As mortgage rates continued to climb, mortgage applications took their biggest hit since mid-April. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 6.0 percent on both a seasonally adjusted and unadjusted basis compared to the previous week. The Refinance Index dropped by 7.0 percent and was 11 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 31.7 percent of total applications from 31.9 percent the previous week. [refiappschart] There was also a 6.0 percent decrease in the seasonally adjusted and unadjusted Purchase indices. This drove the unadjusted index to a level 22 percent lower than the same week one year ago. [purchaseappschart] “Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields. Rates for all mortgage products increased, with the 30-year fixed mortgage rate increasing for the fourth consecutive week, up to and above 7.53 percent – the highest rate since 2000,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result, mortgage applications ground to a halt, dropping to the lowest level since 1996. The purchase market slowed to the lowest level of activity since 1995, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the market. ARM loan applications picked up over the week and the ARM share increased to 8 percent, as some borrowers searched for ways to lower their payments.”
A tempest in a teapot or the start of an uprising? Redfin, the publicly owned Seattle-based real estate company with 50 offices nationwide, announced on Monday it is walking away from the National Association of Realtors (NAR). The company, in a letter published on its website, said it was moving to end its association with NAR. The letter, signed by CEO Glenn Kelman and seven other members of Redfin’s leadership team, said it was making the change because of NAR policies requiring a commission be paid to the buyer’s agent on every listing and “a pattern of alleged sexual harassment.” In August, the New York Times reported that a number of NAR employees had come forward with claims of sexual harassment, discrimination and retribution at the association’s Chicago headquarters and local offices. Many of the complaints involved former NAR president Kenny Parcell. Both NAR and Parcell denied the allegations. Parcell quit shortly after the article was published. Redfin said it had resigned its national board seat in June, before the alleged sexual harassment came to light, because of NAR’s policies on commissions and its prohibition on websites like Redfin.com from showing for-sale-by-owner homes. “Removing these blocks would be easy, and it would make our industry more consumer-friendly and competitive,” the letter said. Redfin said it will now require its brokers and agents to leave NAR wherever possible but because of the independent agent nature of most brokerages “they don’t want to impose a policy that could alienate any of the people who generate its revenue.” However, NAR rules require that Redfin also leave local and state associations even though its beef is only with the national group. In about half of Redfin’s markets, losing membership will mean loss of access to listing databases, lockboxes, and industry-standard contracts. “It’s impossible to be an agent if you can’t see which homes are for sale, or unlock the door to those homes, or even write an offer.”
Pending home sales failed to add a third month onto the mini rally it staged in June and July. The National Association of Realtors® (NAR) said its Pending Home Sale Index (PHSI) declined 7.1 percent to 71.8 in August and is now down 18.7 percent from its August 2022 level. The PHSI ended a three-month decline in June, rising 0.3 percent followed by a 0.9 percent increase in July. [pendinghomesdata] The PHSI is based on contracts signed during the month to purchase existing single-family houses, condos, and cooperative apartments. It is a leading indicator of those sales which are expected to close over the following 30 to 60 days. NAR will report September's existing sales on October 19. “Mortgage rates have been rising above 7 percent since August, which has diminished the pool of home buyers,” said Lawrence Yun, NAR chief economist. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.” “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market ,” added Yun. The index in all four of the nation’s major regions declined compared to both July and to the prior August. The Northeast PHSI was down 0.9 percent to 62.6 and was 18.2 percent lower on an annual basis. The index for the Midwest lost 7.0 percent and 19.1 percent compared to the two earlier periods to a reading of 71.3.
