Apache is functioning normally
Mortgage rates tickets slightly up but remain within the 6% to 7% range, according to Freddie Mac. (iStock)
Mortgage rates tickets slightly up but remain within the 6% to 7% range, according to Freddie Mac. (iStock)
Mortgage rates ticked slightly up, still hovering within the 6% to 7% range, but home sales show buyers are shrugging off the more expensive borrowing costs, according to Freddie Mac.
The average 30-year fixed-rate mortgage increased to 6.71% for the week ending June 29, according to Freddie Mac’s latest Primary Mortgage Market Survey. That’s up from the previous week when it averaged 6.67%. A year ago, the 30-year fixed-rate mortgage averaged 5.7%.
The average rate for a 15-year mortgage was 6.06%, up from 6.03% last week and up from 4.83% last year.
The slight shift marks another week that rates remain within the 6% to 7% range. However, a recovery in home sales may indicate that buyers are accepting the higher borrowing costs as the new normal, according to Freddie Mac Chief Economist Sam Khater.
“Mortgage rates have hovered in the six to seven percent range for over six months and, despite affordability headwinds, homebuyers have adjusted and driven new home sales to its highest level in more than a year,” Khater said. “New home sales have rebounded more robustly than the resale market due to a marginally greater supply of new construction.
“The improved demand has led to a firming of prices, which have now increased for several months in a row,” Khater continued.
If you are looking to buy a home, you can take advantage of lower mortgage rates and shop for the best rate on a loan. You can visit an online marketplace like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.
THESE TWO FACTORS COULD BE DRIVING YOUR CAR INSURANCE COSTS UP
Federal Reserve Chair Jerome Powell said in a recent statement that inflation remains high and the process of getting it to a 2% target rate “has a long way to go.”
The central bank has already raised rates 10 times in 2022 and 2023 to bring inflation down to a 2% target. In June, it announced a much-anticipated pause on interest rate increases following continued moderation in inflation.
The interest rate increase means the federal funds rate will remain in a targeted range of 5% to 5.25%, the highest level in 16 years.
“With the Fed taking a breather from monetary tightening until its July meeting, capital markets are assessing the outlook for the second half of 2023,” Keeping Current Matters Chief Economist George Ratiu said in a statement. “On the upside, even with interest rates more than double what they were at the start of 2022, the economy continues to expand as consumers – buoyed by jobs and rising wages – manage to spend more on goods and services.
“On the downside, the Federal Reserve has been clear that inflation is still hotter than desired, and additional rate hikes are on the table,” Ratiu continued. “Based on the central bank’s forward guidance, we can expect two more rate increases in the months ahead.”
Despite the continued pressure on interest rates, mortgage rates are still expected to drop near 6% by the end of 2023, Realtor.com Chief Economist Jiayi Xu said in a statement.
If you’re trying to find the best mortgage rate, it can help to shop around. Visit the Credible marketplace to compare options from different lenders at once without affecting your credit score.
MORE STUDENTS TURNING TO FEDERAL AND PRIVATE STUDENT LOANS TO FINANCE COLLEGE: SURVEY
Demand for affordability is driving the construction of more homes priced under $300,000, according to a report by Realtor.com. Early estimates in May indicate that homes within this price range constituted approximately 17% of total sales, marking the highest share since December 2021 (18%).
“Despite this encouraging news, there remains an urgent need for more homes at the most affordable price points, where the shortage of available inventory is most severe,” Xu said.
If you are ready to shop for a mortgage, you could get a better rate by looking at several lenders. Credible can help you compare interest rates from multiple mortgage lenders and choose the one with the best rate for you.
HOMEBUYERS ARE FINDING BETTER DEALS IN THESE CITIES, SURVEY SAYS
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Source: foxbusiness.com
During this epic recovery, which started on April 7, 2020, I was very adamant on Twitter that job openings would hit 10 million soon. Today, job openings are now trending near 11 million. As you see from the chart below, the labor market dynamics from the end of the great financial crisis, where job openings were just a tad over 2 million, is much different today. People forget that we had near 7 million job openings before COVID-19 hit us. The trend was always your friend with this data line that many people often ignore.
Jobless claims data looks solid. As the baby boomers retire, we need labor to replace them and grow jobs.
Luckily for the United States of America, our demographics are solid going out into this century compared to other countries. I have always stressed our American muscle is not just having king dollar but our demographics. This is why I use the term replacement buyers for housing, and it applies to workers too.
After I retired the America is back recovery model on Dec. 9, 2020, I knew the jobs recovery would lag all the other economic data for multiple reasons. However, we are getting closer to that September 2022 milestone. So, let’s look at the numbers today with seven months left until the September report:
—Feb 2020: 152,553,000 jobs
—Today: 150,390,000 jobs
That leaves us with 2,163,000 jobs left to make up with seven months to go, which means we need to average adding 309,000 jobs per month. The unemployment rate currently stands at 3.8%.
Take a look at the jobs data and which sector added jobs in February: Construction jobs came in big again, and we didn’t have any negative sectors the last month.
Job openings for construction workers are still historically high today as the need for labor in America is very high. So much for the premise that robots and immigrants would take all the jobs in America.
