Tag Archives: Mortgage Rates

Housing still hoping to gain momentum

Michael J. Berens

Wednesday, August 24, 2016

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Housing still hoping to gain momentum

Slow but steady is the current prognosis for the housing industry. Housing starts are up for the first seven months of the year, but month-to-month gains have remained flat for the past four months. Meanwhile, requests for single-family permits have declined, which could mean fewer new starts in the months ahead.

Nonetheless, builders and housing experts expect the industry will continue to experience modest growth in the second half of the year.

Overall, housing showed signs of improvement in July. The U.S. Department of Commerce announced that housing starts (in number of units) rose 2.1 percent, compared to June, reaching their highest reading since February. Most of the gain was in the multifamily sector, which was up 5 percent. New single-family starts stayed positive but flat, nudging up only 0.5 percent. Applications for new permits slipped slightly (0.1 percent) but were 0.9 percent above a year ago.

Similarly, Dodge reports residential construction (in dollars) increased 3 percent in July over June. Again, the strongest gains were in multifamily, which jumped 9 percent, while single-family construction ticked up just 1 percent. Multifamily also was the strongest performer on the Architecture Billings Index for July, says the American Institute of Architects.

According to the National Association of Home Builders’ Leading Market Index for the second quarter of 2016, average economic and housing activity nationwide is now at 97 percent of “normal,” with 91 percent of markets showing year-over-year improvements. For housing, that means single-family permits and housing prices are nearly at 2000-2003 levels.

However, the boost has come mainly from rising housing prices. Permits as yet have rebounded only to 50 percent of “normal” activity. Realtor magazine relates sales of existing homes “heated up” in July, fueled by an increase in inventory (due to rising housing prices) and historically low mortgage rates.

More millennials in the 25- to 34-year-old age range were actively looking to purchase a home, as well. Qualifying for a mortgage and a shortage of affordable properties continue to be hurdles for many would-be first-time homebuyers, though. That, in turn, is driving the need for rental housing, which is pushing the demand for multifamily units.

Despite the rather mixed bag of favorable and concerning indicators, the industry outlook remains positive. Builder confidence, as measured by the NAHB’s Housing Market Index, was up two points in August, buoyed by improving employment and economic news. Builders were slightly more optimistic (up one point) about sales expectations for the next six months.

A joint forecast by economists from the Associated Builders and Contractors, AIA and NAHB predicts the industry will end the year maintaining its current level of a 10-plus percent increase over last year, and will continue to see gradual, modest growth in 2017.

In its National Residential Economic Report for the second quarter of 2016, MetroStudy forecasts the total number of residential permits will exceed that of 2015 by year’s end. For the longer term, it foresees an overall healthy housing market during the next five years, with valuations increasing and demand outpacing supply.

Unless some change occurs either in household income or home prices, affordability will remain on a drag on the industry’s efforts to accelerate growth.

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at

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Inventory boost lifts home sales

Michael J. Berens

Wednesday, November 28, 2018

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Inventory boost lifts home sales

More buyers looked favorably on the housing market in October, encouraged by a greater number of homes for sale, continued slowing in home prices, and a temporary decline in mortgage rates.

Existing home sales posted their first month-over-month positive growth in six months. New home sales, on the other hand, plummeted to their lowest point in over three-and-a-half years, even as inventories increased and prices dropped. Riding the same downward trajectory, construction of new homes also declined for the second month in a row.

Although the number of existing homes for sale decreased slightly from the end of September to the end of October, available inventory was up from the same period a year ago, according to the National Association of Realtors (NAR).

Real estate website Zillow reports that total available inventory in the metro areas it tracks rose 3 percent year-over-year in October, the first time in four years it has exceeded 1 percent growth. Availability was not widespread, however, with metro areas in California, for example, reporting big gains.

Home prices remain high, but the pace at which prices have been increasing has been slowing over the past six months due to weak sales. According to the latest S&P CoreLogic Case-Shiller home price index, prices in October were 5.1 percent higher than a year ago, down from 5.5 percent in September. The NAR stated the median price of an existing home was 3.8 percent higher than in October 2017, down from 4.2 percent year-over-year in September.