The highest mortgage rates in 20+ years drove another decline in mortgage applications during the week ended September 22. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier and fell by 2.0 percent on an unadjusted basis. The Refinance Index decreased 1.0 percent from the previous week and was 21 percent lower than the same week in 2022. The refinance share of mortgage activity grew to 31.9 percent of total applications from 31.6 percent the previous week. [refiappschart] The Purchase Index was 2.0 percent lower than the prior week on both a seasonally adjusted and unadjusted basis and was down 27 percent compared to the same week one year earlier. [purchaseappschart] According to Joel Kan, MBA’s Vice President and Deputy Chief Economist, “Mortgage rates moved to their highest levels in over 20 years as Treasury yields increased late last week. The 30-year fixed mortgage rate increased to 7.41 percent, the highest rate since December 2000, and the 30-year fixed jumbo mortgage rate increased to 7.34 percent, the highest rate in the history of the jumbo rate series dating back to 2011. Based on the FOMC’s most recent projections, rates are expected to be higher for longer, which drove the increase in Treasury yields. “Overall applications declined, as both prospective homebuyers and homeowners continue to feel the impact of these elevated rates,” he said. “The purchase market, which is still facing limited for-sale inventory and eroded purchasing power, saw applications down over the week and 27 percent behind last year’s pace. Refinance activity was down over 20 percent from last year and accounted for approximately one third of applications, as many homeowners have little incentive to refinance.”
August sales of newly constructed single-family homes failed to match the robust numbers from July but were significantly better than those a year earlier. The U.S. Census Bureau and Department of Housing and Urban Development said last month’s sales were at a seasonally adjusted annual rate of 675,000, the lowest since March and an 8.7 percent decline from July’s revised estimate (from 714,000) of 739,000 units. The August results were 5.8 percent higher than the 638,000-unit rate in August 2022. The August results did not meet the consensus estimates from either Econoday (699,000 annual units) or Trading Economics (700,000). Robert Dietz, chief economist for the National Association of Home Builders said of the report, “Builders continue to grapple with supply-side concerns in a market with poor levels of housing affordability. Higher interest rates (the average was over 7 percent) price out demand, as seen in August, but also increase the cost of financing for builder and developer loans, adding another hurdle for building.” On an unadjusted basis, there were 54,000 homes sold during the month, down from 61,000 in July. Over the first eight months of 2023, sales of new homes have totaled 474,000 compared to 466,000 at the same point last year. Sale prices have fallen slightly in the last 12 months. The median price in August was $430,300, $10,000 lower year-over-year. The average price has dropped from $530,800 to $514,000.
Home prices have resumed their upward climb despite mortgage rates that have doubled post-COVID. According to Craig J. Lazzara, Managing Director at S&P CoreLogic Case-Shiller Indices, the National Index for July hit an all-time high. That index, which covers all nine U.S. census divisions, rose 1.0 percent from the previous July, after posting zero change on an annual basis in June. The 10-City Composite showed an increase of 0.9 percent after a 0.5 percent loss the previous month and the 20-City Composite was up 0.1 percent, improving from an annual loss of 1.2 percent. Chicago, Cleveland, and New York led the way for the third consecutive month reporting the highest year-over-year gains among the 20 cities in July. Chicago remained in the top spot with a 4.4 percent increase, with Cleveland (which has long vied with Detroit for the low spot in Case-Shiller’s numbers) was second, with a 4.0 percent annual gain. New York held down the third spot with a 3.8 percent increase. Eight of 20 cities reported lower prices and 12 of 20 reported higher prices in the year ending July 2023 compared to prior annual numbers. Eighteen of the 20 cities accelerated at a higher rate than in June. Lazzara said, “We have previously noted that home prices peaked in June 2022 and fell through January 2023, declining by 5.0 percent in those seven months. The increase in prices that began in January has now erased the earlier decline, so that July represents a new all-time high for the National Composite. Moreover, this recovery in home prices is broadly based. As was the case last month, 10 of the 20 cities in our sample have reached all-time high levels. In July, prices rose in all 20 cities after seasonal adjustment and in 19 of them before adjustment.
