Tag Archives: Mortgage rates

Mortgage rates stalling the housing market as the 30-year fixed rate sits above 7%

Advice for Home Buyers

Important Takeaways:

  • The 30-year fixed-rate mortgage averaged 7.19% in the week ending September 21, a tick up from 7.18% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 6.29%.
  • “Mortgage rates continue to linger above 7% as the Federal Reserve paused their interest rate hikes,” Sam Khater, Freddie Mac’s chief economist, said. “Given these high rates, housing demand is cooling off and now homebuilders are feeling the effect,” he said. “Builder sentiment declined for the first time in several months and construction levels have dipped to a three-year low, which could have an impact on the already low housing supply,” Khater added.
  • The inventory of existing homes has also dramatically declined as homeowners who previously locked in lower rates are reluctant to sell and become homebuyers with current rates so high. The combination of low inventory and high costs has sent overall home sales 20% lower than last year, year to date.

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Feds efforts to wrangle inflation has Mortgage rates at 7% hitting 21- year high

Mortgage Rate graph

Important Takeaways:

  • Mortgage rates surpassed 7% this week, hitting the highest level in more than two decades
  • That’s the highest point since the first week of April 2002 and marks just the third time rates have exceeded 7% since then. The last times were in October and November of last year, when the rate reached 7.08%.
  • The increase this week further deteriorates affordability for budget-conscious buyers who are facing elevated home prices and a shortage of choices because homeowners remain reluctant to sell and give up their lower mortgage rate.

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Wells Fargo and JP Morgan lay off home lending staff

Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Wells Fargo Cuts Hundreds More Mortgage Employees on Industry Slowdown
  • Wells Fargo & Co. cut hundreds more mortgage employees Thursday, the latest in a series of reductions across the industry after higher interest rates brought the pandemic-era home-lending boom to halt.
  • The firm is not alone: Rival JPMorgan Chase & Co. cut hundreds of home-lending staff and reassigned hundreds more in June, with further reductions since.
  • The latest wave comes amid ongoing Federal Reserve rate hikes to tame persistent inflation, pushing mortgage rates toward their highest levels in two decades. Refinancings have dried up and some potential homebuyers have been sidelined in the process.

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Home Loans rise to 6.02 percent not seen since 2008

Revelations 18:23 ‘For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Mortgage rates hit 6 percent for first time since 2008
  • The average mortgage rate for the benchmark home loan rose to 6.02 percent as of Thursday, according to Freddie Mac, up 0.13 percentage points from last week and 3.16 percentage points above its level a year ago. It’s the first time the 30-year fixed rate mortgage rate was above 6 percent since the week of Nov. 20, 2008.
  • The Fed is aiming to slow economic activity — including home sales and home price growth — to bring consumer and business spending down to a level that won’t spur inflation. The central bank has hiked its baseline interest rate range four times since March by a total of 2.25 percentage points and is certain to hike rates again next week.

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U.S. homebuilding takes a step back amid bitterly cold weather

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding dropped to a six-month low in February as severe cold gripped many parts of the country, in a temporary setback for a housing market that remains supported by extremely lean inventories amid strong demand for larger homes.

The report from the Commerce Department on Wednesday also showed a sharp decline in building permits last month. It followed on the heels of data this week showing that the deep freeze, which was most severe in Texas and other parts of the densely populated South region, depressed retail sales and output at factories.

Though the second straight monthly decline in homebuilding could lead economists to trim their lofty gross domestic product estimates for the first quarter, a rebound in starts is expected in the April-June period, keeping intact predictions that economic growth this year will be the strongest since 1984.

Indeed, the Federal Reserve on Wednesday projected robust growth and higher inflation this year. The U.S. central bank, however, repeated its pledge to keep its benchmark overnight interest rate near zero for years to come.

“We can read nothing into the underlying strength of the economy from these weather-distorted reports,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “March data are likely to show strong bounce backs in consumer spending, industrial production and construction activity.”

Housing starts fell 10.3% to a seasonally adjusted annual rate of 1.421 million units last month, the lowest level since last August. Economists polled by Reuters had forecast starts would decrease to a rate of 1.560 million units in February.

Starts were down 9.3% on a year-on-year basis in February.

Groundbreaking activity plunged in the Northeast, Midwest and South, but surged in the West. Permits for future home building tumbled 10.8% to a rate of 1.682 million units last month. They, however, jumped 17.0% compared to February 2020, underscoring the housing market’s strength.

U.S. stocks pared losses following the Fed statement. The dollar edged down versus a basket of currencies. Longer-dated U.S. Treasury yields were higher.

RISING CHALLENGES

The year-long COVID-19 pandemic has shifted demand towards bigger and more expensive houses as millions of Americans continue to work from home and remote schooling remains in place.