Looking at jobs data is always about prime-age employment data for ages 25-54. The employment-to-population percentage for the prime-age labor force is 1% away from being back to February 2020 levels. The jobs recovery in this new expansion has been much better than we saw during the recovery phase after the great financial crisis.
Education and employment
Most Americans have always been working, even if they’re not college-educated. The labor force with the least educational attainment tends to have a higher unemployment rate. I started the hashtag A Tighter Labor Market Is A Good Thing to remind everyone that the economy runs hot when we have a tighter labor market. We want to see the kind of unemployment rates that college-educated people have spread to everyone because we have tons of jobs that don’t need a college education.
Here is a breakdown of the unemployment rate and educational attainment for those 25 years and older:
—Less than a high school diploma: 4.3%.
—High school graduate and no college: 4.5%.
—Some college or associate degree: 3.8%
—Bachelor’s degree and higher: 2.2%.
The 10-year yield and mortgage rates
My 2022 forecast said: For 2022, my range for the 10-year yield is 0.62%-1.94%, similar to 2021. Accordingly, my upper end range in mortgage rates is 3.375%-3.625% and the lower end range is 2.375%-2.50%. This is very similar to what I have done in the past, paying my respects to the downtrend in bond yields since 1981.
We had a few times in the previous cycle where the 10-year yield was below 1.60% and above 3%. Regarding 4% plus mortgage rates, I can make a case for higher yields, but this would require the world economies functioning all together in a world with no pandemic. For this scenario, Japan and Germany yields need to rise, which would push our 10-year yield toward 2.42% and get mortgage rates over 4%. Current conditions don’t support this.
The 10-year yield has made a great attempt to break over 1.94% this year, as Germany and Japan’s bond yields rose noticeably in mid January. While our 10-year yield didn’t rise as much, once Japan and Germany broke out, our yields did get above 1.94% for the first time since 2019 for a few days. However, they haven’t been able to hold their increases.
As I am writing this, our 10-year yield is at 1.71%. I have stressed that it’s going to be very hard for the 10-year yield to break over 1.94% and have a higher duration, even with the hot economic growth with extremely hot inflation data. The trend in the 10-year yield, which has been going lower for decades, is simply too powerful. The 10-year yield didn’t collapse lower when we had deflationary pressures in 2009. Currently, the 10-year yield is not heading much higher as we see much higher year-over-year growth in inflation.
We have seen mortgage rates fall recently with the moves lower in the 10-year yield. If economic growth gets weaker toward the second half of 2022, it will be tough to have the 10-year yield getting above 1.94% and staying above that level. As you can see now, global yields need to rise for this to happen.
Economic cycle update
Now for an economic update. Some of the economic data has been cooling off as expected, but staying firm. We can’t replicate the same economic growth coming out of COVID-19. Eventually, we get back to our normal slow but steady economic growth patterns. Economics is demographics and productivity, and population growth is slowing here in the U.S., and productivity growth hasn’t been strong for a while now. We have limits to what we can do here in the U.S.
The St. Louis Financial Stress Index, a crucial variable in the AB recovery model, shows life lately at -0.5427%. The stock market has been more active lately, and the Russian Invasion has now put in a shock factor that has simply too many variables to account for. If things get better on that front, the markets will act better. However, we can see more stress in this index if things get worse. The oil and wheat shock in prices will impact global economies.
The leading economic index has had an epic recovery from the lows of April. However, last month it didn’t show any growth. When this data line falls four to six months, a recession red flag is raised. We aren’t there yet, but I am keeping an eye on this.
Retail sales have held up much better than I could have imagined; Americans are spending and even adjusting to inflation and retail sales are booming. However, the growth rate is getting back to normal after the crazy growth in 2021. The moderation in the data that I had expected is finally here but it has still been an impressive run for retail sales.
Americans’ personal savings rate and disposable income are healthy enough to keep the expansion going! Even though the disaster relief has faded from the economic discussion, both these levels are good to go as employment has picked up a lot from the COVID-19 lows with wage growth. We have to remember, households have more cash, more net wealth, and have refinanced their mortgages to have lower payments.
This is a big reason why households’ cash flow is much better now, and employment has been up a lot since the lows of COVID-19.
However, just like I had an America is Back recovery model on April 7, 2020, I have recession models and raise recession red flags as the expansion matures. I raised my first red flag recently when the unemployment rate got to 4%, and the 2-year yield got above 0.56%.
Once the Fed raises rates, the second recession red flag will be presented. This will most likely happen this month.
The third recession red flag is getting very close; the 2/10s are getting very close to inverting. I have been on an inverted yield curve watch since Thanksgiving 2021, and now it’s almost here. Typically we see an inverted curve before every recession. This red flag is very complicated, and once it is raised, I will go into more detail on how I look at this.
My job is to show you the progress of the economic expansion into the next recession and out — over and over again. Each economic expansion is unique, and with the Russian Invasion and massive price increases on oil and wheat, I have incorporated those factors into the equation. We have to take this one day at a time because the news can get better or worse with each passing day.
Source: housingwire.com
Housing starts data, like new home sales data, can be wild month to month, so the trend is always more important than any one report and the revisions are critical. We can have one monthly report with an extremely positive or negative print that is revised higher or lower the next month. The fact that the headline number on this report was good and the revisions were positive is a good sign. So far, housing construction has done well during 2020-2022 considering the economic drama. The housing sector has had to deal with a global pandemic, shortages of products and skyrocketing lumber costs, but in the end, mother demographics wins.
