by tyler | May 17, 2023 | CNN, homes
US home building unexpectedly rose in April, climbing 2% from March.
Housing starts, a measure of new home construction, were down 22.3% from a year ago, according to data released Wednesday by the Census Bureau.
After surging in February following five consecutive months of falling, housing starts fell in March. The April turnaround saw units rise to a seasonally adjusted annual rate of 1.40 million, up from the revised March estimate of 1.37 million.
This is a developing story and will be updated.
by tyler | May 4, 2023 | CNN, homes
The only thing consistent about mortgage rates right now is that they are volatile in the wake of mixed economic signals and recent bank failures. Mortgage rates ticked down this week, after climbing for two weeks in a row.
The 30-year fixed-rate mortgage averaged 6.39% in the week ending May 4, down from 6.43% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.27%.
“This week, mortgage rates inched down slightly amid recent volatility in the banking sector and commentary from the Federal Reserve on its policy outlook,” said Sam Khater, Freddie Mac’s chief economist.
“Spring is typically the busiest season for the residential housing market and, despite rates hovering in the mid-6% range, this year is no different,” he said. “Interested homebuyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability.”
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.
Mortgage rates have been particularly fickle recently, experiencing daily fluctuations due to economic volatility and recent bank failures, said Jiayi Xu, Realtor.com economist.
The Federal Reserve announced a quarter-point rate hike on Wednesday, pushing the federal funds rate to the highest it has been in 16 years. The increase was expected, and in its statement the Fed left open the possibility for an upcoming pause in rate hikes.
“People did talk about pausing, but not so much at this meeting. There’s a sense that we’re much closer to the end of this than to the beginning,” Fed Chair Jerome Powell said during a post-meeting press conference. “If you add up all the tightening that’s going on through various channels, we feel like we’re getting close or maybe even there, but again that is going to be an ongoing assessment.”
The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
Analysts have said that recent bank failures are doing some of the Fed’s work on reducing inflation for it. The move is unlikely to have a big impact on mortgage rates, as the move was already factored in for most investors said Xu.
“The higher rates will continue to slow economic growth toward the target rate of 2%,” she said. “However, as the impacts of earlier rate increases continue to work through the economy and the recent bank failures reveal the impact of higher rates, there is a risk of the US economy entering a recession.”
This time of year is typically very brisk for home selling. But with mortgage rates still elevated and a stubbornly low inventory of homes to buy, the market is much more sluggish than usual.
“In a typical year, we would expect to see the number of homes for sale begin to increase more significantly from this point forward,” said Xu. “However, mortgage rates remain elevated, leading many sellers to report feeling ‘locked in’ by their current low mortgage rate and planning to wait until rates come down before selling, leading to fewer newly listed homes than a year ago.”
One area of the market that is seeing more activity is new construction. Facing limited inventory of existing homes, some buyers are turning to newly built homes.
Mortgage applications decreased slightly last week, according to the Mortgage Bankers Association, with refinance and purchase activity both remaining well below year-ago levels.
“While MBA expects the ongoing uncertainty in the financial markets to keep mortgage rates volatile in the weeks ahead, we still anticipate they will fall, ending the year closer to 5.5%,” said Bob Broeksmit, MBA President and CEO.
by tyler | Apr 20, 2023 | CNN, homes
Mortgage rates rose this week, after five weeks of falling.
The 30-year fixed-rate mortgage averaged 6.39% in the week ending April 20, up from 6.27% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.11%.
“For the first time in over a month, mortgage rates moved up due to shifting market expectations,” said Sam Khater, Freddie Mac’s chief economist.
“Home prices have stabilized somewhat, but with supply tight and rates stuck above 6%, affordable housing continues to be a serious issue for many potential homebuyers,” he said. “Unless rates drop into the mid-5% range, demand will only modestly recover.”
Mortgage rates went higher than 5% for the first time since 2011 a year ago, and have remained over 5% for all but one week during the past year. Since then they have gone as high as 7.08%, last reached in November, and had been trending down since early March.
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.
Rates climbed up this week as 10-year Treasury yields climbed higher. As investors responded to economic indicators, bond yields ticked higher, taking mortgage rates with them.
“Mortgage rates are the product of the larger economic environment, including inflation and employment data as well as banking stability and the Federal Reserve’s actions,” said Hannah Jones, economic data analyst at Realtor.com. “Recent data points to a still-resilient, though cooling economy, leading many to believe the Fed will elect to raise the target rate at next month’s meeting.”
