In this week's update on mortgage applications from the Mortgage Bankers Association (MBA), purchases continued a modest retreat but refinance demand improved for the 2nd week in a row. This was just barely enough for the Refi index to hit the highest levels since October 2024. The uptick makes sense in light of the mortgage rate situation last week. Rates had been inching slowly to the lowest levels in almost 2 months as of Monday morning. Wednesday brought a a noticeable drop and there wasn't much of a bounce for the rest of the week. As has been and continues to be the case, all of the volatility seen in the past year represents only a fraction of the longer-term range. Here's the same refi index over a longer time frame. The purchase side of the market is typically never as responsive to rates in the short term, and last week was no exception. MBA's purchase app index moved down for the 3rd week in a row, although it's still closer to the top of the recent range. In the bigger picture, purchase applications suffer from the same jarring adjustment experienced across the housing market with the epic rate spike in 2022. Here's a breakdown of this week versus last week in several categories of loans in terms of market share: Refinances 40.2 vs 39.0 FHA Loans 16.0 vs 16.2 VA Loans 14.6 vs 13.3 Survey respondents had 30yr fixed rates at 6.95 with 0.64 points, down slightly from 6.97 in the previous week. Jumbo loans were down to 6.96 from 7.01 and ARM rates moved up to 6.20 from 6.07.
There are two main styles of measurement when it comes to keeping track of mortgage rates: daily and weekly. Sometimes, the differences in methodologies mean that two reputable sources can convey seemingly incongruent conclusions. Other times, both the granular and general data agree. This is one of those times. Whether we're looking at MND's daily averages or MBA's weekly survey, mortgage rates hit their lowest levels in 6 weeks by the end of last week. The drop wasn't immense, but based on today's release of MBA application data, it was enough for a small bump in refinance demand. As is constantly the case over the past several months, the scope of the mid-2024 spike in application activity is more easily understood with the benefit of additional historical context. Purchase applications are never as sensitive to rates over short time horizons. In fact, they moved down a bit last week, but the counterpoint is that the purchase index has been holding near recent highs. Here too, broader context changes the takeaway. Other details from the report: Refinances accounted for 39% of the total vs 37.1% last time FHA loans accounted for 16.2%, down a bit from 16.7% VA loans accounted for 13.3% vs 13.2% MBA recorded 30yr fixed rates at 6.97 for the week with 0.64 discount points Jumbo rates were 7.01 with 0.48 discount points
The National Association of Realtors (NAR) released its Pending Home Sales Index (PHSI) for December this morning. Pending sales measures the number signed purchase contracts for existing homes. As such, the index is a good early indicator for Existing Home Sales in the coming month. Pending sales dropped 5.5% from last month, which was the highest level for the index since April 2023. Sales had also been on a 4 month winning streak. In other words, sales activity remains in solid territory, in the upper middle portion of the range over the past year. As is the case with most housing-related metrics, that range is at historically low levels. Regional breakdown of monthly and (year-over-year changes): Northeast -8.1% (-1.3%) Midwest -4.9% (-6.9%) South -2.7% (-5.1%) West -10.3% (-5.1%)
Both S&P Case-Shiller and the FHFA released national home price indices this morning. In both cases, November's prices were slightly higher than expected. For the Case Shiller data, this meant that prices declined less than expected. Unlike FHFA prices, Case Shiller is NOT seasonally adjusted--something that is immediately apparent when viewing a month-to-month chart. November is frequently near the low point of any given year for price appreciation. This month's 0.1% decline is an improvement from October's 0.2% decline or the 0.3% drop from last November. Regionally, Boston and New York were top performers in November, but only NY and Chicago were over 6% year over year. As seen in the table above and the chart below, prices are easily in positive territory in year-over-year terms. The same is true for FHFA, which is seeing almost the exact same change as Case Shiller. In addition, both indices have been fairly flat in the low 4% range recently.
It's no mystery that 2024 hasn't been a stellar year for home sales and many other housing metrics. Today's release of December's Existing Home Sales from the National Association of Realtors (NAR) confirmed that. Bad news first: with December in the books, 2024 goes down as the worst year for existing sales since 1995, just barely edging out 2008.3 The good news is that 2024 is over and we ended the year on the upswing in terms of month-to-month and year-over-year momentum. In addition to 3 straight months of improvement and the best sales pace since February, December's annual pace of 4.24m is 9.3% higher than last December and the largest annual increase since June 2021 (to be clear, the 12 months in 2024 added up to the lowest level of any year since 1995, but this month's pace was the best since mid 2021 when compared to the same month from the previous year). “Home sales in the final months of the year showed solid recovery despite elevated mortgage rates,” said NAR Chief Economist Lawrence Yun. “Home sales during the winter are typically softer than the spring and summer, but momentum is rising with sales climbing year-over-year for three straight months. Consumers clearly understand the long-term benefits of homeownership. Job and wage gains, along with increased inventory, are positively impacting the market.” full release...