From Census: Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,769,000. This is 6.8 percent (±14.9 percent)* above the revised January estimate of 1,657,000 and is 22.3 percent (±14.3 percent) above the February 2021 rate of 1,447,000. Single‐family housing starts in February were at a rate of 1,215,000; this is 5.7 percent (±11.8 percent)* above the revised January figure of 1,150,000. The February rate for units in buildings with five units or more was 501,000.
As we can see below, slow and steady wins this race. We had more housing starts during the bubble years because from 2002 to 2005 that demand curve was higher, but it was facilitated by unhealthy credit growth. The homebuyers of new homes today are very solid, but since we don’t have a credit boom in housing, housing starts will move up slowly. This is a very positive thing because it’s real. When you have a speculative credit bubble, you’re prone to a massive correction.
Remember that back in 2018, the new home sales and housing starts sector had a slowdown when mortgage rates got to 5%. It wasn’t a crash in demand but a slowdown for sure. Since the previous expansion was slow and steady, we weren’t ever working from an overheated new home sales sector, so the slowdown never created a crash. Since then, housing starts have been increasing as new home sales have been growing.
From Census: Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,859,000. This is 1.9 percent below the revised January rate of 1,895,000, but is 7.7 percent above the February 2021 rate of 1,726,000. Single‐family authorizations in February were at a rate of 1,207,000; this is 0.5 percent below the revised January figure of 1,213,000. Authorizations of units in buildings with five units or more were at a rate of 597,000 in February.
I see a similar story here with housing permits: the trend is your friend and slow and steady wins the race. The big difference for me in the years 2020-2022 from 2008-2019 is that the low bar in housing starts is gone. The previous economic expansion had the weakest housing recovery ever; new home sales and housing starts were working from deficient levels and didn’t have the boom that many people had hoped for. It looked pretty normal to me; I didn’t anticipate housing starting a year at 1.5 million until 2020-2024 because then the demand for new homes would warrant that much construction.
People forget that housing construction is built on the need for new homes, which are more expensive than the existing home sales market. So the meager inventory in the existing home sales market has benefited the builders because it makes their products more valuable.
From Census: Privately‐owned housing completions in February were at a seasonally adjusted annual rate of 1,309,000. This is 5.9 percent (±13.3 percent)* above the revised January estimate of 1,236,000, but is 2.8 percent (±12.0 percent)* below the February 2021 rate of 1,347,000. Single‐family housing completions in February were at a rate of 1,034,000; this is 12.1 percent (±14.7 percent)* above the revised January rate of 922,000. The February rate for units in buildings with five units or more was 266,000.
As you can see below, we haven’t gone anywhere for years now. It’s a shame that the housing market has to deal with so much drama while the U.S. has the most prolific housing demographic patch in history.
Here is where we can talk about some risks looking out to the housing market. Mortgage rates have risen since the lows we saw last year. You can make a case that a few people, not many, might not want to buy their expensive new home now that rates have just moved higher.
However, I will give a personal take on this after talking to a friend who sells new homes. The buyers are frustrated beyond belief with how long the process is taking while they watch rates rise. However, what my friend said was: What else are they going to do? The fact that total existing inventory is at all-time lows and it’s been a madhouse trying to buy a house has kept some new home buyers in line.
The recent builder’s confidence data took a noticeable fall, and there is some concern about future sales. I believe the homebuilders confidence index showing you the directional changes in the housing market landscape is critical. In 2020, we had an abnormal surge in housing data which was just showing make-up demand toward the end of the year in 2021. Naturally, the housing data was going to moderate from this pace in 2021. The housing data to me outperformed toward the end of 2021, so look for some moderation in the data coming up as well.
Regardless of that premise, keep an eye out on the builder’s confidence and the monthly supply of new homes data to gauge the health of this sector of our economy.
From NAHB:
All in all, the Census Bureau’s construction report was solid and had positive revisions. However, we are still hampered by the limits of being able to finish building homes promptly. Now that rates have risen, we need to wait and see if that impacts buyers wanting their homes with much higher rates. The new home sales market is more sensitive to mortgage rates than the existing home sales market. History has shown us that when demand isn’t growing, the builders will slow down the growth rate of construction.
Source: housingwire.com
Housing starts data, like new home sales data, can be wild month to month, so the trend is always more important than any one report and the revisions are critical. We can have one monthly report with an extremely positive or negative print that is revised higher or lower the next month. The fact that the headline number on this report was good and the revisions were positive is a good sign. So far, housing construction has done well during 2020-2022 considering the economic drama. The housing sector has had to deal with a global pandemic, shortages of products and skyrocketing lumber costs, but in the end, mother demographics wins.
From Census: Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,769,000. This is 6.8 percent (±14.9 percent)* above the revised January estimate of 1,657,000 and is 22.3 percent (±14.3 percent) above the February 2021 rate of 1,447,000. Single‐family housing starts in February were at a rate of 1,215,000; this is 5.7 percent (±11.8 percent)* above the revised January figure of 1,150,000. The February rate for units in buildings with five units or more was 501,000.