The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
Home buyers remain very sensitive to weekly changes in mortgage rates.
“Last week’s jump in mortgage rates led to a pullback in mortgage applications, as homebuyers remain sensitive to rate movements,” said Bob Broeksmit, CEO of the Mortgage Bankers Association. “The lack of housing inventory this spring buying season is also keeping many prospective buyers on the sidelines.”
While MBA expects mortgage rates to fall to around 5.5% by the end of this year, more housing supply is needed to improve affordability and meet demand, he said.
Last year’s persistent mortgage rate climb, combined with inflation and home price growth, led many buyers to retreat from the housing market, said Jones.
“While spring is typically a season marked by a lively housing market, this year is proving to be less energetic than previous ones,” she said.
Nevertheless, Jones added, buyer demand shows signs of improvement with each gain in affordability.
As a result, she said, “housing demand remains largely stifled as many buyers wait on the sidelines until the cost of purchasing a home becomes more doable.”
by tyler | Apr 13, 2023 | CNN, homes
Homebuyers are embracing mortgage rates dipping closer and closer to 6%. Rates fell for the fifth week in a row as inflation continues to ease.
The 30-year fixed-rate mortgage averaged 6.27% in the week ending April 13, down slightly from 6.28% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5%.
“Incoming data suggest inflation remains well above the desired level but showing signs of deceleration,” said Sam Khater, Freddie Mac’s chief economist. “These trends, coupled with tight labor markets, are creating increased optimism among prospective homebuyers as the housing market hits its peak in the spring and summer.”
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.
The economy continues to give off some mixed signals, but as long as inflation is cooling, it is good for mortgage rates.
The average rate dropped lower this week as bond yields bounced back from last week’s lows following economic data including last Friday’s jobs report that signaled a moderating, but still relatively strong job market, said Danielle Hale, Realtor.com chief economist.
This week’s inflation data, based on the March Consumer Price Index, left plenty of room for interpretation, she said.
“On the one hand, the fact that inflation is still running at more than twice the target level, and core inflation — which includes goods and services, excluding volatile food and energy — saw an uptick to 5.6% in March, highlights that the Fed still has more to do and may need to lift short-term rates again at its early May meeting,” said Hale.
“On the other hand, overall inflation slowed more notably, and even core inflation on a month-to-month basis eased somewhat, a sign that the Fed’s tightening is having the desired effect,” she added. “Even if the Fed needs to raise short-term rates a bit higher, we are very likely nearing the end of the tightening cycle.”
The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
“As long as the economy continues to see progress on inflation, that should help keep mortgage rates at the lower end of the 6% to 7% range that we’ve seen over the past few months,” Hale said. “However, any surprises in the data will likely lead to some volatility in that range.”
Even before the recent easing in mortgage rates, buyers and sellers registered some improvement in sentiment toward housing with higher levels of pending sales.
Recent drops in rates have brought in some buyers, and mortgage applications were up last week from the week before, according to the Mortgage Bankers Association.
“Prospective homebuyers responded to lower rates last week, leading to an 8% jump in applications to buy a home,” said Bob Broeksmit, MBA president and CEO. “The likelihood of even lower rates in the months ahead should lead to increased demand, despite recent signs of a slowing economy and tighter financial conditions.”
As long as the current dip in mortgage rates can be sustained, buyers will be on the hunt. That may pull more homeowners into the market as sellers, said Hale.
“Despite the huge shifts in market momentum, home sellers can count on the usual seasonal trends tipping the scales a bit further in their favor while home shoppers should expect a fair amount of competition that should ease as we move later into the year,” she said.
by tyler | Apr 13, 2023 | CNN, homes
Even as rents are cooling in some parts of the country, it has never cost more to rent a Manhattan apartment as it did in March.
Typically, rental activity builds from the spring to a peak in late summer, but median rent last month was the highest on record, according to a report from Douglas Elliman, a brokerage, and Miller Samuel, an appraisal and consultant firm.
The median cost of renting an apartment in Manhattan was $4,175 in March. That’s up 12.8% from a year ago and up 2% from February, and marks the highest since last July, when rent was $4,150.
