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Home prices rose to record levels in May thanks to a lack of supply of existing houses for sale.

Home prices rose 0.7% nationally compared with April at a seasonally adjusted rate — hitting a record, according to a report from Black Knight released on Monday. Additionally, home prices in May were 0.1% higher than the year before.

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Even as the spring homebuying season comes to an end and mortgage rates push to multimonth highs, there are signs that the housing market is reheating following a slump last year. Black Knight’s vice president of enterprise research, Andy Walden, noted that five back-to-back months of price increases have now reversed the pullback that began last July.

“There is no doubt that the housing market has reignited from a home price perspective,” he said. “Firming prices have now fully erased the pullback we tracked through the last half of 2022 and lifted the seasonally adjusted Black Knight HPI to a new record high in May.”

More than half of the 50 biggest U.S. housing markets are seeing prices at or above their 2022 peaks. A mere eight of the top 50 markets are still down more than 5% from their zeniths.

The Federal Reserve has been raising interest rates for more than a year and has penciled in further hikes after holding off last month.

As of this past week, the average rate on a 30-year fixed-rate mortgage was 6.81%, up a tenth of a percentage point from the week before, according to Freddie Mac. Mortgage rates are now the highest they have been since November when they skyrocketed to above 7%.

This most recent number is up from a recent trough of 6.08% registered in February. The rate on an average 15-year fixed-rate mortgage is now sitting at 6.24%.

During the outset of the pandemic, the Fed slashed rates to near-zero levels to ignite economic activity and stave off a recession. That caused mortgage rates to plunge to super low levels — during much of 2020 and 2021, homebuyers were able to lock in mortgages at below 3%.

Because mortgage rates have surged so much, owners of existing homes who have mortgages with rates locked in before 2022 are shying away from selling because they want to keep their historically low rates. That means less existing home inventory on the market, making new homes more of a hot commodity.

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As a result, sales of new homes have been ticking up to make up the slack. The most recent new home sales data for May showed that sales rose 12.2% to a seasonally adjusted annual rate of 763,000, according to the U.S. Census Bureau, far above the number expected by forecasters.

The lack of inventory has also had the effect of lifting home construction. In June, it was revealed that the number of multifamily units under construction hit a record in May — 994,000. That surge in supply should hopefully help lower rent pressures for families across the country.

Source: washingtonexaminer.com

Apache is functioning normally

As mortgage rates reached their 2023 peak, mortgage applications rose slightly but remained very low last week.  

For the week that ended July 7, mortgage applications rose 0.9% from the prior week, according to data from the Mortgage Bankers Association. 

“Incoming economic data continue to send mixed signals about the economy, with the overall impact leaving Treasury yields higher last week as markets expect that the Federal Reserve will need to hold rates higher for longer to slow inflation. All mortgage rates in our survey followed suit, with the 30-year fixed rate increasing to 7.07%, the highest level since November 2022,” said Joel Kan, MBA’s vice president and deputy chief economist. “The jumbo rate also increased to 7.04%, a record high for the jumbo series, which dates back to 2011.”

Last week, mortgage rates increased dramatically with the 30-year fixed rate increasing to 7.07% from 6.85%, per the MBA’s data. The jumbo rate was higher than the conforming rate for the fifth week in a row. The MBA data showed that for jumbo loan balances (greater than $726,200), the rate jumped to 7.04% from 6.97% last week.   

At Mortgage News Daily, mortgage rates were 2 basis points higher on Wednesday, at 7.09%.

Purchase applications rose, with the purchase index climbing by 2% from one week earlier and was 26% lower than last year’s level on an unadjusted seasonal basis. Refinancing applications decreased 1% last week compared to the previous week and were 39% lower than the same week one year ago. It was the refinance index’s lowest level since early June, as demand for rate/term and cash-out refinances remains extremely low with mortgage rates over 7%, noted Joel Kan.

The refinance share of mortgage activity decreased to 26.8% of total applications from 27.4% the prior week. 

The rise in purchase activity was driven mostly by increases in both FHA and VA purchase applications. The Federal Housing Administration loans’ share increased to 13.3% from 13% the week prior. The U.S. Department of Veteran Affairs loans’ share increased to 12.6% from 11.7% the week prior. And the U.S. Department of Agriculture loans’ share remained unchanged at 0.4% of the total applications.

