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National, State & Local Building Industry News 2018: Issue 7
Weakening Housing Market
Lower inventory, interest rates and rising entry level prices creates lack of buyers Home prices are high, listings are lean and potential buyers are frustrated. There is plenty of demand, but it is not translating into home sales. Mortgage applications dropped 2.5 percent last week, seasonally adjusted, according to the Mortgage Bankers Association. The weakness was driven entirely by a lack of buyers. Total volume was 12 percent lower than the same week one year ago. Mortgage applications to purchase a home fell 5 percent for the week and were just 1 percent higher compared with a year ago. Home prices continue to rise at more than twice the rate of income growth, and bidding wars are the rule rather than the exception for entry-level homes. New buyers are clearly struggling, and that is apparent in the type of loans for which they are applying. “The mix of business changed, with FHA purchase volume increasing as conventional and VA volume decreased,” noted Mike Fratantoni, chief economist at the MBA. “This indicates that more firstTotal housing starts fell 12.3 percent in June to a seasonally adjusted annual rate of 1.17 million units, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. The June reading of 1.17 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts fell 9.1 percent to 858,000 units. Meanwhile, the multifamily sector — which includes apartment buildings and condos — dropped 19.8 percent to 315,000. NAHB•ORG Overall, permits — which are a sign of likely future housing production — dropped 2.2 percent to 1.27 million units in June, the lowest level of the year. Although single-family permits edged up 0.8 percent to 850,000, they remain at their second lowest reading of 2018.
Housing Starts Fall 12.3 Percent As Tariffs Draw Increased Concern
time buyers are entering the market, even as the market as a whole continues to be restricted by tight inventories of homes available for sale.” FHA mortgages are government insured. They offer down payments as low as 3.5 percent but also require mortgage insurance, which adds to the monthly cost. FHA loans have long been the preference of first-time buyers, who may have lower credit scores. The type of loan a borrower choses can make a far bigger difference in the monthly payment than the weekly moves in interest rates, which were basically flat last week anyway. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 4.77 percent from 4.76 percent, with points increasing to 0.46 from 0.43 (including the origination fee) for 80 percent loan-tovalue ratio (LTV) loans. Mortgage rates have not moved much at all in the past month, which may be Multifamily permits fell 7.6 percent to 423,000. “We have been warning the administration for months that the ongoing increases in lumber prices stemming from both the tariffs and profiteering this year are having a strong impact on builders’ ability to meet growing consumer demand,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “This is why we continue to urge senior officials to take leadership and resolve this issue.” While overall production is 7.8 percent higher than its level over the same period last year, the June report raises concerns about a softening in housing production over the near term. “The concern over material costs, especially lumber, is making it more difficult to build homes at competitive price points, particularly for newcomers
why refinance applicants are not doing much either. Applications did move 2 percent higher for the week but they were still 28 percent lower compared with the same week one year ago, when interest rates were lower. Refinance volume has been anemic for more than a year as so many homeowners refinanced several years ago when the average rate on the 30-year fixed was in the 3 percent range rather than the 4 percent range. The refinance share of mortgage activity increased to 36.5 percent of total applications from 34.8 percent the previous week. The critical shortage of homes for sale is not improving that much, although more homes are coming on the market now. Inventory is still significantly lower than a year ago, and what is available is usually expensive. -Diana Olick CNBC Real Estate Reporter entering the housing market. Moreover, the soft permit report does not suggest a significant increase in housing production in the near term,” said NAHB Senior Economist Michael Neal. “However, consumer demand for single-family housing continues to increase as the overall economy and labor market strengthen.” Combined single- and multifamily housing starts fell in all regions of the country. Starts fell 3 percent in the West, 9.1 percent in the South, 35.8 percent in the Midwest and 6.8 percent in the Northeast. Looking at regional permit data, permits rose 6.2 percent in the South. Permits fell 1.8 percent in the West, 16.4 percent in the Northeast and 18.7 percent in the Midwest.
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