Along with increased inventory and easing prices, some buyers in late October would have been able to take advantage of a temporary dip in mortgage rates that occurred in response to turbulence in the stock and bond markets. That may have provided an added incentive to commit to a purchase while conditions were more favorable.

These trends helped push sales of existing homes up 1.4 percent for the month, compared with September’s drop of 3.4 percent, said the NAR. It was the first time since March that month-over-month sales enjoyed positive growth.

Activity was strongest in the Northeast, South and West. Most of the gains came from sales of condos and co-ops, which were up 5.3 percent over the previous month. Sales of single-family homes remained nearly flat, and are now 5.3 percent lower than the same time last year.

Higher than average prices (for existing homes) and rising interest rates are taking their toll on new home sales, which plunged 8.9 percent in October, following a 5.5 percent drop in September, to their lowest point since March 2016. The median price of a new home dipped to $309,700 (3.1 percent lower than the same time last year), but the average price was $395,000 – both far higher than the $255,400 median price (up 3.8 percent) for an existing home sold last month.

The softening market for new homes pushed inventories up to 7.4 months, the highest level of supply in seven and half years, reports MarketWatch. Not surprisingly, new single-family starts declined 1.8 percent from September, and permit requests were down 0.6 percent.

While October’s numbers were a welcome relief for real estate agents after a disappointing third quarter, market indicators suggest the growth in sales is not likely to continue for the remainder of the fourth quarter. Fannie Mae stated that its Home Purchase Sentiment Index (HPSI) fell for the second month in a row, by 2 points, in October.

Concerns about home prices, mortgage rates, and personal financial security combined to bring down the portion of participants saying “now is a good time to buy a home” by 5 points and those saying “now is a good time to sell a home” by 3 points.

Builders, too, are less optimistic about business activity in the coming months. In announcing that the Housing Market Index (HMI) for November had decreased by 8 points, to 60 (its lowest point in over three years), Randy Noe, chairman of the National Association of Home Builders, stated builders are reporting “that customers are taking a pause due to concerns over rising interest rates and home prices.” Current sales activity was down 7 points, customer traffic down 8 points, and expected future activity down 10 points.

Activity is expected to remain flat or worse going into next year. At the NAR’s annual conference earlier this month, chief economist Lawrence Yun told the audience his current forecast projects existing-home sales this year will finish at a pace of 5.345 million — a decrease from 2017 (5.51 million). In 2019, sales are forecasted to increase to 5.4 million, a 1 percent increase, provided the market begins to stabilize.

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About the Author

Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at

Continue reading Inventory boost lifts home sales


NAHB chief economist takes a look at the comparison of inflation and mortgage rates to see how the coming year will be shaped.

An important economic story for 2017 will be a rising rate of inflation. In historical terms, inflation will remain low. However, NAHB forecasts that inflation in 2017 and 2018 will exceed 2% for each year, marking the highest pace of price increases since 2012.

What impacts will additional inflation have on builders? First, mortgage interest rates are expected to rise. NAHB is forecasting the average 30-year fixed-rate mortgage to increase to just below 5% by the end of 2018—still historically low, but higher than with which this generation’s home buyers are familiar. The primary challenge to most home buyers is accumulating savings for a down payment and qualifying for a mortgage, but rising rates do reduce budgets.

Second, input costs, such as land and labor costs, will go up. Given ongoing scarcity of both factors in the building industry, inflation will place additional upward pressure on prices. Inflationary pressure could also raise the interest rate required for acquisition, development, and construction loans in an environment in which lending conditions for commercial real estate loans are tightening.

Why is inflation accelerating? The primary reason in the current cycle is short-term factors related to economic capacity. For example, the unemployment rate has been below 5.5% since May 2015. As the economy creates jobs, the pool of available workers becomes tighter and enterprises must offer higher wages to recruit.

This raises an important concern as the Trump administration assumes office. A key proposal from Trump’s campaign involved a trillion-dollar plan for infrastructure investment. Such a plan would offer positives for the economy. However, given the low unemployment rate and ongoing worker shortage, this fiscal policy—particularly if deficit-financed—would increase inflation and force the Federal Reserve to accelerate its planned interest rate hikes.

