Home Loan Demand Suggests Strong Spring

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes is 27 percent higher than it was at the same time last year. This indicates that this spring’s selling season could be even stronger than last year’s. That is encouraging news, especially since recent economic data has suggested activity is slowing. But despite the annual gain, demand for mortgage applications was down 4.8 percent from the week before. The decline was mostly due to a 7 percent drop in the number of borrowers looking to refinance. Refinance activity is usually more volatile than purchase demand – and more sensitive to rate fluctuations. Last week’s dip happened, however, during a week when mortgage rates were down. In fact, the average contract interest rate for 30-year fixed-rate mortgages with both conforming and jumbo balances fell from the week before. So did average rates on loans backed by the Federal Housing Administration. Joel Kan, MBA’s associate vice president for forecasting and industry surveys, says many years of lower-than-normal mortgage rates has reduced the number of homeowners that can benefit from refinancing. “Applications for both conventional and government refinance loans decreased, as the supply of borrowers who could benefit from rates at this level begins to diminish,” Kan told CNBC. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Skyrocketing Rent Creates Home Buyers

A recently conducted survey of prospective home buyers found that rising rent was cited by 25 percent of respondents as the reason they were looking to buy a home. The only answer more common was a major life event, such as the birth of a child or marriage. That an increasing number of potential home buyers named the cost of renting as their main motivation for buying a house should come as no surprise. Over the past few years, the single-family rental market has boomed, driving rent upward. And though home prices have also been rising, in many markets buying a home is still the more affordable choice. But buyers are thinking about more than just affordability. Prospective buyers also expressed concern that a lack of homes available for sale will make it difficult for them to find a house to buy. In fact, the number of participants who said inventory was a concern has risen 4 percent since the last quarter of 2015. And with fewer homes to choose from, potential buyers are also worried about competition from other buyers, bidding wars, and sticking to their budget. Overall, though, the survey found potential house hunters are more inclined to buy this year than they were last year, with 33 percent of respondents saying they are ready to buy now – up 5 percent from last summer. More here.

Pending Sales See 17th Straight Annual Gain

Though sales estimates can be volatile from month-to-month, the numbers can be a bit more clear when looked at year-over-year. For example, the National Association of Realtors’ Pending Home Sales Index – which measures the number of contracts to buy homes signed during the month – fell 2.5 percent in January from December’s estimate. But, despite the decline, contract signings were up over year-before levels for the 17th consecutive month – an indication that sales continue to strengthen. Because of this, January’s slowdown isn’t likely cause for concern. Lawrence Yun, NAR’s chief economist, says there were many reasons for the dip. “While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” Yun said. “Additionally, some buyers could be waiting for a hike in listings come springtime.” But, though spring is traditionally the time homeowners put their homes up for sale, Yun says low inventory will not improve until home builders begin building more new homes at lower price points. More here.

How The Vacancy Rate Affects Home Buyers

There are nearly 85 million residential properties in the United States. How many of those properties are available to potential buyers determines, in part, whether or not home prices rise or fall. When there are a lot of homes available for sale, buyers will be able to find better deals. When there are fewer homes on the market, sellers will benefit. One way to determine where home prices might be headed is to keep an eye on inventory levels and the vacancy rate. For example, RealtyTrac recently released its Q1 2016 U.S. Residential Property Vacancy Analysis. According to their numbers, there were more than 1.3 million vacant properties at the beginning of February. That’s down 9.3 percent from their last analysis in the third quarter of 2015. But, though fewer vacant homes seems like a positive development, too few vacancies can put upward pressure on prices. RealtyTrac vice president, Daren Blomquist, says low inventory levels around the country are pushing prices higher. “With several notable exceptions, the challenge facing most U.S. real estate markets is not too many vacant homes but too few,” Blomquist said. “The razor-thin vacancy rates in many markets are placing upward pressure on home prices and rents.” More here.

New Home Sales Slide In January

Sales of new single-family homes fell 9.2 percent in January, according to new estimates from the U.S. Census Bureau and the Department of Housing and Urban Development. The decline follows an unexpected December increase of nearly 11 percent and puts sales 5.2 percent below year-ago levels. New home sales estimates tend to be volatile from month-to-month and some of the decrease can be explained by this. After all, the previous month’s surge was nearly equal to the size of January’s slide. Still, a look at regional results can further explain the decline. For example, sales were actually up in the Northeast and South. However, a 32.1 percent drop in the West – combined with falling sales in the Midwest – negated those gains and pulled overall numbers downward. Also in the report, the median sales price of new homes sold in January was $278,800; the average sales price was $365,700. At the end of the month, there was a 5.8-month supply of new homes available for sale at the current sales rate. More here.

