Growth in single-family permits and housing starts seen as good omens
Amid the ever-changing housing market landscape, the focus for mortgage originators is now on the second half of the year. That’s when long-expected growth in home sales activity is being predicted based on recent census data.
Until then, the mortgage morass will continue. According to the Mortgage Brokers Association’s most recent weekly applications survey, mortgage rates have been stubbornly hovering in the 6.5% range to lessen demand. The mortgage rate is the highest in two months, according to the MBA, further putting a damper on borrower demand.
“Higher rates and low inventory levels continue to keep many prospective first-time buyers on the sidelines,” Bob Broeksmit said in a prepared statement. “Purchase applications for FHA loans – popular with many first timers – were down 5% from last week and 17% from a year ago.”
Census figures suggest a rebound in housing activity
And yet, hope appears to be on the horizon – starting in July anyway. Joel Kan, MBA’s vice president and deputy chief economist, echoed Broeksmit’s assessment on the impact of the higher mortgage rates, noting they were more than a percentage point higher than last year.
Nevertheless, the economist predicted better times ahead: “With the recently released census data showing single-family permitting activity on the upswing and housing starts also rising, we expect that to translate to growth in new home sales activity in the second half of the year,” he told Mortgage Professional America.
US Census Bureau statistics buttress Kan’s assessments, with moderate growth seen across different areas of housing activity:
- Building permits: Single‐family authorizations in April were at a rate of 855,000, according to the census bureau. That’s 3.1% above the revised March figure of 829,000. Authorizations of units in buildings with five units or more were at a rate of 502,000 in April, the figures show. Not as promising was the realm of privately owned housing units authorized by building permits, according to the findings. In April such units were at a seasonally adjusted annual rate of 1,416,000 – 1.5% below the revised March rate of 1,437,000 and 21.1% below the April 2022 rate of 1,795,000, according to the bureau.
- Housing starts: Privately owned housing starts in April were at a seasonally adjusted annual rate of 1,401,000, representing a 2.2% increase above the revised March estimate of 1,371,000, according to the data. However, the census bureau noted the showing is 22.3% below the April 2022 rate of 1,803,000. Single‐family housing starts in April were at a rate of 846,000 – representing a 1.6% increase from the revised March figure of 833,000. The April rate for units in buildings with five units or more was 542,000, surveyors added.
- Housing Completions: Privately‐owned housing completions posted a less impressive showing. in April, suck completions were at a seasonally adjusted annual rate of 1,375,000 – a 10.4% decrease from the revised March estimate of 1,534,000 but 1.0% above the April 2022 rate of 1,361,000. Single‐family housing completions in April were at a rate of 971,000; this is 6.5% below the revised March rate of 1,039,000. The April rate for units in buildings with five units or more was 400,000.
Kan noted the continuing contradictions of the market: “Mortgage rates increased last week even as Treasury yields were essentially flat, with the spread between the two rates widening to 310 basis points,” he said. “Mortgage application activity slowed, as most mortgage rates in the survey increased, with the 30-year fixed rate jumping nine basis points to its highest level in two months at 6.57%. Purchase applications decreased 5% to its slowest pace in a month, as buyers remain wary of this rate volatility, but also as for-sale inventory in many parts of the country remains scarce.”
Once mighty refi wave now a ripple
Added Kan, “Refinance applications accounted for 27% of all applications and dropped almost 8% last week. Most borrowers have lower rates on their mortgages, and those who are in the market are extremely rate sensitive.”
That once ever-cresting wave of refinance activity continues to dwindle. According to the MBA, the refinance share of mortgage activity decreased to 27.4% of total applications from 28.0%, according to the group’s most recent study. Moreover, the adjustable-rate mortgage (ARM) share of activity decreased to 6.5% of total applications the study found.
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