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But depending on how a lender interprets the guidelines, the client could have gotten his application rejected for not having consistent employment for a two-year period without interruptions, explained Gastelum.

“It really comes down to interpretation of the guideline. One lender could have said, ‘Oh, he was out a week, so it’s interrupted and therefore, the second employment doesn’t work.’ The problem is, a mortgage credit reject (MCR) is kind of like your scarlet letter, to be completely honest,” Gastelum said. 

When a lender rejects an FHA application, it discourages the next lender from even reviewing the application because of the extra work the underwriters have to do to override that MCR, mortgage pros told HousingWire. 

All FHA mortgage lenders use a system by the U.S. Department of Housing and Urban Development (HUD) called FHA Connection, a database used to insure and generate FHA case numbers associated with the borrower’s home loan application. When the borrower is denied for an FHA mortgage loan, an MCR report had to be created for that denial. That changed on September 11. 

The FHA’s announcement in early September to waive a requirement that FHA-approved lenders flag rejected loans in the FHA Connection system is a step in the right direction since declined borrowers don’t have to overcome a stigma, loan officers said. 

In a rate-rising environment where it has become more difficult for first-time buyers to get into the market, borrowers won’t have to deal with a file that has an MCR for six months. Even after the six-month period is over, the borrower’s case number would still be attached to his/her social security number.

Demand for FHA loans have risen over the past year to comprise 23.8% of mortgage applications in August 2023, up from 17% from the same period a year ago, according to the Mortgage Bankers Association.

The FHA/VA share in Q2 2023 stood at 22.9% of the entire mortgage origination volume, up from 18% in Q2 2022, according to data compiled by Inside Mortgage Finance and Urban Institute.

Loan officers said that the FHA’s waiver will give borrowers a fairer shot at obtaining financing. Borrowers won’t be subject to lenders’ different underwriting interpretations that could lead to a rejection of their mortgage applications.

“That (MCR) is a subjective stigma based on credit risk tolerance of the particular lender that you went to initially. “This is an underwriting technicality that is unfair and it is a good move to create more fairness,” Billy Taylor, CEO of Hometown Lenders, said. 

“We are really happy about this change because it’s going to provide more opportunity for loan officers and is going to provide more opportunity for buyers to get a second chance,” Michael Borodinsky, VP and branch manager at Caliber Home Loans, said. 

Overcoming overlays

The FHA credit requirements are strict, but borrowers can get an FHA loan with no credit score. In fact, HUD forbids lenders from declining a borrower’s FHA loan application simply because they lack a credit history.

In such a case, lenders will ask for documentation, including a letter from the landlord documenting on-time rent payments, payment history of utility companies and cell phone or internet provider.

Lenders, however, have overlays – rules on top of the federal rules that were published as lenders need to sell those loans to investors who do not want to buy high-risk loans.

“Those overlays – it could be higher standards, it could be lower debt-to-income (DTI) ratios – still exist on a subjective basis on a lender-by-lender basis. So a borrower not knowing that they could qualify for a loan where their credit score is below 640 or 620 could be subject to a denial and then not realize that they could be approved somewhere else,” Borodinsky said.

Generally, the FHA requires a minimum 580 credit score with a down payment of 3.5% to qualify for a FHA loan. Under FHA guidelines, borrowers with credit scores between 500 and 579 must make a down payment of at least 10%. But they may also face tighter requirements. Lenders may require a lower loan-to-value (LTV) ratio or ask that the borrower make a larger down payment. 

Reasons for a MCR vary, said Ted Tozer, non-resident fellow at the Urban Institute‘s Housing Finance Policy Center (HFPC) and the former head of Ginnie Mae. 

“It could be low credit scores, or it could be geographics too – maybe they’re in a market that it’s a soft market where they’re looking at home prices that could be falling. Lenders don’t want to tilt their portfolio to one where these 3.5% down payments could very well become over 100% LTV just because home prices fall,” Tozer noted. 

Industry personnel frequently complained that FHA Connection often didn’t provide sufficient information about mortgage credit rejects to determine why the applicant was rejected, said Peter Idziak, senior associate attorney at Polunsky Beitel Green. 

