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Refinancing Picks Up Slightly. Overall Volume Still Flat
Wed, 10 Aug 2022 13:01:48 GMT

Mortgage applications rose slightly for the second week, driven by an increase in refinancing. The Mortgage Bankers Association (MBA) said its Market Composite Index for the week ended August 5 increased 0.2 percent on a seasonally adjusted basis. The Refinance Index was up 3.5 percent from the previous week, its largest gain since early June, but was 82 percent lower than the same week in 2021 . Refinance applications constituted to 32.0 percent of the total received during the week. The share was 30.8 percent the prior week. [refiappschart] Purchase applications declined 1 percent week-over-week on a seasonally adjusted bases and 2 percent before adjustment. That index was 19 percent lower than the same week one year ago. [purchaseappschart] “Mortgage rates remained volatile last week – after drops in the previous two weeks, mortgage rates ended up rising four basis points. Mortgage applications were relatively flat, with a decline in purchase activity offset by an increase in refinance applications,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The purchase market continues to experience a slowdown, despite the strong job market. Activity has now fallen in five of the last six weeks, as buyers remain on the sidelines due to still-challenging affordability conditions and doubts about the strength of the economy .” Added Kan, “Refinance applications increased over three percent but remained more than 80 percent lower than a year ago in this higher rate environment.”

Record Drop in Price Growth - Mortgage Monitor
Mon, 08 Aug 2022 19:45:29 GMT

It will be a few weeks before we get the next installment of the bellwether home price indices (Case Shiller and FHFA), but today's Mortgage Monitor from Black Knight has an earlier look at June's results.   Much like FHFA and Case Shiller, Black Knight's data for May had shown year-over-year appreciation that still looked reluctant to move too far under 20%.  19.3% was the official tally (Case Shiller was still over 20% and FHFA had fallen to 18.3%).   Today's release shows a much sharper deceleration in June with the annual pace falling to 17.3%.  While that's by far and away the largest decline since record-keeping began in the 1970s, there is at least one incredibly important caveat.  Simply put, the price growth leading up to these declines also set records.  As such, any remotely quick return to normalcy will end up producing huge declines. Moreover, let's not overlook the fact that 17.3% is still a staggeringly high year-over-year appreciation rate. It didn't even break above 15% during the housing boom in the mid 2000s that contributed to the financial crisis. Of course this is just the national average.  Results vary widely by metro area, with several already more than 10% off their recent peak annual growth rate. The price decline speaks to the broader issues of affordability, both due to rampant post-pandemic appreciation and the abrupt surge toward higher mortgage rates in 2022.  The net affect, unsurprisingly, is noticeable shift in inventory levels in certain metro areas.  Some are back to 2017-2019 levels while the national average is still down more than 50%.

Post FOMC Rate Drop Spurred Application Volume Last Week
Wed, 03 Aug 2022 13:02:21 GMT

Mortgage application activity rose last week, reversing a series of declines that started in late June. The increase was modest; the Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, ticked up 1.2 percent on a seasonally adjusted basis, but both purchasing and refinancing volumes moved higher. On an unadjusted basis, the Composite Index increased 1 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week, although it was still 82 percent lower than the same week one year ago. The share of applications that were for refinancing grew to 30.8 percent from 30.7 percent the previous week. The Purchase Index rose 1 percent both before and after seasonal adjustment. The unadjusted index was 16 percent lower than the same week one year ago. “Mortgage rates declined last week following another announcement of tighter monetary policy from the Federal Reserve, with the likelihood of more rate hikes to come,” according to Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Treasury yields dropped as a result, as investors continue to expect a weaker macroeconomic environment in the coming months. The 30-year fixed rate saw the largest weekly decline since 2020, falling 31 basis points to 5.43 percent. The drop in rates led to increases in both refinance and purchase applications, but compared to a year ago, activity is still depressed. Lower mortgage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity.”

June’s Monthly Price Gain Finally Showing Some Deceleration
Tue, 02 Aug 2022 17:46:14 GMT