But challenges for the housing market, one of the main drivers of the economic recovery, are mounting. The 30-year fixed-rate mortgage has risen to an eight-month high of 3.05%, according to data from mortgage finance agency Freddie Mac.

Mortgage rates have jumped in tandem with Treasury yields, which have spiked as investors anticipate that stronger growth will generate significant inflation. Growth is being driven by massive fiscal stimulus, including President Joe Biden’s $1.9 trillion rescue package, which was enacted last week.

A separate report from the Mortgage Bankers Association on Wednesday showed a moderate increase in applications for loans to purchase a home last week. Though mortgage rates remain low by historical standards, they are contributing to the rising costs of homeownership, especially for first-time buyers.

Supply disruptions because of coronavirus-related restrictions are driving up commodity prices, including softwood lumber, which surged a record 79.7% in February on a year-on-year basis. According to a survey from the Associated General Contractors of America, manufacturers have hiked drywall prices by 20% effective late March or the beginning of April.

A survey on Tuesday showed confidence among single-family homebuilders dipped in March, despite strong buyer traffic, amid worries over rising material costs and delivery times, especially for softwood lumber.

With the supply of previously owned homes at record low levels, builders are likely to continue breaking more ground, though houses could become more expensive.

“Builders face some near-term challenges,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “We don’t anticipate that this will weigh too heavily on starts, the forecast is for housing starts to steadily increase throughout the course of this year.”

Single-family homebuilding, the largest share of the housing market, declined 8.5% to a rate of 1.040 million units in February, also a six-month low. Single-family building permits tumbled 10.0% to a rate of 1.143 million units.

Starts for the volatile multi-family segment plunged 15.0% to a pace of 381,000 units. Building permits for multi-family housing projects declined 12.5% to a pace of 539,000 units.

Housing completions jumped 2.9% to a rate of 1.362 million units last month. Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to close the inventory gap.

The stock of housing under construction rose 0.3% to a rate of 1.283 million units, the highest level since October 2006.

“Builders will continue to have a key role to play in addressing the inventory shortage for a market chock full of eager home shoppers,” said Matthew Speakman, an economist at Zillow. “The homebuilding sector has more room to run.”

(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci)

U.S. 30-year, 15-year mortgage rates fall to lowest since Nov 2016: Freddie Mac

FILE PHOTO: A home is seen in the Penn Estates development where most of the homeowners are underwater on their mortgages in East Straudsburg, Pennsylvania, U.S., June 20, 2018. Picture taken June 20, 2018. REUTERS/Mike Segar

(Reuters) – Borrowing costs on U.S. 30-year and 15-year fixed-rate mortgages fell to their lowest levels since November 2016, in line with the recent decline in bond yields because of trade and recession fears, Freddie Mac said on Thursday.

Last week, the yields on 10-year Treasury notes briefly dipped below those on two-year notes <US2US10=TWEB> for first time in a dozen years. The “curve inversion” among these two debt maturities has often preceded prior U.S. recessions.

This market phenomenon touched off a fresh wave of buying in U.S. Treasuries, sending 30-year yields <US30YT=RR> to record lows.

The decline in mortgage rates is expected to help home sales and to stoke refinancing, putting more cash into consumers’ pockets, analysts said.

“The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity,” Freddie Mac’s Chief Economist Sam Khater said in a statement.

The interest rates on 30-year mortgages averaged 3.55% in the week ended Aug. 22, down from 3.60% a week earlier and 4.51% a year ago, the mortgage finance agency said.

The average 15-year mortgage rate decreased to 3.03% in the latest week, down from 3.05% the week before. It was 3.98% a year ago.

Interest rates on five-year adjustable-rate home loans averaged 3.32%, the lowest since November 2017.

(Reporting by Richard Leong; Editing by Chizu Nomiyama and Nick Zieminski)

U.S. housing starts fall, but prior months revised up

FILE PHOTO: Single family homes being built by KB Homes are shown under construction in San Diego, California, U.S., April 17, 2017. REUTERS/Mike Blake/File Photo

WASHINGTON (Reuters) – U.S. homebuilding unexpectedly fell in May, but data for the prior two months was revised higher and building permits increased, suggesting that the housing market was drawing some support from a sharp decline in mortgage rates.

Housing starts dropped 0.9% to a seasonally adjusted annual rate of 1.269 million units last month amid a drop in the construction of single-family housing units, the Commerce Department said on Tuesday.

Data for April was revised up to show homebuilding rising to a pace of 1.281 million units, instead of increasing to a rate of 1.235 million units as previously reported. Housing starts in March were also stronger than initially estimated.

Economists polled by Reuters had forecast housing starts edging up to a pace of 1.239 million units in May. Single-family housing starts fell in the Northeast, the Midwest and West, but rose in the South, where the bulk of homebuilding occurs.

