05/24/2024
Current Trends in the Housing and Mortgage Markets
The gist:
The housing market is experiencing mixed trends with lower interest rates boosting refinancing but not purchase applications. Existing-home sales fell slightly in April, and new-home sales decreased amid slowly rising inventory levels. The VA's temporary policy change on buyer agent payments is a significant positive shift, allowing veterans better access to professional real estate representation. Experts continue to monitor inflation and potential Federal Reserve rate cuts, which could impact future mortgage rates and market dynamics.
Current Trends in the Housing and Mortgage Markets:
Market Update: Mortgage Rates and Applications
Lower interest rates have had mixed impacts on the housing market. The Mortgage Bankers Association (MBA) reported a 0.5% increase in the Market Composite Index, measuring mortgage loan application volume, for the week ending May 10. However, home purchase applications fell by 2.0% on both adjusted and unadjusted bases and were 14.0% lower than the same week in 2023.
Joel Kan, MBA’s Vice President and Deputy Chief Economist, noted that treasury yields continued to move lower last week, leading to a decline in mortgage rates. The 30-year fixed-rate mortgage decreased by 10 basis points to 7.08%, the lowest level since early April. Despite this decline benefiting prospective homebuyers, mortgage rates remain significantly higher than a year ago, and the inventory of homes for sale is still tight.
Key highlights from the MBA's Weekly Mortgage Applications Survey include:
The average loan request decreased to $379,400 from $385,600, while purchase loans dropped from $443,200 to $437,700.
The FHA share of applications decreased to 12.4% from 12.9%, and VA applications increased to 12.7% from the prior week's 11.7%.
The conforming 30-year fixed-rate mortgage (FRM) rate of 7.08% saw points decline to 0.63 from 0.65.
Jumbo 30-year FRM rates decreased to 7.22% from 7.31%, with points increasing to 0.58 from 0.46.
Existing-Home Sales
Existing-home sales decreased by 1.9% from March to April, with a seasonally adjusted annual rate of 4.14 million in April. Year-over-year, sales fell 1.9%. The total housing inventory at the end of April was 1.21 million units, up 9% from March and 16.3% from a year ago. Unsold inventory sits at a 3.5-month supply at the current sales pace, up from 3.2 months in March and 3.0 months in April 2023.
The median existing-home price for all housing types in April was $407,600, a 5.7% increase from the previous year. Notably, homes priced $1 million or more saw a significant inventory and sales increase, up 34% and 40% respectively, from a year ago.
New-Home Sales and Inventory
Sales of newly built single-family homes fell to a seasonally adjusted annual rate of 634,000 in April, down 4.7% from March and 7.7% from April 2023. The median sales price of newly built homes in April was $433,500, up from $420,800 a year earlier. The inventory of newly built homes rose to 480,000 units, representing a supply of 9.1 months at the current sales rate, up from an 8.5 month supply in March.
VA Policy Change on Buyer Agent Payments
In a significant policy shift, the Department of Veterans Affairs (VA) announced a temporary lift on the ban preventing VA buyers from directly compensating their real estate agents. This change, driven by advocacy from the National Association of REALTORS® (NAR), aims to ensure veterans have equal opportunities for professional representation in the housing market.
Previously, VA buyers were at a disadvantage when listing brokers did not offer compensation to buyer brokers, potentially forcing veterans to switch to less favorable loan products or forego professional representation. The temporary suspension of this ban allows VA buyers to compete more effectively in the market, ensuring they can access professional assistance without financial hurdles.
Expert Opinions
Jessica Lautz, Deputy Chief Economist & Vice President of NAR Research, emphasized the mixed nature of the current market. While mortgage rates have eased for the second consecutive week, remaining below the historical average of 7.74%, they are still above 7% for the fifth week in a row, affecting first-time buyers and overall affordability. Lautz noted that the recent Consumer Price Index (CPI) report indicated a decline in inflation, which could positively influence mortgage rates in the coming months.
Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), noted that housing starts in April showed a slight rebound after a large decline in the previous month. The total annualized rate of 1.36 million remains insufficient to meet the demand, indicating that the housing shortage persists. Yun highlighted the need for increased supply to stabilize home prices and support market balance.
