Mortgage Rates Decrease For The Second Consecutive Week

Mortgage Rates Decrease For The Second Consecutive Week. April’s new home construction data, released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development This Week in Real Estate, presents a nuanced view of the new home market. Single-family housing completions surged by 15.4% in April compared to the previous month, while single-family starts and permits experienced modest declines. Single-family starts decreased by 0.4% to a rate of 1.03 million annually. However, year-to-date, single-family starts are up by 25.7%, with a 17.7% increase year-on-year in April. Single-family permits decreased by 0.8% to an annualized rate of 976,000 units, marking the lowest pace since August 2023. Concerns among builders regarding expanding regulatory burdens and mortgage rates averaging above 7% for the past four weeks have contributed to a decline in builder confidence in May, the first since November 2023, as reported by the National Association of Home Builders. Meanwhile, mortgage rates have seen a decrease for the second consecutive week. The refinance index rose by 5%, while the purchase index fell by 2% compared to the previous week. Joel Kan, Vice President and Deputy Chief Economist at the Mortgage Bankers Association, noted that the 30-year fixed rate mortgage dipped 10 basis points to 7.08%, the lowest level since early April, as Treasury yields continued to decline. Below are a few newsworthy events from the second week of May that influence our business:  
HIGHER INTEREST RATES KEEP SINGLE-FAMILY HOUSING STARTS FLAT IN APRIL. Single-family starts remained flat in April as mortgage interest rates moved above 7% last month and builders continued to face tight lending conditions. Overall housing starts increased 5.7% in April to a seasonally adjusted annual rate of 1.36 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Within this overall number, single-family starts decreased 0.4% to a 1.03 million seasonally adjusted annual rate. However, this pace is 17.7% higher than a year ago. On a year-to-date basis, single-family starts are up 25.7%, totaling 335,600. In April, there were 674,000 single-family homes under construction, the highest count since November 2023 and down just 2.1% year-over-year. Overall permits decreased 3.0% to a 1.44-million-unit annualized rate in April. Single-family permits decreased 0.8% to a 976,000-unit rate; this is the lowest pace since August 2023. Read the full story here.
MORTGAGE APPLICATIONS RISE SLIGHTLY AS RATES DECLINE FOR SECOND STRAIGHT WEEK. Mortgage demand ticked up last week as interest rates declined for a second week in a row. Applications increased by 0.5% on a seasonally adjusted basis during the week ending May 10, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey. “Treasury yields continued to move lower last week, and mortgage rates declined for the second week in a row, with the 30-year fixed rate down 10 basis points to 7.08 percent, the lowest level since early April,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. Purchase loan application volume decreased by 2% from one week earlier, driven largely by a 9% drop in Federal Housing Administration (FHA) purchase loan applications. Meanwhile, the decline in rates led to a small boost to refinance applications, driven by a strong week for U.S. Department of Veterans Affairs (VA) refinances. The MBA’s refinance index increased 5% from the previous week and was 7% higher than the same week one year ago. Read the full story here.
BUILDER SENTIMENT POSTS ITS FIRST DECLINE SINCE NOVEMBER. With mortgage rates hovering north of 7% for the past few months, builder confidence declined for the first time since November 2023. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) sat at 45 in May, down 6 points from April’s reading of 51, according to data released on Wednesday. The HMI is a monthly survey that gauges NAHB members’ perceptions of newly built single-family home sales, expected sales for the next six months and potential homebuyer traffic. An index of 50 is neutral. Anything higher than 50 indicates that builders view conditions as favorable, while readings lower than 50 indicate that builders view conditions as unfavorable. “We are also concerned about the recent code rules that require the United States Department of Housing and Urban Development and the United States Department of Agriculture to insure mortgages for new single-family homes only if they are built to the 2021 International Energy Conservation Code. This will further increase the cost of construction in a market that sorely needs more inventory for first-time and first-generation buyers.”  Read the full story here.

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