Adjustable-rate mortgages increased to 6.6% of total loan applications last week. The average contract interest rate for 5/1 ARMs rose to 6.24% from 6.00% a week prior.

Source: housingwire.com

Apache is functioning normally

The 10-year yield and mortgage rates have done a slow dance together since 1971, moving in tandem. Recently they have drifted apart because the mortgage market is stressed, but they’re still bound to each other. I always look at where I believe the 10-year yield will range in a year and the inflation growth rate wasn’t the main driver this year: It was the labor market.

Last year the bond market had a crazy ride while trying to digest all the Federal Reserve rate hikes and dramatic world events. In addition, the inflation growth rate was the highest in recent history last year while the 10-year yield was lower than mortgage rates. That can be confusing, but sometimes the growth rate of inflation isn’t the main driver of mortgage rates.

In my 2023 forecast, I said if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating to mortgage rates between 5.75% and 7.25%.  Of course, the spreads with the mortgage rate and the 10-year yield have worsened since the banking crisis, which is the big story of 2023. However, outside of that, the 10-year yield looks right as the labor market hasn’t broken yet and the inflation growth rate is falling. I define the labor market breaking as jobless claims getting over 323,000 on the four-week moving average, and we aren’t there yet.

The CPI data

The CPI data from BLS: The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2 percent in June on a seasonally adjusted basis, after increasing 0.1 percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.0 percent before seasonal adjustment.

The headline inflation growth rate is slowing down as everyone anticipated, and if any Fed member says no progress has been made on inflation, I need to come up with a term stronger than old and slow. The growth rate of headline CPI has collapsed, as you can see in the chart below.

Last year on CPI day in September, I went on CNBC to explain that the shelter inflation portion of CPI data, which is 44.4% of the weighting, was going to lag reality and that in 2023 it would be a positive story as the growth rate of inflation would cool. We are now seeing this process take its course, which will help cool down core inflation over the next 6-12 months.

In real time, the biggest component of core CPI — shelter — is already cooling off, but it’s still lagging in the data.


The most frustrating inflation aspect has probably been car prices: the shortage of chips and supply of cars boosted inflation because of the pandemic lags and other issues. However, the growth rate of car inflation is falling and the used car price index should be cooler over the next few months, which will help. We now have two positive stories looking out 6-12 months on core inflation which will cool the growth rate of inflation down.

All in all, today’s report is positive but one that the markets have expected for some time. If inflation was taking off like the 1970s as the Fed fears, rent inflation would be skyrocketing and honey, that story is dead.

The Federal Reserve over-hiked for no reason the last three rate hikes and if they hike again, the only purpose at this stage would be to target American workers so they lose their jobs. But the 1970s are dead, and the Fed doesn’t need to create a job-loss recession to bring down the inflation growth rate. The Fed needs to endure, let the supply side of certain items come to place and not crash the plane.

If you wonder why the Fed is still talking about more rate hikes with all the data we have now, the best answer I can give you is this: The Fed believes it needs to make real yields higher. As the inflation growth rate falls, it is being more restrictive, which will help it get the unemployment forecast of 4.5%. If it seems like they want to hike more or not even talk about cutting rates, that’s because it was always about attacking the labor market, which is still too strong for them.

Source: housingwire.com

Apache is functioning normally

Purchase loans continue to claim a larger share of the origination pipeline as refinance opportunities dwindle, according to Black Knight’s originations market monitor report. 

In June, purchase locks made up 88.4% of the month’s market mix, a record high. Purchase lock counts were down 31% year over year and 29% compared to pre-pandemic levels in 2019. In other words, nearly nine out of every 10 mortgages originated is a purchase loan.

Rate lock activity fell 1% month over month in May, with conforming loans gaining share mainly at the expense of non-conforming loan products. The benchmark 30-year mortgage finished the month 6 basis points (bps) higher at 6.78%.

Purchase lock volumes are down 11% from the end of March and 31% below the volume of the same month in 2022 and cashout refinances fell 16% over the past three months and are 63% below the same month last year. Meanwhile, rate/term refinances decreased 32% over the three-month period and 44% from the same month in 2022. Refi share of lock volume dipped to 11.6%, a new low for this cycle.

“Purchase loans continue to claim a larger share of a shrinking origination pipeline, as refinance opportunities remain scarce. Indeed, we saw the purchase lending share of June’s locks hit another all-time high. But keep in mind: it is a dominant share of a very constrained market,”Andy Walden, vice president of enterprise research at Black Knight, said in a statement.

