What’s Ahead For Mortgage Rates This Week – December 23rd, 2019

What’s Ahead For Mortgage Rates This Week – December 23rd, 2019Last week’s economic reports included readings from the National Association of Home Builders on housing markets; the National Association of Realtors® released data on sales of previously-owned homes and the Commerce Department released readings on housing starts and building permits issued. Weekly reports on mortgage rates and new jobless claims were also released.

NAHB: Builder Confidence Rises in December

According to the National Association of Home Builders, builder confidence in housing market conditions rose in December to an index reading of 76 as compared to November’s reading of 71. Any reading over 50 indicates that most home builders surveyed were confident about housing market conditions.

Builder confidence in current market conditions rose seven points to an index reading of 84; builder confidence in housing market conditions in the next six months rose one point to 79 and the index reading for buyer traffic in new single-family housing developments rose four points to 58. Analysts noted that the index reading for buyer traffic rarely reaches a reading of 50.

Regional readings were mixed with builder confidence in the Northeast falling two points; the Midwestern region showed builder confidence five points higher than in November and builder confidence readings in the South and West rose one point and three points respectively.

Analysts said that low mortgage rates, a slim supply of pre-owned homes for sale and low unemployment contributed to rising builder confidence. Negative factors impacting builder confidence included high land and labor costs, and a disparity between builders focusing on high-end construction while entry-level homes were most in demand.

The National Association of Realtors ®reported fewer sales of pre-owned homes in November; 5.35 million previously-owned homes sold on a seasonally-adjusted annual basis as compared to October’s reading of 5.44 million sales of previously-owned homes.

Fewer sales were caused by slim inventories of affordable homes for sale. This data supported home builders’ assertion that fewer available pre-owned homes boosted builder confidence in current housing markets.

Housing Starts, Building Permits Issued Rise in November

The Commerce Department reported 1365 million single-family housing starts in November as compared to 1.323 million starts in October. Building permits issued also rose in November with 1.482 million permits issued as compared to October’s reading of 1.461 million building permits issued. Housing Starts and building permits supply estimates for future inventories of available homes.

Mortgage Rates Unchanged, New Jobless ClaimsFall

Fixed mortgage rates were unchanged last week according to Freddie Mac. Rates for 30-year fixed-rate mortgages averaged 3.73 percent and rates for 15-year fixed-rate mortgages averaged 3.19 percent. Rates for 5/1 adjustable rate mortgages averaged one basis point higher at 3.37 percent.

New jobless claims fell to 234,000 claims filed as compared to expectations of 235,000 new claims filed and the prior week’s reading of 252,000 first-time claims filed.

What’s Ahead

This week’s scheduled economic news is limited due to the Christmas holiday. Data on new home sales will be released along with weekly readings on mortgage rates and new jobless claims.

NAHB: Home Builders Remain Confident

NAHB Home Builders Remain ConfidentThe National Association of Home Builders Housing Market Index shows steady builder confidence in housing market conditions. September’s index reading of 68 was one point higher than August’s reading. Any reading over 50 indicates that most home builders surveyed view housing market conditions as favorable. August’s original index reading was adjusted upward by one point.

Component readings for the Housing Market Index were mixed. Builder confidence in current market conditions rose two points to index reading of 75; this was the highest reading year-over-year. Builder confidence in home sales over the next six months fell by one point to 70. The gauge of buyer traffic in single-family housing developments held steady at 50. Readings for buyer traffic seldom exceed 50; September’s reading suggested higher builder confidence than the numerical reading suggested.

Average New Home Size Decreases, Builders Confident In Housing Markets

In recent months, builders have focused on producing larger homes, which has limited the number of affordable homes available to middle-income and first-time home buyers. High demand for homes caused by slim inventories of homes for sale and factors including competition with cash buyers sidelined would-be buyers. Home builders scaled down the size of new homes by 4.30 percent during the second quarter of 2019. This trend is expected to encourage potential home buyers into the market as lower home prices and mortgage rates combine to encourage more buyers into the housing market.

Lower Home Prices And Mortgage Rates Increase Affordability

Analysts and real estate pros have long said that the only way to ease demand for homes is by building more homes within all price ranges. Builders did not immediately respond to calls for more homes, but if current builder confidence and a new focus on building affordable homes continues, high demand for homes and short supplies of available homes may ease toward evenly balanced market conditions, but the unknown factor is mortgage rates. If they rise, affordability will be challenged and buyer interest in new homes could slow.

New home prices typically fall as peak buying season ends. Current trends toward building smaller homes, low mortgage rates and lower home prices combined to provide more choices and affordable options for home buyers. If general economic conditions remain strong, more home shoppers could become homeowners.

 

NAHB: Housing Market Index Rises 1 Point in July

NAHB Housing Market Index Rises 1 Point in JulyHome Builder sentiment rose one point in July according to the National Association of Home Builders Housing Market Index. 2019 builder confidence in housing market condition continued to fall short of 2018 levels. July’s Housing Market Index reading of 65 was one point higher than June’s reading.

Component readings also rose one point each. Builder confidence in current housing market conditions rose to 72; the reading for builder confidence in market conditions for the next six months rose to 71. Builder confidence in buyer traffic in new housing developments rose to an index reading of 48; buyer traffic readings seldom exceed the neutral reading of reading of 50.

2019 Builder Confidence Is Lagging Behind 2018 Readings

Year to date, builder confidence index readings averaged 63 as compared to a reading of 67 in 2018 and 68 in 2017. Ongoing headwinds affecting builders were familiar concerns over materials prices and shortages of buildable lots and labor. Analysts said that builders remain leery of building to many homes after having large inventories of unsold homes after the Great Recession.

Builders also noted that increasing regulation and local building codes are impacting some areas. Builders are under pressure to produce affordable homes, but are log-jammed by “not in my backyard” zoning restrictions when they apply to build mixed developments of single and multi-family homes.

There may be good news on the horizon. Oregon passed state legislation banning exclusively single-family zoning. Depending on population, local jurisdictions will be allowed to build duplexes and larger multi-family units. If other states and communities follow Oregon’s lead, builders may find new options for building multiple units on lots formerly zoned for single family homes. Building affordable homes would help to ease housing shortages and ease demand for homes.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted home mortgage and real estate professionals.