MBA Survey: September 20 – Mortgage Application Rise

Mortgage applications went up by 5.4% in the week ending September 15, 2023, even though the 30-year fixed mortgage rate reached its highest point in four weeks at 7.31%. This increase is due to a surge in both refinance and purchase applications. The average loan size for home purchases was $416,800, the highest in six weeks.

Refinance applications grew by 13% compared to the previous week, while purchase applications for conventional and FHA loans increased, but they were still 26% lower than the same week the previous year. Joel Kan, MBA’s Vice President and Deputy Chief Economist, noted that limited housing inventory and higher mortgage rates were making home purchases more challenging for buyers.

In terms of mortgage activity, refinancing made up 31.6% of total applications, while the share of adjustable-rate mortgages (ARMs) decreased to 7.2%. The average contract interest rate for various types of mortgages showed fluctuations, impacting the effective rates for borrowers. Overall, mortgage applications increased despite the challenges posed by rising interest rates and limited inventory in the housing market.

August Housing Starts Dive, Single and Multifamily Sectors Decline

Housing construction in the U.S. experienced a significant decline in August, with both single-family and multifamily home starts dropping sharply, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. Total housing starts fell by 11.3% compared to the previous month and 14.8% compared to the previous year, reaching a seasonally adjusted annual rate of 1.28 million units. This rate was well below economists’ predictions and marked the lowest level of starts since June 2020. Single-family home starts decreased by 4.3%, while multifamily starts saw a substantial 26.3% monthly decline.

Despite the overall decline, the annualized pace for single-family home starts was 2.4% higher than the previous year, driven in part by incentives and discounts offered by homebuilders to attract buyers. However, challenges loom for residential construction, including rising mortgage rates and escalating home prices. Builder confidence, as measured by the housing market index, fell below the critical level of 50 for the first time in five months, reflecting pessimism among homebuilders. Low existing home inventory, a shortage of 1.5 million units nationwide, and higher mortgage rates have all contributed to the slowdown in housing production, impacting both first-time buyers and younger households in their pursuit of affordable homes. Builders’ confidence remains uncertain, given expectations of continued high mortgage rates as the Federal Reserve plans to raise rates further.

Fannie Mae Predicts Mild Recession in 1H 2024

The economy is sending mixed signals, with inflation going down and the job market cooling, but people are spending more than they’re earning. Economists are still determining if this will lead to a soft landing or a mild recession. According to Fannie Mae’s September 2023 report, a modest economic slowdown is the most likely outcome for 2024.

One big concern is the housing market, where mortgage rates are above 7%. While home sales are still happening for significant life events, new home sales were strong in the first half of the year, partly because builders offered discounts. But as interest rates go up, these discounts will get more expensive, and Fannie Mae expects new home sales to decrease slightly in the future due to higher mortgage rates and less confidence from homebuilders. They predict the housing market will stay slow in 2024 as the government increases interest rates to control inflation.

Source:

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.