Housing Supply Improving, As High Prices and Rising Rates Weigh on Sales. Mortgage applications up for the second week this year

Housing supply improving (2)

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 17thNAHB 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.