“It could be the lender’s own standards could be higher or different, or in addition to just the FHA qualifications,” Idziak said. 

For a prospective homebuyer, the new waiver should avoid a possible misrepresentation of their actual creditworthiness, JR Younathan, SVP and California state mortgage production manager at California Bank & Trust, said

“The given waiver doesn’t necessarily open new paths to compete as they could have done that previously. It would only open a new path in the instance that the other lender wasn’t willing to investigate the reasons the denial was registered, and instead rejected the loan file/borrower on the fact it existed at all, thus eliminating that ability to compete,” Younathan noted. 

Regardless of whether the applicant is walking in to the lender for the first or second time, the lender should be armed with enough financial information to assess the credit risk.

“The lender should be confident enough to know what questions to ask, how to analyze their income, how to analyze all the other risk profiles, it really shouldn’t make that much difference, because they should be in a situation where they should be asking the right questions to really understand,” Tozer said. 

Beggars can’t be choosers 

Though loan officers are unanimous that the waiver will make FHA loans more accessible for borrowers, LOs interviewed by HousingWire don’t expect it to increase their production volume.

In a highly competitive environment, lenders had already taken that extra effort to approve loans that would’ve been rejected or already rejected from another lender.

“We’re more likely to underwrite a 500 credit score than a big bank who’s saying ‘I don’t want that risky loan in my portfolio. I don’t want I don’t even want to underwrite it, because I don’t want a 500 or 520 or 560 borrower in my portfolio,’” Taylor, of Hometown Lenders, said.

Hometown Lenders would perform a manual underwriting for an applicant with a lower credit score to try to get an approval rather than simply rejecting a lower credit score borrower, he said. 

The FHA loan program requires lenders to seek manual underwriting review when a borrower has a credit score lower than 620 and a DTI greater than 43%. According to HUD, borrowers could qualify with a 580 credit score and a DTI of 50%.

“That (loan origination) is the only way we make income. I don’t think it (the new waiver) would affect us at all, we would have looked at that borrower whether there’s an MCR on there or not,” Taylor noted. 

To override an existing MCR would require a level two underwrite – meaning two underwriters would have to underwrite the file as they have the authorization to override the MCR in the FHA Connection system. 

Because the mortgage credit reject is going to be eliminated, we’re no longer going to have to deal with a second underwrite, Gastelum said. 

“It’s not going to be more business. If anything it’s going to bring some of the borrowers that got declined at other companies back to the marketplace sooner,” Gastelum said.

FHA loan limits rose to a maximum of more than $1 million and mortgage insurance premiums for FHA loans were cut by 30 bps this year in line with home price inflation and to provide relief from the steep rise in mortgage rates. 

Some loan officers noted that while the FHA’s decision to cut MIPs was a step in the right direction, the upfront mortgage premium (UFMIP), which amounts to 1.75% of the base loan amount, as well as a monthly premium for the life of the loan, could still be a burden for borrowers compared to those with a conventional loan.  

However, affordability will still remain challenging for borrowers as wages would need to rise and home prices would need to fall to tackle that issue, Taylor noted. 

“You’re not going to change affordability — which is the real reason people don’t have access to housing — by taking MCR off,” said Taylor. 

But any little bit helps, Borodinsky said, citing a tough mortgage origination market that he’s never seen before. 

“I welcome anything that moves the needle even fractionally. Because in this market, beggars can’t be choosers. This market is unlike any market we’ve seen in over 30 years in terms of there being no inventory, high interest rates and a real problem compounded with what’s called the lock-in effect,” Borodinsky said. 

Source: housingwire.com

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Most tech CEOs emphasize how their technology empowers, not replaces, humans. But Pavan Agarwal, CEO of Sun West Mortgage Company and the creator of the Angel Ai technology, has a different perspective, which he shares in this interview with HousingWire Editor in Chief Sarah Wheeler. This interview has been edited for length and clarity.

Sarah Wheeler: What do people in the mortgage industry not understand about AI?

Pavan Agarwal: I think the mortgage industry is captivated by ChatGPT. That’s a good thing: I love ChatGPT because it raised awareness. Before, when you said AI, people thought you were talking about futuristic stuff, pie in the sky. Then ChatGPT came out and people realized AI is real and it’s here today.