As we can see below, slow and steady wins this race. We had more housing starts during the bubble years because from 2002 to 2005 that demand curve was higher, but it was facilitated by unhealthy credit growth. The homebuyers of new homes today are very solid, but since we don’t have a credit boom in housing, housing starts will move up slowly. This is a very positive thing because it’s real. When you have a speculative credit bubble, you’re prone to a massive correction.
Remember that back in 2018, the new home sales and housing starts sector had a slowdown when mortgage rates got to 5%. It wasn’t a crash in demand but a slowdown for sure. Since the previous expansion was slow and steady, we weren’t ever working from an overheated new home sales sector, so the slowdown never created a crash. Since then, housing starts have been increasing as new home sales have been growing.
From Census: Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,859,000. This is 1.9 percent below the revised January rate of 1,895,000, but is 7.7 percent above the February 2021 rate of 1,726,000. Single‐family authorizations in February were at a rate of 1,207,000; this is 0.5 percent below the revised January figure of 1,213,000. Authorizations of units in buildings with five units or more were at a rate of 597,000 in February.
I see a similar story here with housing permits: the trend is your friend and slow and steady wins the race. The big difference for me in the years 2020-2022 from 2008-2019 is that the low bar in housing starts is gone. The previous economic expansion had the weakest housing recovery ever; new home sales and housing starts were working from deficient levels and didn’t have the boom that many people had hoped for. It looked pretty normal to me; I didn’t anticipate housing starting a year at 1.5 million until 2020-2024 because then the demand for new homes would warrant that much construction.
People forget that housing construction is built on the need for new homes, which are more expensive than the existing home sales market. So the meager inventory in the existing home sales market has benefited the builders because it makes their products more valuable.
From Census: Privately‐owned housing completions in February were at a seasonally adjusted annual rate of 1,309,000. This is 5.9 percent (±13.3 percent)* above the revised January estimate of 1,236,000, but is 2.8 percent (±12.0 percent)* below the February 2021 rate of 1,347,000. Single‐family housing completions in February were at a rate of 1,034,000; this is 12.1 percent (±14.7 percent)* above the revised January rate of 922,000. The February rate for units in buildings with five units or more was 266,000.
As you can see below, we haven’t gone anywhere for years now. It’s a shame that the housing market has to deal with so much drama while the U.S. has the most prolific housing demographic patch in history.
Here is where we can talk about some risks looking out to the housing market. Mortgage rates have risen since the lows we saw last year. You can make a case that a few people, not many, might not want to buy their expensive new home now that rates have just moved higher.
However, I will give a personal take on this after talking to a friend who sells new homes. The buyers are frustrated beyond belief with how long the process is taking while they watch rates rise. However, what my friend said was: What else are they going to do? The fact that total existing inventory is at all-time lows and it’s been a madhouse trying to buy a house has kept some new home buyers in line.
The recent builder’s confidence data took a noticeable fall, and there is some concern about future sales. I believe the homebuilders confidence index showing you the directional changes in the housing market landscape is critical. In 2020, we had an abnormal surge in housing data which was just showing make-up demand toward the end of the year in 2021. Naturally, the housing data was going to moderate from this pace in 2021. The housing data to me outperformed toward the end of 2021, so look for some moderation in the data coming up as well.
Regardless of that premise, keep an eye out on the builder’s confidence and the monthly supply of new homes data to gauge the health of this sector of our economy.
From NAHB:
All in all, the Census Bureau’s construction report was solid and had positive revisions. However, we are still hampered by the limits of being able to finish building homes promptly. Now that rates have risen, we need to wait and see if that impacts buyers wanting their homes with much higher rates. The new home sales market is more sensitive to mortgage rates than the existing home sales market. History has shown us that when demand isn’t growing, the builders will slow down the growth rate of construction.
Source: housingwire.com
The Federal Open Market Committee on Wednesday raised the federal funds rate for the first time in four years, marking an end to the easy money that gave rise to the hottest mortgage market in U.S. history.
The FOMC, as was predicted, raised the federal funds rate by 25 basis points to 0.25-0.50 percent, the first time the FOMC has changed the federal funds rate in two years, and the first rate hike since March 2018.
The move, designed to slow the pace of inflation, which reached 7.9% for the year that ended in February, is sure to increase the cost of mortgage borrowing. Whether it slows the frenetic pace of a housing market with historically low supply is yet unclear.
“The Fed worked to ensure today’s announcement would not be a surprise, with the rate hike following a series of foretelling decisions, including its acceleration of asset tapering in December through the end of its asset purchase program earlier this month,” Realtor.com‘s chief economist Danielle Hale said in a statement following the announcement.
“The Fed’s language in its public statements has also prepared markets for rate increases by consistently focusing on above-target inflation and progress against labor market goals. This also meant that mortgage rates have largely adjusted for the first hike, and I don’t expect a spike following the latest announcement.”
Beyond the initial 25 bps rate hike, the Fed also said it planned to raise rates six additional times in 2022 and three times in 2023, giving more certainty to investors in the secondary market, which should help ease overall volatility somewhat.
How should the current market impact lenders’ tech adoption?
HousingWire recently sat down with Polly CEO Adam Carmel to discuss how lenders can break old habits and redefine the mortgage process through innovation and modern, advanced technology.