While annual price increases are still wildly aggressive, monthly gains indicate that the brakes may be on. CoreLogic says nationwide, home prices were up 18.3 percent in June compared to a year earlier, the 125th straight annual gain, however, the monthly change decelerated for the second time. The gain in CoreLogic’s Home Price Index (HPI) from May to June was 0.6 percent compared to the April to May growth of 1.8 percent. The company projects significant slowing in appreciation over the next year, although this has been their expectation for some time. The CoreLogic HPI Forecast indicates that home prices will increase another 0.6 percent from June 2022 to July 2022 but will only rise 4.3 percent by June 2023. Selma Hepp, CoreLogic’s Deputy Chief Economist, said “Signs of a broader slowdown in the housing market are evident, as home price growth decelerated for the second consecutive month. This is in line with our previous expectations and given the notable cooling of buyer demand due to higher mortgage rates and the resulting increased cost of homeownership. Nevertheless, buyers still remain interested, which is keeping the market competitive — particularly for attractive homes that are properly priced.” This graph shows a comparison of the national year-over-year percent change for the CoreLogic HPI and CoreLogic Case-Shiller Index from 2000 to present month with forecasts one year into the future. We note that both the CoreLogic HPI Single Family Combined tier and the CoreLogic Case-Shiller Index are posting positive, but moderating year-over-year percent changes, and forecasting gains for the next year.

Pending Sales Trending Downward, With a Possible Silver Lining
Wed, 27 Jul 2022 17:47:05 GMT

Pending home sales broke out of a seven-month slump in May, gaining 0.7 percent. If this were baseball, we might now call it a “balk.” The National Association of Realtors® (NAR) announced this morning that its June Pending Home Sales Index (PHSI) plunged 8.6 percent.  The index fell from 99.9 in May to 91.0, leaving it 20 percent lower than in June 2021. NAR said the reversal came “as escalating mortgage rates and housing prices impacted potential buyers.” The PHSI, based on new contracts for the purchase of existing residential units, is a leading indicator of closed sales of single-family houses, condominiums, and cooperative apartments over the following one to two months. An index of 100 is equal to the level of contract activity in 2001. [pendinghomesdata] “Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” said NAR Chief Economist Lawrence Yun. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.” Analysts may have thought the May PHSI was already signaling such stabilization. Those polled by Econoday had expected the index to decline by only 1.0 percent. Trading Economics had been slightly closer to the mark with a forecast of -2.1 percent. According to NAR, buying a home in June was about 80 percent more expensive than in June 2019. Nearly a quarter of buyers who purchased a home three years ago would be unable to do so now because they no longer earn the qualifying income to buy a median-priced home today.

Application Volumes Rival Early Pandemic Levels
Wed, 27 Jul 2022 12:55:48 GMT

The number of applications for residential mortgages retreated for the fourth consecutive period during the week ended July 22 according to the Weekly Mortgage Applications Survey produced by the Mortgage Bankers Association (MBA). The MBA’s Market Composite Index, a measure of mortgage loan application volume, decreased 1.8 percent on a seasonally adjusted basis from the prior week and was 2 percent lower on an unadjusted basis. The Refinance Index decreased 4 percent week-over-week and was 83 percent lower than the same week one year ago. The refinance share of mortgage activity faded to 30.7 percent from 31.4 percent. [refiappschart] The Purchase Index declined 1 percent and 0.4 percent on an adjusted and unadjusted basis, respectively. It was 18 percent below its level at the same time in 2021. [purchaseappschart] Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said last week’s mortgage activity brought the Index to its lowest point since February 2000. “Increased economic uncertainty and prevalent affordability challenges are dissuading households from entering the market, leading to declining purchase activity that is close to lows last seen at the onset of the pandemic,” he said “Weakening purchase applications trends in recent months have been consistent with data showing a slowdown in sales for newly constructed homes and existing homes. A potential silver lining for the housing market is that stabilizing mortgage rates and increases in for-sale inventory may bring some buyers back to the market during the second half of the year.”

Home Price Gains Ease but Expected to Finish Year in Double Digits
Tue, 26 Jul 2022 16:42:10 GMT

The pace of home price increases slowed slightly from April to May, but the change in each of the three S&P CoreLogic Case-Shiller indices and the Federal Housing Finance Agency’s (FHFA’s) House Price Index was less than 1 percentage point. Case-Shiller’s National Home Price Index which covers all nine census divisions was up 19.7 percent compared to May 2021. Its 0.9-point deceleration from the annual rate in April was the largest for any of the indices . The 10-City Composite grew 19.0 percent on an annual basis compared to 19.6 percent in April, and the 20-City Composite slowed to 20.5 percent from 21.2 percent the month before. Tampa, Miami, and Dallas reported the highest year-over-year gains among the 20 cities in May. Tampa led the way for the third consecutive month with a 36.1 percent year-over-year price increase. Miami was second with a 34.0 percent gain, followed by Dallas at 30.8 percent. Four of the 20 cities tracked reported higher price increases in the year ending May 2022 versus the year ending April 2022. On a monthly basis the National Index was up 1.5 percent on a seasonally adjusted basis and 1.0 percent unadjusted. The seasonally adjusted 10-City and 20-City Composites posted increases of 1.4 percent and 1.5 percent, and both were 1.3 percent higher before adjustment. All 20 cities reported increases before and after seasonal adjustments. CoreLogic Deputy Chief Economist Selma Hepp said that, while higher mortgage rates and growing recession concerns dampened homebuyer demand in June, it remains robust in parts of the country. She expects price growth to slow but said it is likely to remain in double digits through the remainder of this year.”  