But the mortgage industry and the real estate industry have kind of equated AI with ChatGPT. So there’s this assumption that ChatGPT is cute, it’s nice — it’s helpful for a marketing team. But high value? No.

High value is what we’re doing with Angel Ai: really calculating income, really reviewing documents, really running through tens of thousands of pages of federal and agency regulations and finding the best path. The creation of ChatGPT is revolutionary from a tech standpoint, but its application has been incremental.  

However, on our side, what we’ve developed is fundamentally disruptive. Because 99% of what is done by humans in the mortgage industry, it does automatically.

SW: At which points are humans involved in the mortgage process at Sun West?

PA: We have humans helping in three steps of the process. The first is our Angelistas — the humans who get on the phone and call consumers. The second is when documents are scanned and the data is scrubbed off the documents, we have humans double check it, to make sure there’s no mistakes. And then a third human layer is when the AI is analyzing the rule or analyzing the request, and its confidence level isn’t high enough to issue a final answer, then it automatically loops in a human to make the decision.

And that’s really important, because remember, I put my money behind Angel Ai, so if we let loans go through with a low confidence level, then I’ve got a big problem on my hands — I’m going to have lots of loans on my balance sheet and that’s not good for business.

Increasing the confidence level speaks to the speed that we’ve been solving this and getting better at it. And as you get more and more answers, less and less human review is needed. There’s a lot of intermediate steps for any request I put in AI — it doesn’t just say one answer, it makes a series of decisions along the way to finally get to that answer.

If any one of those decisions has a low confidence score, then a human has to be involved. But just looking at the process we have in place today, we’ve really reduced the amount of human touchpoints.

SW: Most other companies talk about leveraging automation or AI to enhance the work of humans, but it sounds like you have a different goal.

PA: The goal is complete robotic manufacturing. That’s how every other product that you use is manufactured, from your cell phone to your automobile. It’s like the new Tesla with the Giga Press: it’s just press one button and the car squeezes out. And AI can deliver that.

We have hardly any people, and the people we do have are massively scalable. We have people reviewing documents to make sure that the OCR is correct. How much training did that take versus the training to have an experienced underwriter? So when I say this is disruptive, this is why. Because, let’s say, even if my headcount is the same as the headcount of another mortgage company — it isn’t just about headcount, it’s the skill level of the people.

As an example, these are not real numbers, but if a company had 10 DE underwriters, and I have one DE underwriter and nine administrative people double-checking data, which one do you think is more scalable, more resilient and more profitable?

When mortgage rates finally drop and the mortgage business turns around, what happens when you need 10 underwriters again? Remember, back in COVID companies were paying huge signing bonuses to underwriters and mortgage loan processors? With our AI, when the next mortgage wave comes, we’ve got the solution. We basically have a Giga Press for mortgages: You can stamp out as many loans as you want.

SW: How do people in the mortgage industry react when you talk about manufacturing loans like this?

AP: People do get upset. But the median age of homebuyers is like 30 and the median age of loan officers is like 55. And loan officers are getting older every year while homebuyers are staying the same or getting younger, so the gap is expanding. And these young whippersnappers, they want everything fast and reliable. They just don’t understand why everything else in life works one way but not real estate. And this is the real market I’m after:  the loan officers and industry professionals who understand that.

SW: So do you think there’s going to be a day when there will be no more loan officers?

PA: No, I think there will be a day when there will be no more loan officers the way they are today, and that is already here. Our loan officers spend very little time, if at all, in the manufacturing process and they spend all their time sourcing business.

SW: How does that change who you hire for your loan officers?

PA: Well the challenge here is that the last 10 years in this business were amazing and you didn’t really have to source. And most loan officers that are here today came into this over the last 10 years, so they’re not used to sourcing. Sourcing used to be normal! Loan officers didn’t want to get involved in the manufacturing — they wanted to source because that’s how they made money. We were a sourcing industry. Back then the manufacturing was done by hand by a team who supported the loan officers, but now we can do it with AI.

SW: You have this mortgage company, Sun West Mortgage Company, and you also have this tech component, Angel Ai. Which way is the future for you: mortgage or tech?