Purchase Application Demand Moves Higher

Demand for loans to buy homes moved higher last week, according to the Mortgage Bankers Association’s Weekly Applications Survey. The 2 percent increase means purchase application demand is now 27 percent higher than it was at the same time last year. That is significant because mortgage loan demand is typically a good indicator of future home sales – so the improvement could indicate a strong upcoming spring sales season. Overall, mortgage application demand fell 4.3 percent, however, due to a drop in refinance activity. Average mortgage rates were up across all loan categories, including 30-year fixed-rate mortgages with both jumbo and conforming balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. The rate increase caused the number of borrowers seeking to refinance to fall 8 percent. Michael Fratantoni, MBA’s chief economist, said the decline was mostly seen on loans with higher balances. “The dollar volume of refinance applications decreased by 26 percent, while refinance applications based on loan count decreased 17 percent, indicating that the volume of larger loans dropped to a greater extent than smaller loans,” Fratantoni told CNBC. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Existing Home Sales Rise 11% Over Last Year

Sales of previously owned homes were relatively flat in January, according to new estimates from the National Association of Realtors. In fact, sales rose just 0.4 percent from December. But despite being virtually unchanged from the month before, home sales were at their strongest pace in six months and are now 11 percent higher than at the same time last year. Lawrence Yun, NAR’s chief economist, says sales started the year on solid footing. “The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints,” Yun said. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.” And, though flat overall, a closer look at January’s sales data shows that regional results were varied. For example, sales were up 4 percent in the Midwest and 2.7 percent in the Northeast. At the same time, sales of previously owned homes were unchanged in the South and dropped 4.1 percent in the West. More here.

Gov’t Housing Scorecard Shows Strength

The Department of Housing and Urban Development collects and analyzes key housing data each month in an effort to measure government programs put in place to help stabilize the housing market following the financial crisis. The Housing Scorecard provides information on home prices, new and existing home sales, foreclosure mitigation efforts, delinquencies, equity, etc. According to the most recent release, the housing market had a strong 2015 and ended the year on the upswing. For example, sales numbers show new home sales rose 14.6 percent last year over 2014, while existing home sales had their best year since 2006. At the same time, the number of delinquent prime mortgage loans fell 16.7 percent from one year earlier and seriously delinquent loans were down even further, dropping nearly 30 percent. But while low mortgage rates and a stronger economy boosted demand and helped struggling homeowners, improved conditions also brought higher home prices. In fact, home prices are now 27 percent above their low point, reached in March 2011. At the end of last year, they were about 5.5 percent higher than the year before and at their highest level since 2007. But despite the encouraging news, the report cautions that there is still work to be done to help underwater homeowners, further reduce mortgage delinquencies, and foster home sales. More here.

Global Woes Haven’t Hurt Housing Health

In today’s world, everything is connected. Because of this, global economic conditions can impact the U.S. economy and housing market. And, according to Fannie Mae’s latest Economic and Housing Outlook from their Economic & Strategic Research Group, the economy does appear to have slowed in response to sluggish global markets. However, Doug Duncan, Fannie Mae’s chief economist, says the housing market should still improve despite the headwinds. “We expect our 2016 theme ‘housing affordability constrains as expansion matures’ to hold true as home price gains are likely to outpace household income growth as the year continues,” Duncan said. “However, the expected increase in home prices should help lift underwater mortgages and create a healthier housing market. Meanwhile, increased household formation, low mortgage rates, and easing credit standards and more access to credit for residential mortgages are positive factors for a continued housing expansion.” Duncan also says builders should be able to build new single-family homes at a faster pace this year, which should help moderate price increases and provide more options for prospective buyers. In short, though there has been a lot of economic uncertainty in the news lately, the housing market still appears to be on solid footing. More here.

New Home Construction Down In January

The number of new homes being built in any particular area is a good indicator of how well the local housing market and economy are doing. In short, when the economy is up, more new homes will be built because there will be more people looking to buy. Because of this, the U.S. Census Bureau and the Department of Housing and Urban Development track new residential construction numbers each month. According to their most recent release, the number of single-family homes that began construction during the month of January was down 3.9 percent from the month before. The drop was unexpected but appears to be due to harsh winter weather in the Northeast. In fact, a closer look at the numbers shows the region suffered a 14.1 percent slide, while the South and West – where weather is less of a factor – were essentially flat from one month earlier. In addition, building permits, which are a good indictor of future housing starts, were also relatively flat from December’s numbers. Because the decline was likely due to heavy snowfall during the month, analysts expect the downturn to be temporary. More here.