Weekly Mortgage Applications Rise, a Sign of Hope for the Spring Homebuying Season
February 25, 2019
Mortgage application volume increased 3.6 percent last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
Applications to purchase a home increased 2 percent for the week — the first uptick in a month — a sign of optimism in the housing market.
"After four consecutive declines, purchase applications increased almost 2 percent over the week and 2.5 percent compared to a year ago — showing some promise as we edge closer to the spring homebuying season," said Joel Kan, MBA associate vice president.
Some real estate agents have reported surprise at better-than-expected traffic at open houses this month, and the new numbers seem to confirm those perceptions.
Still, overall volume was 2.3 percent lower than a year ago.
The biggest boost came from applications to refinance a home loan, which are far more sensitive to weekly interest rate moves. The 30-year fixed rate was essentially unchanged. Homeowners clearly saw an opportunity, as refinance applications increased 6 percent from the previous week. They were 8 percent lower than a year ago.
The positive numbers in mortgage application volume are in line with this month's homebuilder sentiment, which rose 4 points, according to a monthly survey from the National Association of Home Builders/Wells Fargo Housing Market Index. That index showed an increase in buyer traffic, sales expectations and current sales conditions in February.
Builders still point to a concern in affordability, however, which is at a 10-year low, according to the index's data. There continues to be a critical shortage of affordable single-family homes for sale.
"Ongoing job creation and solid household formations will keep demand firm, but builders will continue to grapple with supply-side headwinds that will dampen more vigorous growth in the single-family sector," said NAHB chief economist Robert Dietz.
Homebuilder Sentiment Rises as Interest Rates Stay in Check
The nation's homebuilders are feeling better about the state of their industry as lower interest rates boost consumer confidence.
Builder sentiment rose 4 points to 62 in February, according to a monthly survey from the National Association of Home Builders/Wells Fargo Housing Market Index. The survey stood at 71 last February. Anything above 50 on the index is considered positive.
Sentiment fell at the end of last year, largely because mortgage rates jumped in the fall, hurting affordability. Newly built homes come at a price premium to existing homes, so higher interest rates can have an outsize effect on the new construction market. Interest rates then fell sharply at the end of the year and have remained lower this year.
"Ongoing reduction in mortgage rates in recent weeks coupled with continued strength in the job market are helping to fuel builder sentiment," said NAHB Chairman Randy Noel. "In the aftermath of the fall slowdown, many builders are reporting positive expectations for the spring selling season."
Sales of newly built homes have been hard to read, due to the recent government shutdown and delays in reporting from the U.S. Census. Several sources noted a sharp decline in sales toward the end of the year, with a slight improvement in January. Mortgage applications to purchase newly built homes were flat in January compared with January 2018, according to the Mortgage Bankers Association. The cost to build homes continues to be a concern.
"Rising costs stemming from excessive regulations, a dearth of buildable lots, a persistent labor shortage and tariffs on lumber and other key building materials continue to make it increasingly difficult to produce housing at affordable price points," said NAHB Chief Economist Robert Dietz.
Housing starts and builder permits data have not been reported since last year, but they have been running well below demand and historical averages since the housing crash. While single-family starts are slowly rising, there continues to be a critical shortage of homes for sale, especially at lower, more affordable prices.
Builders are still focused most on the move-up sector of the housing market, as the costs of land, labor and materials continue to run high, making it more difficult financially to build lower-priced homes.
Source: Ben Lane | HousingWire