PA: Fundamentally, I’m a tech guy. In life, you have things that you need to do and then things that you want to do. And I’ve been able to thread this needle so beautifully that I can do both. I need to run a mortgage company and I want to build amazing technology that can help everyone. And I’ve been able to leverage the mortgage company to do that. Because it’s the best testing ground and development R&D ground.

SW: You developed Angel Ai for Sun West but now you’ve made it available to your competitors. How does that work?

PA: I don’t have to win by someone else losing — there is plenty of business out there, even in a market like this.

There’s definitely an advantage that we [Sun West] have, because we understand the tech at a level that no one else does. But there’s also a disadvantage relative to other lenders because we have a tech culture, so this is not the place for everyone.

For example, there are some brokers we just can’t work with because they refuse to chat with the AI, they want to talk to a person all the time. Of course, we have senior VPs who have decision authority that are happy to talk to you, but we’re not going to be there to visit you at your office at a moment’s notice. We’re not staffed to wine and dine you, romancing you like other account executives are doing.

SW: 10 years from now when we look back at this moment, do you think this will be the inflection point for AI?

PA: Yes, I think the combination of market conditions and AI tech, and then this generation gap in the originators versus customers — those three are a perfect storm. They are a forest fire and today’s redwoods are gonna get slashed and burned and new seedlings are going to be the next forest. And you can already see it — I’m talking to lenders, brokers, originators who right now have this new generation mindset. They understand what 20-somethings want, and they don’t want to talk to their bankers on the phone, and yet we see brokers who don’t want to talk to AI, they can’t do business unless they talk to someone. Yet their customers, that they want to win over, don’t want to talk to them that way.  

Source: housingwire.com

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Calm Waters Again, But Tomorrow Could Rock The Boat

By:
Matthew Graham

Tue, Sep 12 2023, 4:59 PM

Calm Waters Again, But Tomorrow Could Rock The Boat

Much like yesterday (which saw the narrowest 10yr yield range in 2 years), today was exceptionally sideways.  If it weren’t for a few minutes of highs in the early morning, or the extent of the afternoon rally, it would have been just as narrow.  As such, it’s another day that adds to the sense of “bracing for impact” ahead of Wednesday’s CPI data.  While it’s always possible that big ticket data will thread the needle and result in minimal movement, there’s little question that any big departure from expectations will rock the bond boat for better or worse.

09:00 AM

Sideways to slightly stronger overnight, but bouncing back toward unchanged.  10yr down 0.8bps at 4.288.  MBS down 1 tick (.03).

12:11 PM

Still very flat/sideways despite some morning volatility.  MBS down 1 tick (0.03).  10yr yield down 1bp at 4.284.

01:42 PM

no reaction to 10yr auction.  10yr down 1bp at 4.284.  MBS down 2 ticks (0.06).

03:08 PM

Some late day gains in the long end of the curve.  10yr down 2.6bps at 4.268 and MBS roughly unchanged (occasionally showing a 2 tick loss due to illiquidity).

 Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.

Source: mortgagenewsdaily.com

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A Moody’s survey of 55 banks pointed to office loans as one the riskiest property types. Office loans have been hit by the shift toward remote work at some companies.

Jeenah Moon/Bloomberg

Banks are facing substantial risk of losses from commercial real estate loans, according to a new Moody’s survey of lenders, which found that some borrowers are already struggling and others may hit trouble when more of their loans mature.

The survey’s findings also suggest that some banks may not be tracking CRE borrowers’ health as closely as others — since they weren’t able to provide fully up-to-date metrics when asked.

The lack of timeliness in some banks’ disclosures was “eye-opening,” said Stephen Lynch, senior credit officer at Moody’s Investors Service. Up-to-date data about commercial property values and borrowers’ ability to cover their interest payments is critical for spotting potential problems, Lynch said.

“Good underwriting can maybe compensate for subpar portfolio analytics,” Lynch said, but strong analytics give banks the ability to mitigate problems early, rather than the often-costlier option of letting them bubble up.

The survey drew responses from 55 banks — including large, regional and community banks — in June and July. Since banks’ public disclosures are somewhat limited, Moody’s asked the respondents to provide more detail about certain key metrics.