Mortgage application activity bounced back from the holiday-shortened prior week but is still running significantly below historic levels. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, increased 5.4 percent on a seasonally adjusted basis during the week ended September 15. On an unadjusted basis, the Index increased 16 percent compared with the week that started with Labor Day. The Refinance Index rose 13 percent week-over-week and was 29 percent lower than the same week in 2022. The refinance share of mortgage activity increased to 31.6 percent of total applications from 29.1 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index gained 2.0 percent compared to the prior week. The unadjusted Purchase Index increased 12 percent and was 26 percent lower than the same week one year ago. [purchaseappschart] “Mortgage applications increased last week, despite the 30-year fixed rate edging back up to 7.31 percent – its highest level in four weeks,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications increased for conventional and FHA loans over the week but remained 26 percent lower than the same week a year ago, as homebuyers continue to face higher rates and limited for-sale inventory , which have made purchase conditions more challenging. Refinance applications also increased last week but are still almost 30 percent lower than the same week last year.”
Results of the August Residential Construction report from the U.S. Census Bureau and the Department of Housing and Urban Development were decidedly mixed. While permits were issued at a rate higher than anticipated, housing starts sunk to the lowest level since June 2020, Construction was started on residential units at a seasonally adjusted annual rate of 1.283 million, an 11.3 percent decline from the July level of 1.447 million units. Further, the earlier results represent a downward revision from the original estimate of 1.452 million. Both Econoday and Trading Economics had consensus forecasts of 1.44 million units. Starts were 14.8 percent lower than in August 2022. Single-family starts were down 4.3 percent from July to an annual rate of 941,000. This, however, was 2.3 percent higher than the level a year prior. Multifamily starts plunged 26.3 percent month-over-month and 41.0 percent on an annual basis to a rate of 334,000 units. Permits for residential construction rose to a seasonally adjusted rate of 1.543 million units, a 6.9 percent increase from the 1.443 million rate in July and the highest level in ten months. Permits were, however, still down 2.7 percent on an annual basis. The number was about 100,000 units higher than consensus estimates. Construction permits were issued for 949,000 single-family homes on an annualized basis, a 2.0 percent increase from July and 7.2 percent more than a year earlier. Multifamily permits were 14.8 percent higher than the prior month but, at an annualized 535,000 units, down 17.7 percent from August 2022.
The National Association of Home Builders (NAHB) said on Monday that its index that measures home builder confidence in the new home market has fallen below the halfway mark for the first time since April. The NAHB/Wells Fargo Housing Market Index declined 5 points in December. Coupled with its 6-point drop in August, the index has erased five months of gains. NAHB chief economist Robert Dietz said, “The two-month decline in builder sentiment coincides with when mortgage rates jumped above 7 percent and significantly eroded buyer purchasing power. And on the supply-side front, builders continue to grapple with shortages of construction workers, buildable lots and distribution transformers , which is further adding to housing affordability woes. Insurance cost and availability is also a growing concern for the housing sector.” Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All three major HMI indices posted declines in September and two of the three are now below the break-even point. The HMI indices gauging current sales conditions and those over the next six months each fell 6 points to 51 and 49 respectively. The component measuring traffic prospective buyer traffic was down 5 points to 30.
The Mortgage Bankers Association (MBA) said the volume of mortgage applications dipped slightly during the week ended September 8. MBA said its Market Composite Index, a measure of that volume, decreased 0.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index dropped 12 percent during the week, which was shortened by the Labor Day holiday. The Refinance Index declined 5 percent week-over-week and was 31 percent lower than the same week in 2022. The refinance share of mortgage activity was 29.1 percent compared to 30.0 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index rose 1 percent but fell 11 percent before adjustment. Activity was 27 percent lower than the same week one year ago. [purchaseappschart] “Mortgage applications decreased for the seventh time in eight weeks, reaching the lowest level since 1996 ” according to d Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Last week’s decline driven by a 5 percent drop in refinance applications to the weakest reading since January 2023. The 30-year fixed mortgage rate increased to 7.27 percent last week and was 40 basis points higher than where it was in late July. Purchase applications increased over the week despite the increase in rates, pushed higher by a 2 percent gain in conventional loans. Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate .”