Mortgage Rates Fall for Third Straight Week

Mortgage Rates Fall for Third Straight Week
Freddie Mac | August 24, 2018

Borrowers continued to get relief with mortgage rates this week, as the 30-year fixed-rate mortgage sank lower for the third consecutive week. Mortgage rates are now at their lowest level since mid-April.

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“Backed by very strong consumer spending, the economy is red-hot this month, which is in turn rippling through the financial markets and driving equities higher,” says Sam Khater, Freddie Mac’s chief economist. “Unfortunately, the same cannot be said about the housing market, where it appears sales activity crested in late 2017. Existing-home sales have now stepped back annually for the fifth straight month, and purchase mortgage applications this week were barely above year ago levels.”

Khater notes that “it is clear affordability constraints” have cooled the housing market, particularly in expensive coastal markets. “Many metro areas desperately need more new and existing affordable inventory to break out of this slump,” he notes.

Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 23:

30-year fixed-rate mortgages: averaged 4.51 percent, with an average 0.5 point, falling from last week’s 4.53 percent average. Last year at this time, 30-year rates averaged 3.86 percent.

15-year fixed-rate mortgages: averaged 3.98 percent, with an average 0.5 point, falling from last week’s 4.01 percent average. A year ago, 15-year rates averaged 3.16 percent.

5-year hybrid adjustable-rate mortgages: averaged 3.82 percent, with an average 0.3 point, down from last week’s 3.87 percent average. A year ago, 5-year ARMs averaged 3.17 percent.

Source: “Mortgage Rates Maintain Downward Trend,” Freddie Mac (Aug. 23, 2018); REALTOR® Magazine 082418

Nationally: Inventory Drought Pushes New-Home Sales to 9-Month Low

Inventory Drought Pushes New-Home Sales to 9-Month Low
National Association of Home Builders | August 24, 2018

House 1059The shortage of homes for-sale continues to depress sales. Sales of newly built, single-family homes dropped last month and are now at the lowest level since last October, the Commerce Department reported Thursday. This follows on the heels of the National Association of REALTORS®’ report earlier this week that showed existing-home sales also dipped in July, reaching their sluggish pace in more than two years.

“A lack of overall housing inventory is pushing up home prices, which is hurting affordability and causing prospective buyers to delay making a home purchase,” says Randy Noel, chairman of the National Association of Home Builders.

New-homes sales were at a 627,000 rate in July, about 1.7 percent lower than June sales. However, sales are now 7.2 percent higher than a year ago.

“Although this month marks the lowest sales pace since last October, we continue to see solid housing demand due to economic strengthening and positive demographic tailwinds,” says Danushka Nanayakkara-Skillington, NAHB’s senior economist. “Builders need to manage rising construction costs to keep their homes competitively priced for the newcomers to the housing market.”

The median price of new homes was $328,700 in July, which is 1.8 percent higher than a year ago.

Regionally, new-homes sales were up in the West (10.9 percent month-over-month) and the Midwest (up 9.9 percent month-over-month). However, those gains could not offset a 52.3 percent decline in the Northeast and a 3.3 percent drop in the South last month. “Year-to-date, sales in the Northeast are down 14.5 percent as the region deals with the impact from tax reform and persistent affordability issues,” NAHB notes in its release.

The slowdown in housing is getting the Federal Reserve’s attention, as reflected in the minutes of the central bank’s last meeting, which was released this week. Ward McCarthy, Jefferies LLC economist, noted:

“Housing activity in general has retreated from levels that were temporarily boosted by 2017 natural disasters—hurricanes and wildfires—that forced displaced households to seek alternative housing. The housing sector is also undergoing an adjustment to affordability that is less attractive than it was for most of the cycle, as well as changes in the treatment of SALT deductions in the federal tax code. That is the bad news. The good news is that there is no evidence of the type of imbalances that could cause a sharp downturn, such as heavy inventories and/or rising mortgage default and delinquency rates. We also note this is not the first temporary slowdown in housing activity this cycle.”

Source: “New-Home Sales Sink to a 9-Month Low as Housing Market Wobbles,” MarketWatch (Aug. 23, 2018) and National Association of Home Builders; REALTOR® Magazine 082418