The Mortgage Bankers Association's (MBA) weekly mortgage application survey showed a modest decrease in refinance applications and an even more modest increase in purchase applications. At these levels of movement, it's just as fair to say that applications generally held steady. That's a good thing for purchases considering last week was already at the highest levels in nearly a year, but again, there's no real change from the previous week. The more we zoom out, the more sobering the context becomes. The counterpoint is that this context is also optimistic because short of a major meltdown in the housing/mortgage market, there's really nowhere to go but up. Refinance demand will always be more closely tied to interest rates. As such, it's no surprise to see low levels persist as rates remain elevated compared to the lows seen several months ago. On a positive note, present levels are still about 30% higher than the late 2023 lows. The big picture view of refi apps reminds us of a different time, when each new long-term low in rates meant that most mortgage holders could benefit from a refi. Other highlights from this week's data: Refis accounted for 40.4% of the total, down from 42.7 last time Adjustable rate mortgages accounted for 5.5% of the total FHA loan were 16.5% of the total, down from 16.9% VA loans were 14.6% of the total, down from 15.7%
While it would be technically accurate to point out a slight increase in January's homebuilder confidence (officially the National Association of Homebuilders Housing Market Index or HMI ), the type of movement we've seen in the past 2 years is better characterized as "incidental" in the bigger picture. As with most housing-related metrics, HMI plummeted in 2022 as interest rates skyrocketed. It's been broadly sideways ever since with the swings between highs and lows getting smaller and smaller. In market jargon, this is a textbook example of "consolidation"--something that can signal an eventual reversal back toward higher levels or a renewed slide to lower lows. Absent another catastrophic episode like the Great Financial Crisis, it's not clear what would make builders feel incrementally more gloomy than the post-pandemic lows. As such, this consolidation is widely viewed as representing some sort of lower boundary. Time is the key variable, and one that's likely to be determined by economic factors such as interest rates and inflation. Other highlights from this month's NAHB data: 30% of builders lowered prices in January, which is in line with the average of the past 6 months Average price reduction: 5%, unchanged from last month Sales incentives were used in 61% of transactions, also in line with norms
The US Census Bureau released its New Residential Construction report for December today. The report measures building permits, the start of the construction process (housing starts), and housing completions. While construction has definitely been running well below the highs seen 3 years ago, it continues to operate just above pre-pandemic levels. That's something that can't be said for many other housing and mortgage market metrics. Last month's data showed housing starts closer to the low end of 2024's range. Today's report shows a bounce back to the highest levels since February. The multifamily sector played the biggest role in the rebound--especially in the South which accounted for 128k additional units. Nationally, multifamily housing starts increased by 155k units to a 12 month high of 418k and single family starts rose 34k to a total of 1.05 million.
There hasn't been meaningful change in economic data that measures activity in the housing and mortgage markets. In a nutshell, activity has been drifting along at long-term lows. The weekly survey of mortgage application activity from the Mortgage Bankers Association (MBA) is no exception, for the most part. Refinancing picked up in the summer months as rates fell, but not to historically strong levels, by any means. Purchase applications appear to be more volatile, but that's a factor of a narrower overall range. They've been even more sideways. As of last week, both purchase and refi applications were effectively at the lowest levels of the year. We knew the application landscape would be challenging due to the big jump in rates that hadn't yet been captured in last week's data. The saving grace was the potential for seasonal distortions surrounding the New Year holiday. Holidays that fall on specific dates can create inconsistencies in seasonal adjustments in economic reports. Last year saw New Year's Day fall on a Monday, which was less of a disruption to the business week compared to this year's Wednesday holiday. Perhaps the applications that tend to come in after the holiday were delayed by few days as a result, thus helping explain why applications rose for both purchases and refis despite the higher rates. Purchase activity was actually the highest in nearly a year.
2024 has been one of those "it is what it is" sort of years for activity in the mortgage market. There were signs of hope over the summer months as rates fell enough to make for a noticeable spike in refinance activity. But with the rapid reversal starting in October, refi demand is right back in line with long term lows according to the Mortgage Bankers Association's (MBA) refinancing index. It's hard to see in the chart, but this week's survey actually showed a modest increase over last week, the difference is inconsequential as both are effectively the lowest levels since late 2023. The purchase side of the market has been less eventful, but no less depressing. This application data was collected well before this week's jobs report and subsequent rate spike. As such, we wouldn't expect any resilience in next week's numbers. On the brighter side, present levels are so repressed that we also wouldn't expect much more of a contraction.