Those measures include the percentage of CRE loans maturing soon; debt service coverage ratios, which show borrowers’ debt obligations relative to their cash flow; and loan-to-value ratios, which quantify the amount of debt outstanding as a percentage of the property’s value.

Some banks provided up-to-date data, while others submitted information from the end of 2022.

The Moody’s survey found that U.S. banks have significant amounts of CRE loans that will mature in the next 18 months. For the median bank that responded, those loans amounted to 46% of their tangible common equity — a percentage that Moody’s said was material. Some banks were substantially above that figure.

Upcoming maturities may pose problems for borrowers because they’ll need to refinance those loans, and they’ll need to do so at much higher interest rates and with banks being more demanding in their underwriting criteria.

Properties whose values have fallen sharply may get some help from providers of private capital, which can kick in additional equity to help property owners meet banks’ more stringent criteria. But the amount of money available likely isn’t going to “move the needle,” given the large amount of loans outstanding, Moody’s Lynch said.

While private equity firms, hedge funds and other sources of private capital may see opportunities to jump in, they are “not going to solve every problem,” said Brendan Browne, an analyst at the ratings firm S&P Global. Private money will help where companies see a chance to make significant returns, but there will also be cases “where the economics probably just don’t work well enough,” Browne said.

Overall, banks will feel “some pain” on CRE loans — particularly banks with larger exposures to the sector, Browne said. Most of the banks that S&P rates don’t have such outsized exposures, he added.

The Moody’s survey pointed to office and construction loans as the riskiest property types, given the shift at some companies toward remote work and the fact that properties that serve as collateral for construction loans don’t earn income while those loans are outstanding.

A loan may be at greater risk now if the borrower is having a tougher time paying its obligations. So Moody’s asked banks about how many of their loans have debt service coverage ratios below 1, an indication that the borrower does not have adequate cash flow.

The median respondent has 13.5% of its tangible common equity in CRE loans where the debt service coverage ratios are below 1, Moody’s survey found.

That figure was higher than Moody’s expected, Lynch said.

Source: nationalmortgagenews.com

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A lot rides on a home appraisal, whether you’re trying to sell a house, refinance your mortgage or tap into your home equity.

An appraisal may come in lower than you expected because property values dropped or because you’ve overestimated your home’s market value. But the appraisal process isn’t foolproof, and there are options if you think the appraiser got it wrong, or you suspect that you’ve been subject to appraisal discrimination.

Here’s what to do if your home appraises for less than you think it should.

Understand how an appraisal affects home equity

A home appraisal is a licensed appraiser’s opinion of home value, based on research, analysis and professional judgment. Lenders require an appraisal for most kinds of home loans because the property serves as collateral for the loan — they don’t want to lend more than the property is worth. Lenders plug the appraised value into a formula called the loan-to-value ratio (LTV) — the loan balance divided by the home value. A combined LTV includes the balance of the mortgage plus the amount of a home equity loan or line of credit. The ratio affects the amount you can extract in home equity and whether you can refinance.

Here’s an example of how the appraised value would affect borrowing from your home equity. Say, for instance, a lender’s maximum combined LTV is 85%. You’d like to borrow $100,000 through a home equity loan and currently owe $200,000 on your mortgage.

If your home appraised for $375,000, your combined loan-to-value ratio (300,000 divided by 375,000) would be 80%, and you might qualify. But if the home appraised for $325,000, the LTV (300,000 divided by 325,000) would be 92%, too high to meet the lender’s requirement.

Check the appraisal report for accuracy

The lender is required to send a free copy of the appraisal report to the loan applicant at least three days before the loan closes. So you’ll get one if you’re refinancing or applying for a home equity loan. But in a home sale, the buyer will receive it as part of the mortgage process. If you’re the seller, work with your real estate agent to get a copy of the report from the buyer.

The appraisal report documents a slew of property details that the appraiser considered in the valuation. Even the best appraisers can make mistakes, so scour the report to make sure all the particulars are correct, such as:

  • Number of bedrooms and bathrooms.

  • Square footage.

  • Amenities, including fireplaces, patios and pools.