“With the unemployment rate below 4%, inflation nearing 8% and the war in Ukraine likely to put even more upward pressure on prices, this is what the Fed needs to do to bring inflation under control,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association. “The FOMC economic projections indicate slower growth and higher inflation than had been the expectation at their December meeting. Note that they do not expect to be back at 2% inflation until after 2024.”
Big questions remain, however. It’s still not entirely clear how quickly the Fed will unwind its $9 trillion balance sheet. The Federal Reserve said it would “begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting,” but did not get more specific.
“Although we anticipate that shrinking the balance sheet will begin this summer, we will be looking for details regarding the pace of the runoff and whether they would consider active MBS sales at some point to return to an all-Treasury portfolio,” said Fratantoni.
The purchases of Treasuries and MBS, which ended this month and were designed to support the economy during the Covid-19 pandemic, helped the housing and mortgage markets reach never-before-seen heights.
Fueled by a sharp drop in mortgage rates during the pandemic, the U.S. mortgage industry funded $4.1 trillion in new loans in 2020 (64% refis, 36% purchases), and $3.9 trillion in 2021 (57% refis, 43% purchases), according to the MBA.
But refi applications fell to about one-third of rate locks in February, and lenders have switched gears to serve a heavy purchase market. And that market is largely defined by a dearth of inventory.
On Friday, Zillow reported that overall housing inventory dropped to 729,000 home listings in February, a 25% drop year-over-year and a 48% fall since February 2020. It was the fifth consecutive drop in inventory.
Though the rise of mortgage rates – the MBA anticipates rates to hover around 4.5% for the next year – will force some would-be buyers out of the purchase market, other factors appear more important.
“Mortgage rates have already been increasing for many reasons — improving economy, higher inflation expectations and Fed tightening,” said Odeta Kushi, deputy chief economist of First American Financial. “As rates rise, some buyers on the margin will pull back from the market and sellers will adjust price expectations, resulting in a moderation in house price appreciation.”
But, Kushi added: “The other implication of a rising mortgage rate environment is the rate lock-in effect. Many homeowners have locked into historically low rates, and are less likely to move as rates move higher — this does not bode well for housing supply.”
Source: housingwire.com
First, total home sales should be 6.2 million or higher during 2020-2024. This is new home sales and existing home sales combined. The demographic bump in 2020-2024 is giving us a push in demand.
Second, because of the downtrend in inventory since 2014 and the demand pick-up we will see in the years 2020-2024, we had a risk of home prices accelerating too much. So, I set a five-year home-price cumulative growth level of 23%. If home prices grew between 0-23% in the five years of 2020-2024, we should be OK with where wage growth was going.
The fact that the 23% home-price growth level has been smashed in just two years and inventory just collapsed to all-time lows has created the most unhealthy housing market post-2010. The only risk to that 6.2 million line in the sand has been this:
The two things I had as risk factors are now in play.
We have a risk to sales here, and the one area where we could be most in trouble is the new home sales sector. This sector on an apples-to-apples basis is more expensive than the existing home sales market. It’s also driven more by mortgage buyers who tend to be older and make more money than the new-home buyers. Compared to the existing home sales marketplace, it doesn’t have a high cash buyer or investor buyer profile.
Today, new home sales came in as a miss of estimates at 772,000, but the revisions were all positive so there’s not too much going on here. The builders are struggling to finish their homes, and there is a risk to builders in a rising rate environment when you have people wait so long to build a house.
Regarding the new home sales sector itself, it’s just an OK marketplace and has been for some time.
From Census: Sales of new single‐family houses in February 2022 were at a seasonally adjusted annual rate of 772,000, according to estimates released today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.0 percent (±11.9 percent)* below the revised January rate of 788,000 and is 6.2 percent (±13.7 percent)* below the February 2021 estimate of 823,000.
As you can see below, the new home sales market from 2018-2022 doesn’t look like the housing market we had from 2002-2005. Without exotic loan debt structures, credit always has limits, which is a good thing. Could you imagine this housing market if we eased lending standards? I would be protesting in front of Congress and speaking at congressional hearings if lending standards were reduced.
From Census: The seasonally‐adjusted estimate of new houses for sale at the end of February was 407,000. This represents a supply of 6.3 months at the current sales rate.
My rule of thumb for anticipating builder behavior is based on the three-month average of supply:
Currently, the monthly supply headline is 6.3 months, and the three-month average is at 5.93 months. This is just an OK marketplace, so don’t look for the builders to be really pressing to build now, especially when rates have risen so much. They’re mindful of higher rates because in 2013, 2014 and 2015 they had to deal with a miss in sales expectations. Then in 2018, when mortgage rates got to 5%, we saw a supply spike in the monthly home sales data and their stocks were down over 30%.
As you can see below, the completion data looks terrible. It’s taking forever to build a home and that has created a huge number of homes under construction. The risk is that cancellations can rise by the time the home is ready for move in.
From Census: The median sales price of new houses sold in February 2022 was $400,600. The average sales price was $511,000.
As always, the years 2020-2024 were going to be different. The builders have pricing power that means they can push the price onto their consumers. Like home sellers, they try to make as much money as possible. The only thing we have that creates balance in this market is higher rates, hence why I am team higher rates.