New Home Sales Fall Below 600K
Tue, 26 Jul 2022 15:33:15 GMT

New home sales fell again in June, more than wiping out the increase posted for May. The U.S. Census Bureau and the Department of Housing and Urban Development said sales during the month were at a seasonally adjusted annual rate of 590,000 units. This was an 8.1 percent retreat from the estimated 642,000 rate in May, a revision from the 696,000-unit rate originally reported. June sales were down 17.4 percent from those a year earlier. [newhomesall] The consensus estimates from analysts were considerably higher than reality. Those polled by Trading Economics has expected a rate of 660,000 while the Econoday expectations were slightly lower at 664,000. On a non-adjusted basis there were 49,000 newly constructed homes sold during the month,10,000 fewer than in May. For the year-to-date, sales are down 13.4 percent from the same period in 2021 at 372,000 units. At the end of June where were an estimated 463,000 new homes for sale, a 9.4-month supply at the current sales pace. A year earlier the 350,000-home inventory was estimated at a 5.8-month supply. The median sales price in June was $402,400 and the average was $456,800. In June 2021, the relative sales prices were $374,700 and $431,900. [newhomeprices] Sales were down in three regions but rose significantly in the Midwest , an increase of 42.3 percent. They were down 5.3 percent in the Northeast, 2.0 percent in the South, and 36.7 percent in the West. All four regions are lagging on a year-to-date basis, ranging from -9.6 percent in the West to 24.8 percent in the Midwest.

Existing Home Inventory UP Year-Over-Year For The First Time in 3 Years
Wed, 20 Jul 2022 18:52:52 GMT

The National Association of Realtors (NAR) reported that June saw the 5th consecutive monthly decline in Existing Home Sales today.  The annual pace of sales came in at 5.12 million, well short of the consensus (5.38m) and 5.4% lower than May's 5.41m reading.  In the grand scheme of things, sales were already back in line with pre-pandemic levels over the last 2 months.  Today's release leaves them near the lower end of the range seen from 2015-2019, but sharply lower from the post-covid peaks around 6.5m. One major gripe about home sales (and one major explanation for an epic surge in home values) over the past two years is the broad notion of "inventory."  In other words, there weren't enough homes on the market to match the level of demand.   Even now, inventory levels remain historically low.  That was a problem that was only getting worst until the first part of 2021 when rates began to move noticeably higher from all-time lows.  Since then, inventory was still shrinking in year over year terms, but by smaller and smaller amounts.  Today's report is significant because it's the first time since mid 2019 that inventory has increased year-over-year. The following charts from Redfin's market data center show other ways to visualize the same phenomenon.  The first is the outright level of active listings in markets it covers.  Notice the black line (2022) overtaking the orange line (2021), but still very low compared to the 2019 and 2020

Normal Contraction Patterns Leave Mortgage Apps at 22 Year Low
Wed, 20 Jul 2022 14:24:23 GMT

The Mortgage Bankers Association (MBA) said today that its Market Composite Index, a measure of mortgage loan application volume, fell again during the week ended July 15. The Index declined 6.3 percent on a seasonally adjusted basis but was 17 percent higher than the prior week on an unadjusted basis. The week ended July 8 had been impacted by the Independence Day holiday. The Refinance Index decreased 4 percent from the previous week and was 80 percent lower than the same week one year ago although the refinancing portion of applications did increase. The share was 31.4 percent, up from 30.8 percent the previous week. The seasonally adjusted Purchase Index decreased 7 percent, although it was 16 percent higher before adjustment. The Index was 19 percent lower than the same week in 2021. "It's easy to spin scary headlines when it comes to mortgage apps right now," said Matt Graham, CEO of originator rate-tracking platform MBSLive.net, "Times are tough.  Apps are indeed at 22 year lows, but the drop has followed normal patterns for both purchases and refis." Graham added, "compared to the post-covid boom, purchase apps are indeed very low, but unlike the case for refi apps, we've seen worse as recently as 2016, not including the initial covid lockdown period, which we generally disregard when looking back at econ data." “Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs.”   

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