  • Garage type and condition.

  • Condition of roof, furnace or other major systems listed on the report.

  • Additional features, such as energy-efficient systems.

Evaluate the ‘comps’

To help determine home value, appraisers consider prices of comparable homes that were recently sold in the area, known as real estate comps.

Check which homes were used. Were they truly comparable? How nearby are the homes, and how recently were they sold?

You may want to ask a friendly real estate agent familiar with your neighborhood — or your agent, if you’re working with one — for a list of recent comparable sales.

🤓Nerdy Tip

Understand that appraisals are different from online home value estimates. The appraisal isn’t wrong just because it’s lower than the ballpark figure you saw online. Home appraisals take more details into account than home-search algorithms can, so use online estimates as guidelines only.

Submit a ‘Reconsideration of Value’

Promptly document any mistakes or missing information from the appraisal report, as well as any additional information about comparable sales that you think should be considered. If you’re the loan applicant, then submit that written information as part of a “reconsideration of value” to your lender.

If you’re the home seller, ask your real estate agent to communicate those issues to the buyer and ask the buyer to submit the information to their lender.

Although the loan applicant ultimately pays for the appraisal, the appraiser actually works for the lender. So any feedback about the appraisal should go to the lender, not the appraiser.

The lender will pass along the information to the appraiser. The information you provide could prompt the appraiser to revise the valuation, but only if the additional details are relevant and significant enough to move the needle.

A loan applicant could also ask for a second appraisal or start over with a different lender. But appraisals typically cost at least a few hundred dollars, and there’s no guarantee the next appraisal will come in higher.

File a complaint if you suspect discrimination

Under the U.S. Fair Housing Act of 1968, home appraisers aren’t allowed to discriminate based on someone’s race, color, religion, sex, disability, family status or national origin. Yet many media reports in recent years have highlighted instances in which properties appraised for more when Black homeowners hid evidence of their race. Although the stories were new, the concept of “white-washing” a home to get a fair value has a long and painful history in the Black community.

Another option is to file a fair housing complaint. You can do that directly with the Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity or get help through your local fair housing center. Funded through HUD’s Fair Housing Initiatives Program, fair housing centers do preliminary investigations and help people navigate the complaint process. You can find a fair housing organization near you on the HUD website.

Refinance programs that don’t require appraisals

If you have a mortgage backed by the Federal Housing Administration or the Department of Veterans Affairs, you may be able to refinance without getting an appraisal. These programs, however, don’t let you cash out any of your home equity:

Source: nerdwallet.com

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In the space of just 2-3 short days, mortgage rates have moved from multi-decade highs to the lowest levels in 3 weeks.  The catch is that the last 3 weeks have also seen some of the highest rates in decades, but hey! Long journeys begin with single steps, right?

As to the pace and duration at which this journey will continue, that’s entirely up to economic data–the periodic reports released by the government and 3rd party firms measuring things like jobs, inflation, and economic output. 

Today’s initial boost came from a small downward adjustment in GDP for the 2nd quarter.  Yes, the 2nd quarter ended 2 months ago, but the market will take any clarity it can get when it comes to how the economy is responding to the Fed’s restrictive rate policies.  After all, as soon as the Fed observes enough of an impact, it will begin to reconsider those policies.

In other words, weaker economic data leads to lower rates, all other things being equal.  Some reports are more important than others and we’ll be waiting until Friday to get this week’s headliner: the big jobs report.  Between now and then, tomorrow’s data can still move the needle a bit, for better or worse.

Source: mortgagenewsdaily.com

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Have homebuilders reached their limit on how much they can lower mortgage rates to boost demand? Today we got the housing starts data, which was a beat of estimates, but total housing activity isn’t booming here.

I firmly believe that the builders can’t solve the housing inventory situation when it comes to single-family units because they will simply not provide enough. As shown below, we currently have only 72,000 new homes for sale.

This data is returning to more normal levels, but even during the worst days of the housing bubble crash, we never got to 200,000 homes. In a country with over 335 million people (and over 156 million people working), 72,000 isn’t going to do much to move the needle on inventory.