From the National Association of Home Builders, the builder’s confidence has faded recently, and you have to go with this data because it has been good historically with where housing starts and new home sales. Until you find a base on the data line, go with the trend. We no longer have the COVID-19 comps in play with the moderation in the data that needed to happen.
Regarding the purchase application data that came out on Wednesday, some context needs to be discussed here. Purchase application data is down 2% week to week, 12% year over year. This data line has been negative year over year since June of 2021. A big theme of my work on HousingWire is to try to talk about housing data making COVID-19 adjustments because if you didn’t realize that we had some high comps due to the make-up demand of COVID-19, you might have thought housing was crashing in the middle of last year.
First, as you can see from the chart below, the market we had from 2002-2005 never existed in housing from 2014-2022. We cannot have a credit boom because speculation debt has been taken off-grid post-2010 with credit. It was always a slow and steady ride from the 2014 lows.
This is the year-over-year data since the start of the year. I have talked about how we would still have some makeup demand COVID-19 comps into February, and that’s what happened from my view: makeup demand spilled over into early 2021.
Those make-up demand comps are now gone.
Now, this week the year-over-year data shows -12%. You can see some of the weakness, but nothing too drastic. We can compare these previous times when housing was soft too.
In 2013-2014, when the 10-year yield went from 1.60% – to 3%, it created a negative 20% year-over-year data trend for most of the year. As you can see below, that downtrend was noticeable but we are far from those levels today.
2014 was the last year total inventory rose from weakness in demand. When rates rose toward 5% in 2018, we only had three negative year-over-year prints in the purchase application data, and the total inventory didn’t grow that year.
This year, inventory has collapsed again, and I have downgraded the housing market to a savagely unhealthy market because we simply lack homes, creating forced bidding. For me to stop saying this housing market is unhealthy, I need to see inventory get back up in a 1.52 – 1.93 million range, which takes us back toward 2018-2019 levels. Historically, that level of inventory is low but the market was still much more balanced then.
Speaking at a housing conference in 2019, I explained to the audience that it was a good thing that real home prices went negative. I had a big smile back then as housing was balanced. We don’t have a balanced housing market any longer.
Why won’t inventory grow? At the end of 2017, existing home sales went from 5.72 million and trended toward 4.98 million by Jan 2019, and we saw no inventory growth back then!
Housing tenure has doubled; homeowners on paper in 2018-2019 were already in great shape and now look better than ever on paper with the last refinance boom. What a hedge against inflation this year! But, housing tenure has become a severe problem in the housing market as inventory is collapsing in 2022.
While I am on team higher rates and welcome this significant bit of news to try to create more days on the market to cool this terrible home-price growth down, I am not blinded by the reality that this can also cause issues with home sellers who want to buy a home. Home seller data has been showing some stress, and that is the last thing I wanted to see right now.
However, it makes sense when inventory has collapsed to such low levels, and now rates are higher. Are you going to risk selling your home, not getting the home you want, and renting at a higher cost? This is the last thing I wanted to see in 2022, and since we are so close to April, it’s a reality we have to deal with for the rest of the year as long as inventory is still negative year over year.
Going out for the rest of the year, keep an eye out for that new home sales data. One of my six recession red flags is that new home sales and housing starts fade into a recession. Because the new home sales marketplace means more to an economy than the existing home sales marketplace, it’s more important to look at that.
Housing construction jobs and big-ticket item purchases are things that move with the demand of new homes. The existing home sales market results in a transfer of commission, moving trucks and some big-ticket item purchases.
Going back to my summer of 2020 premise of what can cool down the housing market, a 10-year yield over 1.94% should. Even though mortgage rates are still low historically, rising rates do matter, and with the home-price growth we saw in 2020, 2021 and 2022, it matters even more. You can see why I believe in economic models; they keep us in line.
Source: housingwire.com
It’s been a good week for borrowers as mortgage rates have improved slightly thanks to easing political tensions in Italy. Rates are expected to rise over the coming weeks and months so if you’re looking to buy or refinance, you should do it soon. Read on for more details.
It’s good news for anyone looking to buy a home or refinance their current mortgage as mortgage rates fell for the second consecutive week in this week’s Freddie Mac Primary Mortgage Market Survey. This now puts the average rate on a 30-year fixed rate at a 7-week low. Here are the numbers:
Here is what the Economic and Housing Research Group at Freddie Mac had to say about rates this week:
“Mortgage rates dipped for the second consecutive week.
Homebuyers have taken advantage of the recent moderation in rates, which led to a 4 percent increase in purchase applications last week.
Although demand has remained steadfast against the backdrop of this year’s higher borrowing costs, it’s important to note that the growth rate of purchase loan balances has moderated so far this year – and particularly since March. This slowdown indicates that buyers are having difficulty stretching to keep up with the pace of home-price growth.
While the very healthy job market continues to fuel interest in buying a home, the supply shortages in most markets are pushing prices higher and currently keeping sales at a standstill. Listings for new and existing homes need to increase in the months ahead to moderate price growth and reignite sales activity.”
Mortgage rates are down to levels that haven’t been seen for almost two months. This is clearly great news for anyone who is about to buy a new home or refinance their current mortgage. However, mortgage rates are expected to tick back up in the coming weeks and months so you’ll want to take action soon to avoid the risk of locking in a higher rate.
