Monthly Archives: May 2022

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, April’s annual sales pace is down 16.6% from the revised March rate of 709,000 units and 26.9%. In April, the drop in new-home sales was the fourth consecutive monthly dip and the second consecutive month with a double-digit percentage-point drop. When combined with recent reports of low single-family construction activity and persistent existing-home difficulties, April’s data fuel the fire of dwindling homebuyer desire amid rising mortgage rates, low inventory, and still-high prices.

“The volume of signed sales contracts significantly declined in April as the cost of purchasing a home increased in 2022 as interest rates surged higher,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB). “Higher construction costs fueled by rising material prices and supply-side constraints and limited existing-home inventory are pricing many potential homebuyers out of the market.” Read More

After nearly two years of skyrocketing prices and dwindling inventories, the housing market is starting to cool this spring. As per Zillow, inventories are rising fast enough to close the gap with available houses in 2021 and should surpass last year’s stock by 2022. Homebuyers and renters who have been unable to locate an affordable place to live will have more options and, perhaps, fewer bidding wars. This will take time to come to fruition, but the signs of improving inventory are there.

According to Tucker of Zillow, the cooling is not a hint of a housing crisis but rather a sign that the market will revert to a more balanced state. While prices aren’t likely to start falling quickly, they will no longer be growing as swiftly.

Lawrence Yun, a chief economist for the National Association of Realtors, said that new home construction had increased the housing supply. However, he believes that continuous inflation and external concerns such as the Ukraine conflict will continue to pressure potential purchasers.

Homebuilder Sentiment Falls To 2-year Low On Declining Demand And Rising Costs

Builder confidence in the single-family home market declined dramatically in May as mortgage rates rose and construction material costs remained unchanged. According to the National Association of Home Builders/Wells Fargo Housing Market Index, sentiment dropped 8 points to 69 in May. Although readings above 50 are considered favorable, builder sentiment has fallen for the seventh month in a row.

It’s the lowest reading since June 2020, when builders experienced a temporary, adverse reaction to the start of the Covid epidemic before quickly rebounding. Demand for single-family houses in the suburbs with outdoor space soared when the economy collapsed. By November 2020, builder sentiment had reached a new high of 90. When the pandemic effect is removed, the number for this month is the lowest since September 2019, when the US-China trade war was wreaking havoc on building material supply chains.

Of the index’s three components, current sales conditions fell 8 points to 78, and sales expectations in the next six months dropped 10 points to 63. Buyer traffic fell 9 points to 52. According to Mortgage News Daily, the average rate on a 30-year fixed mortgage increased from 4.88 percent to 5.41 percent in April before peaking at 5.64 percent in the first week of May. This year, the rate was only 3.29 percent. Builders, on the other hand, were hammered heavily by inflation.

Builder sentiment in the Northeast remained constant at 72 on a three-month moving average. It dropped 7 points to 62 in the Midwest and 2 points to 80 in the South. Sentiment in the West declined 6 points to 83.

Mortgage Demand From Homebuyers Tumbles 12%, As Higher Interest Rates Take Their Toll

According to the Mortgage Bankers Association’s seasonally adjusted index, refinance and purchase loan demand fell this week, bringing overall mortgage application volume down 11%. Mortgage applications for home purchases fell 12% week over week, and since the third week of April, there has been a weekly reduction in homebuyer demand. 

Applications to refinance a home loan continued to plummet, dropping another 10% week over week. Demand for refinances was down 76% from a year ago. During the Covid epidemic, two years of record-low borrowing rates sparked a refinance boom that has since burst. Only a tiny fraction of borrowers can now take advantage of a refinance.

Next week’s potential market-moving reports are:

• Monday, May 23rd – No Report
• Tuesday, May 24th – New Home Sales
• Wednesday, May 25th – FOMC Minutes        
• Thursday, May 26th – Initial Jobless Claims, Continuing Jobless Claims, Pending Home Sales
• Friday, May 27th – Core PCE Inflation, Real Consumer Spending, 5-year Inflation Expectations

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

According to new data from Realtor.com, the supply of properties for sale could expand in the coming weeks. Inventory was down 12% in April compared to the same month last year, the smallest year-over-year drop since 2019. The change in supply is most likely due to a slower sales volume caused by the recent abrupt spike in mortgage rates, which has made already expensive properties considerably more costly.

Some areas of the country already see more homes coming on the market. As well, traffic at open houses has declined. The likelihood of home prices experiencing a significant drop remains low due to the fact there is still considerable demand. However, bidding wars for homes are decreasing in many markets. This could be the beginning of the market adjusting to a more balanced relationship between buyers and sellers.

Inflation Barreled Ahead At 8.3% In April from A Year Ago, Remaining Near 40-year Highs

The Bureau of Labor Statistics said Wednesday that inflation jumped again in April, continuing a trend that has pushed consumers to the edge and put the economy in jeopardy. The consumer price index, a comprehensive measure of prices for goods and services, rose 8.3 percent from a year ago, beating the Dow Jones forecast of 8.1 percent – a modest drop from the peak in March, but it was still near the most significant level since 1982.

Even after removing volatile food and energy costs, the core CPI jumped 6.2 percent, despite predictions of a 6% increase, casting doubt on optimism that inflation had peaked in March. The month-over-month increases were also more significant than expected, with headline CPI up 0.3 percent versus a forecast of 0.2 percent and core CPI rising 0.6 percent versus a forecast of 0.4 percent.

Officials at the Federal Reserve have responded to the crisis with two interest rate hikes this year and promise more until inflation falls below the central bank’s target of 2%. Markets were hoping that March’s 8.5 percent CPI reading would be the highest since the pandemic began. However, the April report showed that “this is another upward inflation surprise and suggests that the deceleration is going to be painstakingly slow,” said Seema Shah, chief strategist at Principal Global Investors.

MBA Weekly Applications Survey May 11, 2022: Winning Streak at 2

Mortgage applications grew for the second week in a row, despite interest rates reaching a 13-year high, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending May 6. The Market Composite Index increased 2.0 percent over the previous week on a seasonally adjusted basis. On the other hand, the unadjusted Refinance Index dropped by 2 percent from the prior week. The refinance share of overall mortgage applications fell to 32.4 percent from 33.9 percent the previous week. The seasonally adjusted Purchase Index increased by 5 percent from one week ago. The FHA’s percentage of overall applications fell to 10.5 percent this week, and the rate of total applications submitted by veterans grew to 10.5 percent, up from 10.3 percent the week before. The USDA’s proportion of overall applications rose from 0.4 percent early to 0.5 percent.

“Despite a slow start to this year’s spring homebuying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. Kan stated that more customers continue to utilize adjustable-rate mortgages to offset rising rates. 

Moreover, MBA reports that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) jumped to 5.53 percent from 5.36 percent, with points jumping to 0.73 from 0.63 for 80 percent loan-to-value ratio loans. The effective rate has risen since the previous week.

Next week’s potential market-moving reports are:

• Monday, May 16th – No Report
• Tuesday, May 17th – NAHB Home Builders’ Index
• Wednesday, May 18th – Building Permits, Housing Starts
• Thursday, May 19th – Initial Jobless Claims, Continuing Jobless Claims, Existing Home Sales
• Friday, May 20th – Advance Services Report

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.