Home Prices Rise, Mortgage Applications Dip

Mortgage applications decreased for the third straight week – this time down 2.5%, according to the latest report from the Mortgage Bankers Association, as reported by HousingWire.

Refinance activity dropped to its slowest pace since September 2020 – down a full 5% – with declines in both conventional and government applications, according to Joel Kan, MBA's associate vice president of economic and industry forecasting. He added that mortgage rates have moved higher in tandem with Treasury yields.

"Inadequate housing inventory continues to put upward pressure on home prices," Kan said. "As both home-price growth and mortgage rates continue this upward trend, we may see affordability challenges become more severe if new and existing supply does not significantly pick up."

The dip in applications is linked to broader trends in the housing market: more than a year of low inventory is forcing interested buyers to snag whatever they can get their hands on, even if it's overpriced. That's coupled with a rise in mortgage rates, too.

A recent Redfin study showed that cash is currently king, with buyers increasing their chance of landing that home they want by nearly 300% if they offer all-cash. 

For most people, though, that isn't an option.

The 30-year fixed mortgage rate increased to 3.36% last week, and the purchase index increased for the fourth consecutive week – up 3% . The purchase index was up 26% year-over-year, according to the MBA. The refinance share of mortgage activity decreased to 60.9% of total applications, down from 62.9% the previous week.

The FHA share of total mortgage applications remained unchanged at 11.7% from the week prior. The VA share of total mortgage applications decreased to 9.8% from 10.3% the week prior.

New Home Sales Take a Hit as Builders Grapple with Big Delays and Bigger Costs, 

The headline sales numbers were disappointing, with an 18% monthly drop to the slowest pace since last May, according to the U.S. Census. But according to CNBC, some of the technical numbers are more telling of where builders expect their business to go.

"Though buyer traffic remains strong, some home building activity is being delayed due to material shortages," said Chuck Fowke, chairman of the National Association of Home Builders and a builder from Tampa, Florida. "This is forcing builders and buyers to grapple with rising affordability issues, as soaring lumber prices have added more than $24,000 to the price of a new home."

Higher interest rates, supply shortages and rising material prices are weakening affordability, pushing the median price of a new home in February up just over 5% annually.

There are other, more telling data points, as well.

The number of homes sold before construction began rose 20% year over year in February, according to the Census Bureau.

This shows that, in the context of the broader housing market, builders are seeing increased delays in getting their products to their buyers. Some of the big public builders have said in earnings releases that they are delaying construction, so as not to be building while material costs are at their latest peaks.

Likewise, the number of homes for sale that haven't started construction was up 64% in February.

While some are blaming weather for the drop in new home sales as well as weaker housing starts in February, these numbers suggest that sales offices were still busy. Given the epic shortage of existing homes for sale, builders who can offer more affordable homes should see strong demand.

"So while sales activity may have paused somewhat in February, it should resume in coming months as the labor market improves, nationwide vaccine distributions continue and the shortage of available homes persists," said Matthew Speakman, an economist at Zillow. "New home sales remain well above pre-pandemic levels and the good times are likely to continue to roll this spring and summer, despite a weak February."

These 40 Cities Could Be Poised for a Housing Crisis

Although today's housing market is largely hot, experts are bracing for a wave of evictions triggered by pandemic-related disruptions. 

Some American cities are much more vulnerable to a housing downturn than others, according to a new study from GOBankingRates. The study examined factors such as mortgage delinquencies, foreclosures, and homeowner and rental vacancy rates.

• • Hartford, Connecticut
  • Pittsburgh, Pennsylvania
  • Hampton, Virginia
  • Clearwater, Florida
  • Corpus Christi, Texas
  • Newark, New Jersey
  • San Antonio, Texas
  • Louisville, Kentucky
  • Jacksonville, Florida
  • Winston-Salem, North Carolina

For the full list, visit the article on Yahoo Finance. 

Weekly Mortgage Rate Update

Over the last year, 'home' has become more important than ever, resulting in a strong purchase demand – but buyers continue to outnumber the sellers. 

Since January, mortgage rates have increased and home prices have risen, leaving potential homebuyers with less purchasing power. Unfortunately, this has disproportionately affected the low end of the market, where supply is the slimmest.The Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 3.17%, which is 0.8 points higher than last week, and down 0.33 points from this time last year.