Applications filed for U.S. unemployment benefits fell 1,000 from the prior week putting them at 222,000.
*Terms and conditions apply.
Source: totalmortgage.com
While money may not be everything, there’s no denying that having plenty of money gives you more options, and offers access to lifestyles that are out of reach for those with more limited resources. But what if you don’t have a lot of money? Can you still look like you do? The answer is yes. In this article, we’ll delve into some ways people look rich even if they aren’t.
Wearing simple clothes made with good quality is one way of appearing better off than you are. Lots of name-brand or quality clothes can be found second-hand, on thrifting websites, or marked down when they’re out of season. Another option is to have luxury and name brand accessories: you could save up for an expensive watch, sunglasses, or purse. Just a few accessories can elevate your whole outfit and give the impression of wealth even if the rest of your appearance is unremarkable.
One Redditor commented, “Overrated expensive clothes. Mark Zuckerberg wears a t-shirt and jeans on an ordinary day.”
Taking Taking loans to look rich is the worst and most dangerous way to look rich because it can lead you to financial trouble, can easily land you in jail, and the stress of loads or credit card debt can cause health problems such as stress, anxiety, and depression. Taking out loans to fund a lavish lifestyle can create the illusion of wealth and furnish you with some expensive personal property, but it’s a risky strategy that can lead to debt and financial instability.
While some people may believe that buying groceries at expensive stores is a way to look rich, it’s not a recommended approach. Despite the premium products offered by high-end grocery stores, they come with higher price tags that can quickly strain your budget. Instead, with a little practice and skill, you can learn to make great foods with the same ingredients at a cheaper price, using food from regular grocery stores and just one or two expensive ingredients. Prioritizing budget and health needs, shopping smartly, and seeking out deals and discounts where possible are better strategies for achieving financial stability and good nutrition.
One Redditor said, “I have a friend who is thousands of dollars in debt and she will only shop at expensive grocery stores, buy organic foods, and only buy name-brand foods/ items. She refuses to listen to me when I tell her to buy store brands and shop at places like Aldi/ TJ.”
Going to expensive restaurants is a common way for people to create the impression of wealth, and it makes sense because expensive restaurants have luxurious surroundings and high class wait staff in addition to the good food. But despite all that, expensive restaurants get very pricey, very quickly. While some people may associate fine dining with affluence, others may see it as an indulgent and unnecessary expense.
Cooking at home can also be a more cost-effective and healthier option, as it allows for greater control over ingredients and portion sizes. Or simply dine out less often, and use the money you’ve saved by cooking for yourself to afford the occasional dinner at a fancier place.
Driving luxury cars that you can’t afford in order to look rich is not a wise or sustainable way to manage your finances. It may create a false impression of wealth or status, but ultimately, cars are a depreciating asset and you’ll be paying for maintenance no matter which vehicle you own. Instead of focusing on material possessions and trying to impress others, prioritize financial responsibility and drive something which won’t cost you more than you can afford. If you are considering taking on significant debt to maintain the appearance of wealth, it’s important to reconsider your priorities and focus on building a strong financial foundation for yourself.
Technology has become an integral part of daily life and using expensive gadgets and devices is a popular way to create an impression of wealth. However, it’s crucial to understand that unless you have a way to pay for your expensive phone, computer, etc., it’s really not sustainable nor healthy for showcasing your financial status. Buying pricey technology may give you a temporary ego boost, it’s not an authentic way to display one’s wealth.
Using excessive gambling as a means to appear wealthy is both impractical and generally harmful. Gambling can be an enjoyable form of entertainment, but it should be practiced in moderation and with responsible limits. When gambling becomes excessive, it can result in financial difficulties and addiction. This behavior does not genuinely showcase one’s wealth, instead, it can lead to significant financial losses and a damaged reputation. Additionally, it can impact personal relationships, work productivity, and overall mental and emotional well-being.
Living in an expensive neighborhood is a widespread trend, but it is not a sustainable or healthy if you’re just doing it to appear well off. Buying a house you can’t afford is a very risky situation, and it’s tough to get out of. It’s crucial to make wise financial decisions based on personal needs and priorities. While living in an upscale neighborhood can provide a social status and prestige, it should not be the sole basis for one’s self-worth.
Beyond just buying expensive products, something as simple as having a really well-styled haircut and good personal grooming can make you appear better off than you are. Get to know a good hair stylist, and then practice styling your hair at home until you’re able to do it well. Keeping your personal appearance clean, simple and elegant can go a long ways towards helping people perceive you as well-off.
And last but not least something as simple as having good poise when you meet people, interact with coworkers, and talk with new friends can help others to perceive you as having more money than you do. Having good posture and acting with quiet confidence tends to make people think you are a confident person, and can even give people the idea that you have plenty of money. Practice walking with good posture, and having open, friendly mannerisms when you converse with others. Your poise and confidence will have people believe that you’ve never wanted for anything a day in your life.
Source: Reddit.
Who is one actress you can never stand watching, no matter their role? After polling the internet, these were the top-voted actresses that people couldn’t stand watching.
10 Actresses People Despise Watching Regardless of Their Role
We’ve all heard the famous adage that “no publicity is bad publicity,” and while it tends to be accurate, there are certainly exceptions. But what about those few stars who stay out of the limelight and get along without a hint of trouble?
