Demand For Home Purchase Loans Rises

According to the Mortgage Bankers Association’s Weekly Applications Survey, the number of Americans who requested applications for loans to buy homes rose 5 percent last week. The improvement puts demand for home purchase loans 17 percent higher than it was at the same time one year ago. Lynn Fisher, MBA’s vice president of research and economics, told CNBC purchase application demand rebounded last week after a slight lull. “Purchase applications got back on track last week, resuming the level of activity observed throughout most of April and May,” Fisher said. On the other hand, refinance demand was relatively flat – mostly due to a slight rise in average mortgage rates. In fact, rates were up across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Also in the report, the average home purchase loan hit an all-time survey high of $307,700. This reflects a lack of homes available for sale at the lower end of the market. Since there are more high-end homes for sale this spring, the average loan size has climbed. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

New Home Sales Post Biggest Gain Since ’92

Sales of newly built, single-family homes rose 16.6 percent in April, according to new estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development. The gain was the largest month-over-month increase since 1992 and puts new home sales nearly 24 percent higher than they were last year at this time. Combined with rising housing starts, building permits, and sales of previously owned homes, the improvement is another sign that the housing market and economy are gaining strength. And, though economists expected new home sales to increase in April, the actual numbers far exceeded their predictions. In fact, economists polled by Reuters forecast sales rising to a 523,000 unit-rate, while the official estimate came in at 619,000. Regionally, the South, West, and Northeast saw dramatic double-digit increases over the previous month. The Midwest, on the other hand, experienced a 4.8 percent drop in sales. The report also included news that the median price for a new home set a new record at $321,100, up 9.7 percent from last year. More here.

Are Low Credit Scores Discouraging Buyers?

A recent review of home loan activity conducted by CoreLogic reveals a significant difference between the average loan applicant today compared with 10 years ago. The analysis looked at possible reasons loan originations have dropped over the past decade. Tighter credit standards are often blamed for keeping potential buyers from entering the housing market. But – though credit availability is tighter today than it was before the financial crisis and recession – there hasn’t been an equivalent increase in the number of applicants who have been denied loans. This indicates that, though credit standards have been raised, they may not be the only reason loan originations have dropped. In fact, CoreLogic’s analysis found that the average borrower credit score last year was nearly 750, while it was closer to 700 in 2005. The fact that average credit scores have increased could point to a drop in the number of loan applications from buyers with lower scores. If potential buyers are being discouraged from applying for a loan because their credit score isn’t optimal, it could be contributing to the overall drop in originations. It also means that loosening credit standards may not be the key to unlocking mortgage demand. Instead, consumers may need to be better informed about lending standards and how to check, correct, and maintain a good credit score. More here.

Sales Of Existing Homes Up In April

Sales of previously owned homes rose for the second-consecutive month, according to new numbers released by the National Association of Realtors. In April, existing-home sales – which includes single-family homes, townhomes, condominiums, and co-ops – increased 1.7 percent, beating economists’ expectations and pushing sales 6 percent above last year’s level. Lawrence Yun, NAR’s chief economist, said April’s increase is a sign that the housing market is slowly building momentum. “Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” Yun said. “Except for in the West – where supply shortages and stark price growth are hampering buyers the most – sales are meaningfully higher than a year ago in much of the country.” A look at regional results shows the South and West both down slightly from the month before, while the Northeast posted a 2.8 percent improvement and the Midwest surged 12.1 percent. Also in the report, the number of homes available for sale rose 9.2 percent. More here.

Spring Rebound To Follow Slow 1st Quarter

Much like last year, the first quarter of 2016 was slower than expected. Both the housing market and broader economy showed weakness amid harsh winter weather and global economic uncertainty. But also like last year, Fannie Mae’s Economic & Strategic Research Group says economic growth should rebound in the spring and continue to grow through the remainder of the year. Doug Duncan, Fannie Mae’s chief economist, says an uptick in hours worked and average hourly earnings should help support consumer spending, which will help boost the economy. He also expects home sales to climb. “Home sales are expected to pick up heading into the spring season amid the backdrop of declining mortgage rates, rising pending home sales and purchase mortgage applications, and continued easing of lending standards on residential mortgage loans,” Duncan said. “Meanwhile, the homeownership rate showed signs of stabilizing during the first quarter of this year, as the relatively high homeownership rates among Baby Boomers have helped offset low homeownership rates among Millennials, many of whom remain on the sidelines due to ongoing affordability issues.” More here.

