The Average Size Of A New Mortgage Set A Record, While Home Prices Continue To Increase

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The National Association of Realtors reported This Week in Real Estate that January existing-home sales rose nearly 7% over the prior month despite total inventory down 2.3% from December and down 16.5% compared to January 2021. According to the Department of Housing and Urban Development and the U.S. Census Bureau, housing starts dipped 4.1% in January, however building permits increased at a solid pace in January. The number of single-family homes under construction is 27% higher than a year ago. Below are a few newsworthy events from the third week of February that influence our business: 

Existing-Home Sales Surge 6.7% in January. Existing-home sales rose in January, making a notable move upward following a previous month where sales declined, according to the National Association of Realtors. “Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers,” said Lawrence Yun, NAR’s chief economist. “Consequently, housing prices continue to move solidly higher.” Total housing inventory at the end of January amounted to 860,000 units, down 2.3% from December and down 16.5% from one year ago (1.03 million). “The inventory of homes on the market remains woefully depleted, and in fact is currently at an all-time low,” Yun said. Properties typically remained on the market for 19 days in January, equal to days on market for December, and down from 21 days in January 2021. Seventy-nine percent of homes sold in January 2022 were on the market for less than a month. Yun explained that the forthcoming increase in mortgage rates will be problematic for at least two market segments.”First, some moderate-income buyers who barely qualified for a mortgage when interest rates were lower will now be unable to afford a mortgage,” he said. “Second, consumers in expensive markets, such as California and the New York City metro area, will feel the sting of nearly an additional $500 to $1000 in monthly payments due to rising rates.”

Slight Decline For January Single-Family Starts. Single-family starts dipped somewhat in January, as ongoing supply-chain issues are adding cost and construction time to home building. The availability of labor and lots also remain key headwinds, with labor likely to become more challenging in 2022. Overall housing starts decreased 4.1% to a seasonally adjusted annual rate of 1.64 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. However, in a sign of strong demand, building permits increased at a solid pace in January. Single-family permits increased 6.8% for the month. The January reading of 1.64 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 5.6% to a 1.12 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 0.8% to an annualized 522,000 pace. Due to supply-chain effects, there are 151,000 single-family units authorized but not started construction – up 32.5% from a year ago. In February, single-family builder confidence decreased one point to a level 82 on strong buyer demand, according to the NAHB/Wells Fargo Housing Market Index (HMI). As an indicator of the economic impact of housing, there are now 785,000 single-family homes under construction. This is 27% higher than a year ago. Total housing units now under construction (single-family and multifamily combined) is 20% higher than a year ago.

The Average Size Of A New Mortgage Just Set A Record, As Home Prices Continue To Climb. While mortgage demand is falling, due to rising interest rates, the size of the average purchase loan application just set a record. Mortgage applications to buy a home fell 1% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 7% lower than the same week one year ago. “Purchase applications saw a modest decline over the week, with government purchase applications accounting for most of the decrease,” said Joel Kan, an MBA economist. “Prospective buyers still face elevated sales prices in addition to higher mortgage rates. The heavier mix of conventional applications again contributed to another record average loan size at $453,000.” The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.05% from 3.83%, with points rising to 0.45 from 0.40 (including the origination fee) for loans with a 20% down payment. The rate was 107 basis points lower the same week one year ago. The sharp rise in mortgage rates over the last several months has cut refinance demand dramatically. Application volume was down 9% for the week and was 54% lower than the same week one year ago. The refinance share of applications decreased to 52.8% of total applications from 56.2% the previous week. That was the lowest level since July 2019.

Did you know every home listed for sale with Berkshire Hathaway HomeServices Northwest Real Estate is eligible to receive no-obligation home warranty coverage from American Home Shield the first six months the home is listed with our company?