As such, it’s important for the government to consider policies that would hold back inflation. First, enact labor rules (including tax policies) that reward work. The labor force participation rate declined from 66.2% to 62.8% over the past 10 years. This reduction in the number of available workers cannot all be explained by the aging of America. Reducing taxes on workers or lowering the cost of hiring for employers would help stop the decline in number of people in the labor force and help hold back wage-related inflation.

Building more housing also can help as higher housing costs, for rental and owner-occupied, contribute to inflation. Smart regulatory policy that encourages construction can be a policy tool to check inflationary pressures.


Rising Rates, Slowing Home Sales Expected to Hurt Remodelers

Small businesses in the home remodeling industry can expect revenue to slow in 2019, the result of rising mortgage rates and sluggish home sales.

Oct. 22, 2018, at 11:21 a.m.
The Associated Press


FILE- In this July 23, 2018, file photo construction workers put down roofing paper on home in Houston. General contractors and other small businesses in the home remodeling industry can expect revenue to slow in 2019, the result of rising mortgage rates and sluggish home sales. That’s the prediction of Harvard University’s Joint Center for Housing Studies, which last week issued its quarterly report on home remodeling. (AP Photo/David J. Phillip, File) THE ASSOCIATED PRESS


NEW YORK (AP) — General contractors and other small businesses in the home remodeling industry can expect revenue to slow in 2019, the result of rising mortgage rates and sluggish home sales.

That’s the prediction of Harvard University’s Joint Center for Housing Studies, which last week issued its quarterly report on home remodeling. The center’s index of remodeling activity projects spending on renovations and repairs will gradually slow into the third quarter. Spending is expected to rise 7.7 percent in the current quarter compared to a year ago, and 6.6 percent in the July-September 2019 period.

A 6.6 percent gain is healthy, but it nonetheless is a sign that the remodeling boom of the past few years is waning.

Many homeowners renovate and make repairs before they sell and after they buy a house, but spending on remodeling has largely withstood a dip in home sales over the last year. Home sales have been hurt by an ongoing shortage of houses and apartments on the market. Existing home sales fell over 4 percent over the 12 months, the National Association of Realtors said Friday.

Rising interest rates are affecting both home sales and remodeling. Home mortgage rates are at their highest levels in more than seven years, with the 30-year mortgage close to 5 percent. Typical monthly payments are up 15.4 percent higher from a year ago, according to real estate data company Zillow, which calculates that it now costs about $118 a month more to buy the same house today than it did this time in 2017.

Many homeowners borrow to finance major home improvements, so rising rates may deter some of them from starting projects.

Homeowners’ reduced spending was reflected in weaker sales last month of building materials and gardening equipment and supplies; they rose just 1.5 percent in September from a year ago, compared to a nearly 5 percent gain in August, according to the Commerce Department. That weakness will affect retailers, including small and independent stores, that sell those goods.

The slowdown may also continue past next year’s third quarter. The Realtors said their pending home sales index fell 1.8 percent last month to 104.2. The index, which tracks signings of sales contracts, is down 2.3 percent over the past year.


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Home sales weaken as buyers back off

Home sales weaken as buyers back off



Michael J. BerensTuesday, November 13, 2018

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Home sales weaken as buyers back off

Increased inventory and declining prices were not enough to seal the deal for some prospective homebuyers in September. Sales of both new and existing homes were down from August’s rather lackluster performance. Although demand remains high, concerns about rising mortgage rates and a shortage of entry-level properties kept buyers at bay.

After a modest gain in August, sales of new single-family homes dropped 5.5 percent in September, the lowest month-over-month decline since December 2016, and were down 13.2 percent from the same period last year.

In a reverse from earlier in the year, the median sales price of a new home ($320,000) was down 3.5 percent year-to-year, and the supply of inventory rose from 6.5 to 7.1 months. Yet, at an average price of $377,200 and with mortgage rates approaching their highest level in eight years, many would-be buyers cannot afford to purchase a new home.

Sales of existing homes extended their slump for the sixth straight month, sliding 3.4 percent, to their lowest level since November 2015. Overall, sales are down 4.1 percent from a year ago.

Inventories increased slightly, but the median home price ($285,100) is up 4.2 percent from a year ago, which is keeping many first-time buyers out of the market. Single-family home sales fell 3.4 percent from August and are down 4.0 percent from last September. Even sales of more affordable condos and co-ops ($239,200) declined 3.4 percent and are 5 percent below last year’s figures.