Mortgage Rates At Lowest Level In A Year

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were mostly flat last week. In fact, rates for 30-year fixed-rate loans with both conforming and jumbo balances were unchanged from one week earlier while rates for loans backed by the Federal Housing Administration and 15-year fixed-rate mortgages dropped. By the end of the week, average rates were as low as they’d been in nearly a year. That didn’t spur demand for mortgage applications, however, which fell 1.6 percent from the week before. Joel Kan, MBA’s associate vice president of industry surveys and forecasting, told CNBC that the declining demand for home purchase loans was mostly seen at the higher end of the market. “Purchase applications jumped up during the first full week of April and had effectively remained at that level, on an unadjusted basis, before falling this week,” Kan said. “The seasonally adjusted purchase index decreased to the lowest level since February, led by declines in applications for larger home purchase amounts.” Purchase volume was still almost 12 percent higher than one year earlier, despite the decline in jumbo loans. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Home Construction, Permits Rise In April

The number of new homes that began construction in April was 6.6 percent higher than the previous month, according to new numbers released by the U.S. Census Bureau and the Department of Housing and Urban Development. The improvement, which included a surge in multi-family construction, also included a 3.3 percent jump in the number of single-family homes that broke ground during the month. That’s good news for home buyers because any increase in new home construction boosts the number of homes available for sale, which helps balance the market and keeps prices from rising too quickly. Buyer demand has been high so far this spring but, because for-sale inventory has been low, prospective buyers have fewer homes to choose from and less room for price negotiation. Also in the report, there was an 1.5 percent increase in the number of authorized building permits to build single-family homes – which is a good sign that new home construction will continue to improve in coming months. The newly released figures outpaced economists’ expectations and were another sign that the economy and housing market, which had slowed to start the year, have begun to pick up. More here.

Builders Expect New Home Sales Bump

Builders are in an unique position to gauge home buyer traffic and demand for newly-built single-family homes. Because of this, their views are considered an important measure of the market’s health and future outlook. Each month, the National Association of Home Builders surveys builders and scores their responses on a scale where any number above 50 indicates more builders view conditions as good than poor. In May, the index was unchanged from the month before – remaining at 58 for the fourth-consecutive month. Robert Dietz, NAHB’s chief economist, says a closer look at the numbers shows there is a lot of optimism about the market going forward. “The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” Dietz said. “Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward.” In fact, builders are so optimistic that the index component measuring sales expectations for the next six months jumped three points to 65, while gauges of buyer traffic and current sales stayed flat. Regionally speaking, three-month moving averages show the Midwest and South up a point, the West unchanged, and the Northeast down slightly. More here.

Home Sales See Best 1st Quarter Since 2007

So far this year, there has been a lot of talk about higher home prices, declining affordability, and a lack of available homes for sale. But, according to the National Association of Realtors, demand remains strong and sales of previously owned homes just had their best first quarter since 2007. Lawrence Yun, NAR’s chief economist, says the housing market continues to make gains despite the challenges facing home buyers this spring. “The housing market continues to expand at a moderate pace in spite of the fact that home prices are rising too fast in some areas because of insufficient supply fueled by the grossly inadequate number of new single-family homes being constructed,” Yun said. “The good news is that pending sales in recent months have remained stable and should support a modest gain in home sales heading into the summer.” Yun is forecasting home sales to finish the year at their strongest pace in a decade. With mortgage rates still historically low and an improved job market, home buyers are showing that they aren’t deterred by higher prices. However, Yun cautions that there needs to be an increase in the number of homes for sale in order to meet the level of demand from buyers and keep prices affordable. More here.

Homeownership Remains Goal For Millennials

Housing and Urban Development Secretary Julian Castro says the idea that younger Americans aren’t interested in homeownership is a myth and that it is as much a goal for them as it was previous generations. “The American Dream of homeownership is as strong today as ever,” Castro told the National Association of Realtors Regulatory Issues Forum. “And perhaps the best news of all is that millennials are showing that their generation is just as committed to homeownership as their parents and grandparents.” Long seen as an essential part of achieving the American Dream, homeownership seemed to lose some of its appeal following the housing crash and financial crisis. Since then, a smaller than normal share of younger buyers have been active in the housing market – fueling the notion that they weren’t interested in owning a home. But, according to one recent poll cited by Castro, 40 percent of millennials plan to buy their first home sometime in the next year. That high level of interest, combined with recent improvements to the labor market and economy, should result in more of those potential buyers becoming actual buyers, according to Castro. In his view, student loan debt has been the main obstacle for young Americans hoping to purchase a home. More here.