Archive for the ‘Fed and Economy Watch’ Category

Rising interest rates continued to take a toll on mortgage applications during the week ended April 19. Even purchase mortgage volume fell victim to the increasing rates after rising for six consecutive weeks. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, declined by 7.3 percent on a seasonally adjusted basis from the previous week. On an unadjusted basis, the Index was down 6 percent. The Refinance Index had surged 39 percent at the end of March co-incident with the largest one week drop in mortgage rates in 10 years but has now erased most of those gains. 

The pace of home price appreciation slowed notably in February, at least as reflected in the Federal Housing Finance Agency's (FHFA's) House Price Index (HPI).  The index, which is calculated using home sales information from mortgages sold to or guaranteed by the GSEs Fannie Mae and Freddie Mac, rose 0.3 percent from January to February and was up 4.9 percent on an annual basis.mFHFA's index stood out in January when it jumped 0.6 percent from its December level and had a 5.6 percent increase compared to January 2018.   Price indices for the month released by other entities had showed considerable slowing; most had monthly appreciation of 0.1-0.2 percent and annual changes in the 4 percent range.

The question this morning was whether March's existing home sales could build on the strong numbers posted in February, an 11.8 percent increase from the prior month with a seasonally adjusted pace of 5.51 million.  It was the largest gain in more than three years. The consensus was that they would not.  The forecasters were spot on. The National Association of Realtors® (NAR) reports that sales of existing single-family homes, townhomes, condos, and cooperative apartments retreated from their February gains, with each of the four major U.S. regions falling back. The Midwest saw the largest decline although the West wasn't far behind.

Contrary to expectations, all three of the residential construction measures from the U.S. Census Bureau and the Department of Housing and Urban Development fell in March.  Not only were they lower than in February, but they were down year-over-year, and both permits and housing starts are running behind 2018 on a year-to-date (YTD) basis.  The West was the only region to show any strength. Permits for residential units were at a seasonally adjusted annual rate of 1,269,000 units, a 1.7 percent decrease from the February estimate of 1,291,000.  That estimate was also revised lower from an original estimate of 1,296,000.   The March number was 7.8 percent lower than the rate a year earlier, 1,377,000 units.

It would appear that Refis' time in the sun is listing back towards purchases, as mortgage rates increased for the second straight week and application volume retreated further. The Mortgage Bankers Association's Market Composite Index, a measure of that volume, decreased 3.5 percent on a seasonally adjusted basis from the week ended April 5.  On an unadjusted basis, the Index was down 3 percent.  The Refinance Index decreased 8 percent from the previous week and the share of applications that were for refinancing dropped from 44.1 percent down to 41.5 percent. Falling interest rates had driven the refinancing share over 47 percent at the end of March.

Builder confidence levels as reported by the National Association of Home Builders (NAHB) remained in the low 60s in April, a space it has now occupied for three months.  The NAHB/Wells Fargo Housing Market Index (HMI) a measure of confidence in the market for new homes, rose 1 point to 63, continuing to slowly recover from the three year low of 56 it reached in December. "Builders report solid demand for new single-family homes but they are also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots," said NAHB Chairman Greg Ugalde.

Homeowners are and should be proud of their homes, but that often leads them to think it has a higher value than does an appraiser and the difference between the two opinions increased significantly in March.  Quicken Loans says the gap in its Home Price Perception Index grew by 25 percent compared to February. Part of the difference might be accounted for by a decline in home prices of 0.20 percent during the month although prices rose 3.37 percent over the previous 12 months. Nationwide, appraised values came in 0.78 percent lower than homeowners expected compared to 0.50 percent in February.

Multifamily properties led the list of investments in what was a record year of of commercial and multifamily lending in 2018.  Commercial and multifamily mortgage bankers closed $573.9 billion in loans during the year according to results from a Mortgage Bankers Association (MBA) survey.  The total represents an 8 percent increase from the volume in 2017. Multifamily lending accounted for $266.4 billion in lending volume. This category was followed by office buildings, retail properties, industrial, hotel/motel and health care.  Ninety-six percent of the volume was in senior lien lending. 

The rally in mortgage application volume that sent several of the Mortgage Bankers Association's (MBA's) metrics to recent highs at the end of March faded last week as interest rates reversed course.  The unexpected boom in refinancing ratcheted down, and purchase applications returned to more modest gains.  MBA said its Market Composite Index, a measure of loan application volume, declined by 5.6 percent on a seasonally adjusted basis during the week ended April 5, erasing the about a third of the previous week's gains.  The index was down 5 percent on an unadjusted basis.

Borrowers had a bit of an easier time getting a loan in March, especially those looking for Jumbo products.  The Mortgage Bankers Association's (MBA's) Mortgage Credit Availability Index (MCAI) rose 1.1 percent from February to a reading of 182.1.  A decline in the index indicates that lending standards are tightening while an increase means a loosening of credit. The Total MCAI has component indices representing various loan types.  The Conventional MCAI increased 3.6 percent while the Government version was down 1.2 percent.  The two sub-indices within the Conventional MCAI both moved higher.  The Jumbo index increased 5.2 percent and the Conforming MCAI was up 1.4 percent.