Some of the softening in sales can be attributed to the impact of hurricane activity in the South and Southeast regions of the country. But affordability remains the biggest challenge for the industry.

Weakening sales in recent months have begun to curb, but not reverse, rising home prices. At the same time, rising mortgage rates are eating away at whatever savings prospective buyers may have hoped to gain from more favorable prices.

Even though consumers are optimistic about their prospects and the economy as a whole, they are losing confidence in their ability to purchase a home. According to real estate website Redfin, early stage homebuying activity increased 11.2 percent from August to September, but the number of those making offers was down 13.7 percent from a year ago.

Fannie Mae reports that after increasing 5 percent in September, the net share of respondents to its Home Purchase Sentiment Index (HPSI) stating “now is a good time to buy a home” dropped back 5 percent in October, the second largest decline in the survey’s history. The net share of respondents stating “now is a good time to sell a home” also fell by 3 percent. October’s overall score was the lowest in a year.

Weakening sales also are impacting builders. New home construction activity (in number of units) fell by 5.3 percent from August to September, with single-family home starts dropping by slightly less than 1 percent.

Completions also were down, by 4.1 percent and 8.7 percent, respectively. Requests for permits were off by about half a percentage point overall, but single-family permit requests rose 2.9 percent.

These current trends suggest that while homeownership remains a goal for many Americans, buyers are no longer willing to pursue that goal at any cost. And that will have consequences for both sellers and builders. Noted NAHB Chief Economist Robert Dietz in announcing the results of the association’s October Home Market Index (HMI), “Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019.”

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Owning Is the New Renting: Homeownership Trends Upward as U.S. Loses Renter Households

Rising wages, loosening credit standards and demographic shifts are all creating momentum for owning rather than renting.

The homeownership rate rose from the prior year for the fifth consecutive quarter in 2018,  according to U.S. Census data released Thursday. It held steady at 64.2%, unchanged from the prior quarter and its highest level since 2014. The share of Americans who own a home rose from the prior year, from 63.6% in the first quarter of 2017.

The homeownership rate rose last year for the first time in 13 years. That marked a turning point in the recovery, during which home prices have risen sharply and credit standards were initially very tight, blocking many renters from buying homes.

The U.S. added 1.3 million owner households over the last year and lost 286,000 renter households, the fourth consecutive quarter in which the number of renter households declined from the same quarter a year earlier. That could pose challenges for apartment landlords, who are bracing this year for one of the largest infusions of new rental supply in three decades.


“Landlords should start to take caution,” said Ralph McLaughlin, chief economist and founder of Veritas Urbis Economics, a consulting firm. “There’s going to be downward pressure on rents in the near future.”

Rising wages and looser credit standards have helped bolster demand for homes in the last year. Fannie Mae made it easier for borrowers to take on more debt in the middle of last year, which coincided with a significant rise in the homeownership rate.

Demographics trends also increasingly favor homeownership, as members of the large millennial generation are entering their early to mid 30s, when people typically marry, have children and purchase their first home.

Nonetheless, challenges remain. Rising interest rates this year and a tax bill that passed late last year that diminished the tax benefits of homeownership were expected to dampen demand for homes this year.

The rate for a 30-year, fixed-rate mortgage hit 4.58% this week—the highest level since August 2013, according to data released by Freddie Mac on Thursday.

Limited inventory and rising prices are also making it difficult for young people to buy their first homes, as they compete in fierce bidding wars and often lose out to downsizing baby boomers or investors able to pay cash  or make large down payments.

The homeownership rate for households headed by someone 35 years or younger declined to 35.3% from 36% the prior quarter. Nonetheless, it rose a full percentage point from 34.3% in the first quarter a year ago—the fifth consecutive quarter it has gone up on an annual basis.

A lack of homes for sale is also creating challenges for would-be buyers. The homeowner vacancy rate declined to 1.5% from 1.7% a year earlier, according to the Census data. That is down significantly from the recent peak of 2.8% during the housing bust in 2008 and close to the level seen in the early 1990s, according to Tian Liu, chief economist at Genworth Mortgage Insurance.

That is likely to push home prices up even further, Mr. Liu said.

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