These 7 Celebrities are Genuinely Good People
Have you ever known someone and thought you liked them—until you learned about their hobbies? Then you get to know them and then you’re like, “Wow, red flag.” Well, you’re not alone.
These 10 Activities Are an Immediate Red Flag
Some celebrities definitely seem to enjoy the limelight and keep working to stay in the public eye. While others quickly move out of the spotlight. Many of these actors and actresses stepped out of the spotlight to live a more private life without constant media pressures.
10 Celebrities That Made the Big Times Then Disappeared Off The Face of the Earth
We’ve all been there – sitting through a movie that we can’t help but cringe at, but somehow it still manages to hold a special place in our hearts.
These 10 Terrible Movies Are Still People’s Favorites
Source: financequickfix.com
Purchase mortgage rates this week averaged 5.10% continuing a decline from last week amid a housing market slowdown, according to the latest Freddie Mac PMMS.
A year ago at this time, 30-year fixed rate purchase rates were at 2.95%. The government-sponsored enterprise index accounts solely for purchase mortgages reported by lenders during the past three days.
“Mortgage rates decreased for the second week in a row due to multiple headwinds that the economy is facing,” said Sam Khater, Freddie Mac’s chief economist. “Despite the recent moderation in rates, the housing market has clearly slowed, and the deceleration is spreading to other segments of the economy, such as consumer spending on durable goods.”
Another index shows rates at a higher mark. Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages, measured the 30-year conforming mortgage rate at 5.32% Wednesday, down from 5.50% the previous week.
The 30-year fixed-rate jumbo was at 4.90% Wednesday, also down from 5.01% the week prior, according to the Black Knight index.
This week, mortgage application volume dropped 1.2% from the past week: refi applications declined 4% and purchase apps remained the same, according to the MBA. The MBA found the adjustable-rate mortgage share dipped to 9.4% of total applications.
Mortgage rates are following the Federal Reserve’s (Fed) inflation-fighting monetary policy. Minutes from the Fed’s meeting earlier this month released Wednesday showed policymakers emphasized the need to quickly raise interest rates to bring consumer prices closer to the Fed’s 2% goal.
The central bank raised the interest rate by a half percentage point May 4 and announced a plan to reduce its $9 trillion asset portfolio. The Fed also has repeatedly signaled it will raise rates six times in 2022, and likely several more in 2023.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.31% with an average of 0.8 point, down from last week’s 4.43%. The 15-year fixed-rate mortgage averaged 2.27%
The 5-year ARM averaged 4.20% with buyers on average paying for 0.3 point, up from 4.08% the week prior. The product averaged 2.59% a year ago.
Economists forecast the tightening monetary policy will reduce originations in 2022 and 2023. The MBA expects loan origination volume to drop more than 35% to about $2.5 trillion this year, from last year’s $4 trillion. Meanwhile, the MBA expects 5.93 million home sales in 2022, compared to 6.12 million in 2021.
Source: housingwire.com
Purchase mortgage rates climbed 55 basis points, reflecting surging inflation and the Federal Reserve‘s (The Fed) tightening monetary policy.
According to the latest Freddie Mac PMMS, purchase mortgage rates this week averaged 5.78%, compared to 5.23% the week prior. A year ago at this time, 30-year fixed rate purchase rates were at 2.93%.
“Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987,” said Sam Khater, Freddie Mac’s chief economist, according to a statement.
The government-sponsored enterprise index accounts solely for purchase mortgages reported by lenders during the past three days. Another index showed rates greater than 6% this week.
Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming mortgage rate at 6.03% Wednesday, up from 5.5% the previous week.
The 30-year fixed-rate jumbo was at 5.46% Wednesday, up from 4.99% the week prior, according to the Black Knight index.
Creating a path to success in today’s purchase market
Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?
Higher rates usually reduce borrowers’ demand for mortgage loans. But, this week, mortgage application volume rose 6.6% from the past week as potential borrowers wanted to guarantee a lower rate: Refi applications increased 4% and purchase apps ticked up 8%, according to the Mortgage Bankers Association.
Overall, mortgage rates are following the Fed’s inflation-fighting monetary policy. Wednesday, the Fed raised the federal funds rate by 75 basis points, to 1.50-1.75%, a hike not seen since 1994. Friday, the inflation price index showed 8.6% increase in May.
And more rates hikes are expected to come out of the Fed meeting in July. During a news conference following the Fed’s committee meeting, Chairman Jerome Powell said: “Either a 50 bps or a 75 bps increase seems most likely at our next meeting.”
However, Powell said the central bank will react to incoming data.
“Any guidance that we give is always going to be subject to things working out about as we expect,” he said. “I like to think though that our guidance is still credible, but it’s always going to be conditional on what happens.”
The Fed’s actions are intended to restore greater balance to supply and demand in the housing market, which now faces inventory problems and rising housing prices.
“Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market,” Khater said.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.81% with an average of 0.9 point, up from last week’s 4.38%. The 15-year fixed-rate mortgage averaged 2.24% a year ago.
The 5-year ARM averaged 4.33%, with buyers on average paying for 0.3 point, up from 4.12% the week prior. The product averaged 2.52% a year ago.
Source: housingwire.com