Category Archive: Mortgage Rates

What’s Ahead For Mortgage Rates This Week – May 22, 2017

Last week’s economic reports included readings from the National Association of Home Builders, Commerce Department readings on housing starts and building permits and weekly reports on mortgage rates and new jobless claims.

NAHB Housing Market Index Rises, Exceeds Expectations

Builder Sentiment rose two points in May, which exceeded expectations of no change to April’s reading of 68. Builders and analysts said that short inventories of available homes continue to drive demand for new homes. While index readings jumped immediately after the Presidential election in November, builder enthusiasm settled when tariffs on lumber were increased.

Two of three components used in calculating the NAHB Housing Market Index reading. Builder confidence in current housing market conditions gained two points to a reading of 76; Confidence in market conditions over the next six months gained four points to 79. The reading for buyer traffic in new home developments fell one point to 51. Any reading over 50 is considered positive in NAHB HMI reports.

Housing Starts, Building Permits Lower in April

Despite rising home builder confidence in current and future housing markets, housing starts and building permits issued were lower in April than for March. According to the Commerce Department, 1.172 million homes were started in April as compared to 1.203 million housing starts reported in March; April’s housing starts were 0.070 percent higher year over year. Analysts had expected a reading of 1,259 million starts, which are calculated on a seasonally-adjusted annual basis.

Builders started single-family homes at a seasonally- adjusted annual pace of 835,000 homes in April, which indicated that builders may be gaining confidence in building homes for sale as compared to rental units. Building permits were issued at a pace of 1,229 million on a seasonally-adjusted annual basis; this was lower than the March reading of 1.260 million permits issued.

 The apparent lag between strong builder sentiment and housing starts and permits could be due to ongoing concerns over increasing materials prices and shortages of buildable lots and labor needed to ramp up home construction.

Mortgage Rates, Weekly Jobless Claims Fall

Mortgage rates fell last week. Freddie Mac reported that the average rate for a 30-year fixed rate mortgage averaged three basis points lower at 4.02 percent. Rates for a 15-year fixed rate mortgage averaged 3.27 percent, a drop of two basis points over the prior week. Mortgage rates for a 5/1 adjustable rate mortgage averaged 3.13 percent, which was one basis point lower than the prior week. Discount points were unchanged at an average of 0.50 percent for all three mortgage types reported.

New jobless claims were lower than expected last week, with 232,000 new claims filed as compared to 240,000 new claims expected and 236,000 claims reported the prior week. Low readings for new unemployment claims suggest strong jobs markets, but can be volatile and subject to adjustment.

Whats Ahead

This week’s scheduled economic reports include readings on new and existing home sales and consumer sentiment. Mortgage rates and new jobless claims will also be released.

NAHB: Home Builder Confidence Rises in May

The National Association of Homebuilders reported a two-point increase in builder confidence in May. The NAHB Housing Market Index reading increased from 68 in April to 70, which was the second-highest reading since the economic recovery started. May’s reading exceeded analyst expectations of a flat reading for May. Builder confidence rose as demand for homes continued to rise; this factor overrode builder obstacles including higher prices for lots and ongoing labor shortages. A new tariff on lumber was also expected to dampen builder confidence.

Component Readings Suggest Strong Builder Confidence in Current and Future Housing Markets

The monthly Housing Market Index is comprised of three components. Builder confidence in current housing market conditions rose two points to 76; the reading for builder confidence in market conditions for the next six months rose four points to 79. Builder confidence in buyer traffic in new homes dropped one point to 51, but overall, builder confidence in market conditions is strong as any NAHB Housing Market Index reading over 50 is considered positive.

Fewer Mortgage Applications: Home Buyers Dont Share Builder Optimism

According to the Mortgage Bankers Association, mortgage applications dropped 4.30 percent year-over-year in April, and were 20 percent lower than in March. While the Mortgage Bankers Association doesn’t report seasonal adjustments, fewer applications for purchase mortgages on new homes illustrated ongoing affordability challenges faced by first-time and moderate income home buyers.

High demand for available homes puts mortgage-dependent home buyers at a disadvantage when cash offers are in play. Rapid escalation of home prices creates difficulty for first-time and moderate income buyers as down payment and mortgage qualification requirements sideline buyers.

Increasing home builder sentiment has not corresponded to the number of new homes being built, which industry analysts consider the main solution to high demand for homes driven by short inventories of homes. First-time buyers are important to housing markets as they enable “move-up” buyers to sell their homes and buy new or larger homes.