A one bedroom apartment had a median rent of $4,150, up 9.6% from last year, while a two bedroom apartment had a median rent of $5,680, up 18.3% from a year ago. A studio apartment rents for a median price of $3,190, up 16% from last year.
While the median rent for all sizes of apartments taken together has reached a new high, this is not the skyrocketing rent rise seen in 2021, said Jonathan Miller, president and CEO of Miller Samuel.
“It isn’t a rocket ship,” he said of median rents. “It is just creeping higher and every so often it creeps high enough to reach a new high.”
The opposite of rising rents is not necessarily falling rents, it is stabilizing rents, Miller said. The price for new rentals has been bobbing along, not going way up or way down.
“It is part of a long process since the summer. There was expectation that rents would fall and that didn’t happen. Rents peaked last summer. Every month since then, they’ve been moving sideways,” he said. “With a modest increase, it was just enough to set a new record.”
A main driver for rents remaining strong in Manhattan in March is that mortgage rates have doubled from a year ago, making purchasing a home unaffordable for many buyers. In addition, the failure of some banks in March created uncertainty that may have encouraged some people considering buying to rent instead, pushing the prices higher, said Miller.
New leases in March were up 15.4% from last year, according to the report, and leasing activity jumped 20.5% from February.
“The drive in more leasing activity is parallel in the rise in mortgage rates that has continued to push people into the rental market,” said Miller. “Not just the unaffordability, but also the uncertainty.”
Listing inventory for rentals in Manhattan was near record lows a year ago and has been climbing higher. Inventory was up 40.5%, year over year, which enabled more leasing activity.
Even though inventory rose significantly, it is about 10% below long-term norms, Miller said.
Some renters appear to expect prices to climb, since more than half of renters in March opted for a two-year lease, rather than a one-year lease, said Miller.
“If you look at market share of two-year leases, 56.3%, that is the highest since June of 2021 during the rocket ship of rental activity,” said Miller. “What that says to me is that the consumer expects rents to rise going forward and they are locking in rent now as a protection.”
Renters may be on to something there, and can likely expect more highs ahead.
“We’re entering prime leasing season in an already tight market and seasonal pressure may force new records to occur,” Miller said. “I wouldn’t be surprised if we saw a few months where we see more record highs.”
by tyler | Apr 6, 2023 | CNN, homes
Homebuyers benefited from another week of falling mortgage rates, with the average rate dropping for the fourth week in a row, according to data from Freddie Mac released Thursday.
The 30-year fixed-rate mortgage averaged 6.28% in the week ending April 6, down from 6.32% the week before. A year ago, the 30-year fixed-rate was 4.72%.
“Mortgage rates continue to trend down entering the traditional spring homebuying season,” said Sam Khater, Freddie Mac’s chief economist. “Unfortunately, those in the market to buy are facing a number of challenges, not the least of which is the low inventory of homes for sale, especially for aspiring first-time homebuyers.”
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.
After hitting a 2022 high of 7.08% in November, rates started 2023 trending down. However, they climbed again in February, after robust economic data suggested the Federal Reserve was not done in its battle to cool the US economy and would likely continue hiking its benchmark lending rate.
The Fed raised interest rates by a quarter point at its most recent policymaking meeting, in an effort to continue to fight stubbornly high inflation while taking into account the risks to financial stability brought about by recent turmoil in the banking sector.
The fallout from the banking meltdown could lead to potentially stricter lending requirements and a “less hospitable borrowing environment,” said Hannah Jones, economic research analyst at Realtor.com, in a statement Thursday. “More expensive, stricter lending helps to usher in the long-term health of the economy, but the downside is that borrowing for large purchases, including a home purchase, may be relatively more challenging in the short term.”
“In response to recent bank instability, investors went searching for high land in the bond market, which nudged bond yields lower,” she said. “However, as the uncertainty in the financial sector waned, investors shifted away from bonds, pushing bond yields back up. Mortgage rates tend to move with the 10-year Treasury yield, which ticked up this week, but the spread between the two narrowed as mortgage rates moved down and the market continued to navigate ongoing economic uncertainty.”
“Potential buyers continue to face elevated mortgage rates and home prices, making buying less accessible than a year ago,” said Jones. “However, home prices continue to show signs of softening, a welcomed development for buyers. This week’s rate also creates an opportunity for potential buyers to dive in while rates are slightly lower. Pent-up housing demand is evident with every gain in affordability, whether it be softening prices or lower mortgage rates.”
