel Kan said, “Last week’s Refinance Index level was the lowest in over a year, as mortgage rates continue to trend higher. Many borrowers have either already refinanced at lower rates or are unwilling – or unable – to refinance at current rates.” Freddie Mac released its quarterly forecast report today signaling that as ‘the economy recovers, the housing market remains healthy while mortgage rates move up.’ Freddie Mac went on to say that hurdles for potential homebuyers are low inventories and rising rates. The numbers: 30-year fixed-rate mortgage to average 3.2% in 2021, 3.7% in 2022. Home price growth to rise 6.6% in 2021 and decline to 4.4% in 2022. Total originations are expected to be $3.5% trillion in 2021, $2.4 trillion in 2022. Purchase originations $1.7 trillion in 2021 and $1.6 trillion in 2022. Refinance originations are expected at $1.8 trillion in 2021 and $770 billion in 2022. Homes sales should reach 7.1 million this year and 6.7 million next year.

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Consumer Price Index to be released, HPSI for March jumped, Gas prices level off

April 12, 2021

There are no economic reports today but the calendar is full this week. The closely watched inflation reading Consumer Price Index will be released tomorrow. The week also features housing and manufacturing data along with Retail Sales for March. The Retail Sales number will be closely watched after the $1,400 stimulus checks were released last month. Also, earnings season kicks off this week where expectations are very high for solid numbers.

Fannie Mae recently released its Home Purchase Sentiment Index (HPSI) for March revealing that housing sentiment jumped on consumers’ selling and personal finance optimism. The Index rose 5.2 points to 81.7 with four of the six components increasing for the month. The percentage of respondents who say it is a good time to buy a home increased from 48% to 53% while respondents who say it is a good time to sell a home increased from 55% to 61%. “The significant increase in the HPSI in March reflects consumer optimism toward the housing market and larger economy as vaccinations continue to roll out and the spring homebuying season began – perhaps with even more intensity this year, since 2020’s spring homebuying season was limited by virus-related lockdowns,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

After a swift rise since the beginning of the year, gas prices have leveled off the past few weeks as oil prices decline while refinery utilization is on the rise. AAA Motor Club reports that the national average prices for a regular gallon of gasoline was unchanged this week at $2.87 and just slightly higher than the $2.83 seen a month ago. A year ago the price was $1.86. Jeanette McGee, AAA spokesperson. “Cheaper crude oil prices will likely help to keep price fluctuation low this week.”

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4-9-21 Home Borrowing fell, unemployment, Fed minutes

April 09, 2021

Home borrowing costs fell for the first time in seven weeks and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage declined to 3.13% from 3.18% with 0.7 in points and fees. A year ago at this time, the rate was not much higher at 3.33%. It is up from 2.65% on January 7 of this year. Sam Khater, Freddie Mac’s Chief Economist said, “The drop in rates creates yet another opportunity for those who have not refinanced to take a look at the possibility.”

First-time unemployment claims increased in the latest week but the numbers have been on a downward slope. Weekly Initial Jobless Claims rose to 744,000 from 728,000 for the week ended April 3, 2021. To put it into perspective, the week of March 14, 2020 claims were 282,000. The week of March 21, 2020, they skyrocketed to 3.3 million as lockdowns took hold. Continuing claims, or those receiving benefits for at least two weeks straight, fell to 3.73 million from 3.75 million. With more and more states reopening their economies, many unemployed Americans should be able to go back to work.

The Fed minutes from the March Federal Open Market Committee meeting revealed what Fed Chair Powell has been saying for quite some time … rates will remain low through at least 2022 and maybe even into 2023. The Fed minutes also signaled that it is still wary of the labor market and the ongoing risks from COVID. The Fed will continue to purchase Mortgage-Backed and Treasury securities until such time that it sees significant improvement in the economy and labor markets. The short-term Fed Funds Rate, currently near zero percent, was left unchanged. Bottom line … the Fed continues its dovish tone.

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