Rates Are Down & Mortgage Demand Is Up: The Future Is Looking Bright.


The National Association of Home Builders/Wells Fargo Housing Market Index was released This Week in Real Estate and homebuilder confidence unexpectedly rose in January for the first time in 12 months. Both builders and consumers are likely responding to the recent drop in mortgage rates. The average interest rate on the 30-year fixed mortgage last peaked at 7.37% in October followed by consecutive weeks of declines throughout December and standing at 6.37% on Friday. Mortgage application volume jumped nearly 28% last week compared to the previous week, according to the Mortgage Bankers Association. Below are a few newsworthy events from the third week of January that influence our business: 

Mortgage Demand Jumps Nearly 28% in One Week, as Interest Rates Drop to Lowest Point in Months. Consumers returned from the holiday season to find mortgage rates at their lowest point since September, and they are responding in dramatic fashion. Mortgage application volume jumped nearly 28% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Refinance demand made the biggest move, up 34% from the previous week. The refinance share of mortgage activity increased to 31.2% of total applications from 30.7% the previous week. “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers,” said Mike Fratantoni, senior vice president and chief economist at the MBA. The market, however, is not seeing any surge in inventory. The number of active listings is about 21% higher than it was a year ago. That is mostly because homes are now sitting on the market longer. New listings of homes for sale are down 22% year over year. Read the full story here.

Homebuilder Sentiment Rises in January for the First Time in a Year, Thanks to Lower Mortgage Rates. Builder sentiment in the single-family housing market posted an unexpected gain in January, rising for the first time in 12 straight months. Sentiment rose 4 points to 35 on the National Association of Home Builders/Wells Fargo Housing Market Index. “It appears the low point for builder sentiment in this cycle was registered in December, even as many builders continue to use a variety of incentives, including price reductions, to bolster sales,” said Jerry Konter, NAHB chairman. “The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023.” “While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” said Robert Dietz, NAHB’s chief economist. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability.” Dietz noted the nation still has a structural housing deficit of 1.5 million units. Read the full story here.

2022 Ends With a Decline in Single-Family Starts for the First Time Since 2011. Overall housing starts decreased by 1.4% to a seasonally adjusted annual rate of 1.38 million units in December, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Also of note, single-family housing starts ended the year down more than 10%, marking the first annual decline since 2011. The December reading of 1.38 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Total housing starts for 2022 were 1.55 million, a 3% decline from the 1.60 million total from 2021. Single-family starts in 2022 totaled 1.01 million, down 10.6% from the previous year. Multifamily starts in 2022 were up 15.1% compared to the previous year and exceeded a 500,000 annual pace for the first time since the Great Recession. Overall permits decreased 1.6% to a 1.33-million-unit annualized rate in December and are down 29.9% compared to December 2021. Single-family permits decreased by 6.5% to a 730,000-unit rate and are down 34.7% compared to December 2021. Total permits for 2022 were 1.65 million units, a 5% decline from the 1.74-million-unit total from 2021. Single-family permits in 2022 totaled a 972,000-unit rate, down 12.9% from the previous year. Multifamily permits in 2022 were up 9.0% compared to the previous year. Read the full story here.

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