From Census:

Housing Starts: Privately‐owned housing starts in July were at a seasonally adjusted annual rate of 1,452,000. This is 3.9 percent (±16.0 percent)* above the revised June estimate of 1,398,000 and is 5.9 percent (±16.1 percent)* above the July 2022 rate of 1,371,000. Single‐family housing starts in July were at a rate of 983,000; this is 6.7 percent (±13.0 percent)* above the revised June figure of 921,000. The July rate for units in buildings with five units or more was 460,000.

As you can see in the chart below, housing starts have stabilized as new home sales are still showing year-over-year growth, but starts aren’t exactly booming. We must remember that the homebuilders still have a sizable backlog of houses they haven’t started to build yet.


Building permits: Privately‐owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,442,000. This is 0.1 percent above the revised June rate of 1,441,000, but is 13.0 percent below the July 2022 rate of 1,658,000. Single‐family authorizations in July were at a rate of 930,000; this is 0.6 percent above the revised June figure of 924,000. Authorizations of units in buildings with five units or more were at a rate of 464,000 in July.

Housing permits have also stabilized from their fall, and we are seeing more single-family permits issued, but it’s not a big move, as the chart below shows.

How long will the builders keep their advantage?

Why am I focusing on mortgage rates now? Well, mortgage rates are now at the high end of my forecast range for 2023, and we are still dealing with a stressed mortgage market. Over the last year the builders have grown yearly sales by offering lower mortgage rates, which they could do because they had good enough profit margins. 

However, for the first time this year, they have expressed concern about their future in the builder’s confidence index: back-to-back declines in the forward-looking six-month data line from the builder’s survey. The headline data also fell for the first time in a long time, but last month the forward-looking data line declined even with the positive print.

Forward-looking housing data for the builders was positive for many months, but in the last two months, that changed, so the builders are more cautious about their future. What has changed is that mortgage rates have stayed higher for longer over the last two months, so we have a direct correlation to higher rates here.

I am a big fan of the HMI data because the builders know more than anyone else what they can and can’t do. You just have to believe in this survey and keep an eye out for whether higher rates are starting to hit their confidence metrics looking ahead. I see cracks in the system that warrant close monitoring because this data line can be very choppy sometimes, but if we get a string of these lines, it makes a trend.

For now, I am keeping a watchful eye on this because if the builders are having issues looking ahead, then the housing market, in general, will be in a slow phase as well. As we saw today with the purchase application data, we aren’t crashing in sales like in 2022, but we aren’t growing either.

Source: housingwire.com

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Last week ended with a wild ride for mortgage rates. We anticipated the two inflation reports could help mortgage rates, however, we had a bad bond auction last Thursday, and the 10-year yield rose sharply. Weekly active inventory grew slowly again and purchase apps were down week to week again.

  • Weekly active listings rose by only 4,270
  • Mortgage rates went from 7.03% to 7.19%
  • Purchase apps were down 3% week to week

Mortgage rates and bond yields

Last week we started with lower bond yields as we anticipated inflation reports to continue the trend of slower year-over-year inflation data. This happened as expected, except we had a lousy bond auction, which meant too much debt supply came online with insufficient buyers. This pushed yields higher Thursday and Friday to move mortgage rates to 7.19%.

A valid case for higher mortgage rates in the short term is that we are simply going to be in an environment where we don’t have a lot of bond buyers versus the supply coming in, thus making it harder for mortgage rates to go lower. We saw an example of that last week.

For my 2023 forecast, my range on the 10-year yield has been between 3.21%-4.25%, emphasizing that the bond yields can go lower than 3.21% only if the labor market breaks. The labor market breaking to me is if jobless claims on a four-week moving average go over 323,000; currently, that data is 231,000. As the economy has stayed firm, bond yields are at a higher level of my range for 2023.

Weekly housing inventory

The painful housing inventory story of 2023 continues as we had yet another week of slow inventory growth. Last year when mortgage rates spiked higher, inventory growth was much faster, but we were also working from the lowest levels recorded in history in March of 2022. This year, it’s been a much different story. 