Building permits rose 0.3% to a rate of 1.294 million units in May. It was the second straight monthly increase in permits. Building permits have been weak this year, with much of the decline concentrated in the single-family housing segment. The housing market hit a soft patch last year and has been a drag on economic growth for five straight quarters.

The sector is being constrained by land and labor shortages, which are making it difficult for builders to fully take advantage of lower borrowing costs. As a result, the housing market continues to struggle with tight inventory, leading to sluggish sales growth.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci) ((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net)

U.S. homebuilding slowing; labor market strong

FILE PHOTO: Construction workers are pictured building a new home in Vienna, Virginia, outside of Washington, October 20, 2014./File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding rebounded less than expected from a nine-month low in July, suggesting the housing market was likely to tread water for the rest of this year against the backdrop of rising construction costs and labor shortages.

But the fundamentals for the housing market remain strong. New filings for jobless benefits fell again last week, other data showed on Thursday, pointing to sustained labor market strength despite an escalating trade war between the United States and China that has rattled financial markets.

“It is more expensive to buy a new home for the American worker,” said Chris Rupkey, chief economist at MUFG in New York. “We cannot be confident that home construction will pick up in the near future.”

Housing starts rose 0.9 percent to a seasonally adjusted annual rate of 1.168 million units in July, the Commerce Department said. Starts fell to a nine-month low in June.

Groundbreaking activity increased in the Midwest and South, but dropped in the Northeast, and hit a more than 1-1/2-year low in the West. Last month’s increase in starts still left the bulk of June’s 12.9 percent plunge intact.

Building permits increased 1.5 percent to a rate of 1.311 million units, snapping three straight months of decreases. With permits now outpacing starts, homebuilding could pick up in the months ahead. But gains are likely to be limited as builders continue to complain about rising construction costs as well as shortages of skilled labor and land.

Lumber prices shot up after the Trump administration slapped anti-subsidy duties on imports of Canadian softwood lumber. Though prices have dropped in the past months, they remain high.

The housing market has underperformed a robust economy, with economists also blaming the slowdown on rising mortgage rates, which have combined with higher house prices to make home purchasing unaffordable for some first-time buyers.

The 30-year fixed mortgage rate has risen more than 50 basis points this year to an average of 4.53 percent, according to data from mortgage finance agency Freddie Mac. While that is still low by historical standards, the rise has outpaced annual wage growth, which has been stuck below 3 percent.

At the same time, house prices have increased more than 6.0 percent on an annual basis, largely driven by a dearth of properties available for sale. Residential investment contracted in the first half of the year and economists do not expect housing to contribute to growth in the final six months of 2018.

The economy grew at a 4.1 percent annualized rate in the second quarter, the fastest in nearly four years and almost double the 2.2 percent pace logged in the January-March period.

Economists polled by Reuters had forecast housing starts rising to a pace of 1.260 million units last month and permits increasing to a rate of 1.310 million units.

“Given the chronic lack of affordable housing and rapidly escalating home prices, it is worrisome that on a per capita basis, the country is producing new single-family housing stock at a rate that is similar to the trough of a typical recession,” said Sam Khater, chief economist at Freddie Mac.

The PHLX housing index &lt;.HGX&gt; was trading higher, tracking a broadly firmer U.S. stock market. The dollar slipped against a basket of currencies and U.S. Treasury prices fell.

TIGHT SUPPLY

Single-family home building, which accounts for the largest share of the housing market, rose 0.9 percent to a rate of 862,000 units in July. Single-family homebuilding has lost momentum since hitting a pace of 948,000 units last November, which was the strongest in more than 10 years.

Permits to build single-family homes jumped 1.9 percent in July to a pace of 869,000 units. Single-family building permits in the South, where more than half of homebuilding occurs, vaulted to an 11-year high in July.

Starts for the volatile multi-family housing segment gained 0.7 percent to a rate of 306,000 units in July. Permits for the construction of multi-family homes climbed 0.7 percent to a pace of 442,000 units.

With the moderate rise in homebuilding last month, housing inventory is likely to remain tight. In addition, housing completions fell for a third straight month, hitting an eight-month low rate of 1.188 million.

Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to plug the inventory gap. The stock of housing under construction was little changed at 1.122 million units.

In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 212,000 for the week ended Aug. 11.

The claims data is being closely watched for signs of layoffs as a result of the Trump administration’s protectionist trade policy, which has also led to tit-for-tat import tariffs with other trading partners, including the European Union, Canada, and Mexico.

There have been reports of some companies either laying off workers or planning to as a result of the import duties. But with many companies reporting difficulties finding qualified workers, the fallout from the trade tensions might be minimal.

A third report showed factory activity in the mid-Atlantic region slowing sharply in August as new orders growth cooled. The Philadelphia Federal Reserve said its business conditions index tumbled 14 points to a 21-month low of 11.9 this month. Manufacturers were, however, optimistic about business prospects over the next six months.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)