  • Weekly inventory change (August 4-August 11): Inventory rose from 487,870 to 492,140
  • Same week last year (August 5-August 12): Inventory rose from 543,898 to 550,175
  • The inventory bottom for 2022 was 240,194
  • The inventory peak for 2023 so far is 492,140
  • For context, active listings for this week in 2015 were 1,203,577


As we can see in the chart below, inventory growth has been so slow that active listings have been negative year over year for some time now. For those calling for a massive inventory spike since 2008, the last few years have not gone as planned.

New listings data has been trending at the lowest levels recorded in history for more than 12 months. However, even with higher mortgage rates in the last few months, we haven’t seen a new leg lower in this data line, which means we might be forming a workable bottom in 2023. As you can see in the chart below, 2023 has had a clear divergence versus 2021 and 2022 data, which were already at all-time lows before last year.

Here’s how new listings this week compare to the same week in past years:

  • 2023: 60,759
  • 2022: 73,384
  • 2021: 79,184

Purchase application data

Purchase application data was down again by 3% last week, making the count year-to-date at 14 positive and 16 negative prints. If we start from Nov. 9, 2022, it’s been 21 positive prints versus 16 negative prints. Mortgage rates near or above 7% are simply too high to promote real growth in this data line, which is working from a historical bottom. 

So, when rates fall, moving the needle higher for purchase apps won’t take much. However, for now, rates this high have facilitated more negative week-to-week data than positive, leading to lower sales as this data line looks out 30-90 days. While we aren’t seeing sales collapse like last year, we aren’t growing sales meaningfully from the recent lows. 

The week ahead: Tons of economic data

This week, we have various economic data reports that can move mortgage rates and give us a sense of where the housing market is going. Retail sales and the Leading Economic Index are out this week. Also, we get two key data lines for housing this week: the homebuilders survey by NAHB/Wells Fargo and housing starts!

What I am looking for in housing data is what the builder survey indicates for the next six months. In last month’s report, we saw a slight decline in this data line. For this week, I want to see how mortgage rates react to the batch of new economic data. 

Source: housingwire.com

Apache is functioning normally

This week I’ve got another behind the scenes look into my Sunset Magazine Reimagined Home project for you! For this edition, we’re talking sourcing. It’s often one of the hardest parts of decorating, right? To whet your appetite, here are a few sneak peeks of some of our final finds!

But let’s back up and discuss how I got there.

Finding that one perfect piece for your home can feel like a total needle in a haystack experience. Combing stores takes time and patience. The internet is such a vast and overwhelming place to find things. So where to start?!

The first step is setting parameters to help narrow down your search. To make it easier when shopping for my Sunset rooms, I kept three things in mind: our original room inspiration, scale and color palette. It is so easy to stray off your design path and lust over the next best idea. The key to success is to maintain focus. Eye on the prize my dears!!

Pinterest was also a big help here. As I mentioned during the presentations I gave during Celebration Weekend, Pinterest is a wonderful tool for discovery, inspiration and organization. I follow people on Pinterest with impeccable taste and they were often resources for some of my best finds. I also kept track of every source on room specific Pinterest boards. That way I never lost a single link. The boards also served as mini-lookbooks. I could browse each one to narrow down to the final selections.

This Ombre Console was one of the first pieces I discovered Pinterest. I love that it came from Etsy!! It drove the use of blue tones throughout the rest of my den.

Overall, I kept accessorizing very minimal, so I really wanted each piece selected to make a huge statement on its own! One way to do this is to look for pieces with beautiful lines like the Hexagon Side Table and Oskar Chair. Each have a strong architectural feel.

Or, you can choose to do something in an oversized scale like we did with this Starburst Tray, White Clock, and one of my favorite finds, a Bear Print created by an artist I came across at the Brooklyn Flea Market! Each one added a ton of visual interest. Here are some of our favorite pieces that made the final cut!

get your shop on: 1 // 2 // 3 // 4 // 5 // 6 // 7 // 8 // 9 // 10

Of course this isn’t everything I used in my rooms! I had the opportunity to work with some amazing designers who made or loaned awesome one-of-a-kind, unique, and vintage pieces. We’ll be taking you behind the scenes to some of the designers’ studios and into some gorgeous San Francisco store fronts over the coming weeks. I can’t wait to share them with you!

Stay tuned….

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Source: apartment34.com