The average purchase price rose for the seventh consecutive month, to $457,000 with an average loan amount remaining flat at $360,000. Demand for ARM loans dipped slightly to 7.38% of total locks. Jumbo rates increased disproportionately to conforming, resulting in nonconforming locks (including jumbo and expanded guidelines) claiming a smaller share of the pipeline.

Of course, some markets were more purchase-heavy than others. The lowest percentage of refi locks were in the Houston and Minneapolis metros, at just 6%,. By contrast, 20% of locks in the Los Angeles metro were refis in April. Atlanta (15%), Miami (15%), Riverside-San Bernardino (14%), San Francisco-Oakland (14%) also had a higher rate of refis than the national average.

Credit: Black Knight

“As May gave way to June, we saw banks lose some of their appetite for jumbo loans. While the OMBBI 30-year conforming index rose 6 basis points over the month, the jumbo rate index was up by three times that level,” said Walden.

Credit scores for conforming, FHA and VA borrowers improved slightly in the month, suggesting a tightening of credit standards in an uncertain economy. 

At the same time, the level of economic uncertainty in the market resulted in historically wide spreads between 10-year Treasury yields and 30-year mortgage rates, and that uncertainty appears to be trickling down to tightening credit standards across the board.

Black Knight researchers found that the purchase pull-through rate was 77.7% in April, up 94 basis points from March. The refinance pull-through rate, however, fell to 61.9%, a 402 bps drop from March.

Source: housingwire.com

Apache is functioning normally

The so-called core measure — which economists view as the better indicator of underlying inflation — advanced 4.8% from last June, the lowest since late 2021 but still well above the Fed’s target.

This is the smallest 12-month increase since the year ending March 2021 and the 12th consecutive month of inflation declines.

Indexes that increased in June include shelter, motor vehicle insurance, apparel, recreation, and personal care. The indexes for airline fares, communication, used cars and trucks, and household furnishings and operations were among those that decreased in June.

Shelter, which is the largest category, also posted a sizable increase, rising 7.8% year over year (down from 8.0% in May) and accounting for more than 70% of the total increase in the all items less food and energy index which was up 0.2% in June.

But the shelter inflation figure is highly imperfect. The BLS’s CPI metric lags asking rents because the CPI measures in-place rent, and because most renters see a change only once per year, the index lags significantly from asking rents on new leases. Peak rent inflation was between May 2022 and February 2023, but has declined in subsequent months and is expected to continue to do so.

An index tracking the rent of primary residences slowed to a 0.46% change in June, the weakest increase since March 2022.

“Despite the positive inflation report, the Fed likely will resume its rate hikes when it meets later this month, remaining committed to raising interest rates until the magical 2% inflation target is met,” said Lisa Sturtevant, chief economist at Bright MLS.

The problem is that housing costs, which account for a large share of the inflation picture, are not coming down meaningfully in the CPI. In June, the index for shelter accounted for 70% of the increase in the CPI. Rents were up 8.3% in June, while owner costs rose 7.8%.

Unfortunately, the Fed does not have the right tools to tackle high housing costs in the U.S, Sturtevant noted. Initially, higher rates did cool housing demand. But because rates had been pushed so low by the Fed during the pandemic and then increased so quickly, the Federal Reserve’s rate increases not only reduced housing demand—as intended—but also severely limited supply by locking homeowners into homes they would have otherwise listed for sale. 

“Housing should not be treated like other goods and services in the CPI’s basket. A home is not a dozen eggs or a flat screen tv or a trip to the beach. Pushing rates higher without a strategy for increasing supply in the market will not cause housing costs to fall—until the Fed has gone too far by sending the economy into a recession and decimating demand through job and income losses,” said Sturtevant in a statement. 

In the meantime, with inventory hovering around record lows and mortgage rates north of 7%, a generation of Americans is being forced to the sidelines, excluded from the ability to build wealth through homeownership.

Nevertheless, there are signs the housing industry is turning a corner. “Low inflation means low mortgage rates. Therefore, decelerating consumer prices could steadily lift home sales and increase home production in a few months,” said Lawrence Yun, chief economist for the National Association of Realtors. “Moreover, with so many empty apartment units under construction, rents could plateau by this time next year.”

Yun, who’s been critical of the Federal Reserve’s series of rate hikes, said the monetary policymakers “misjudged the early strength of inflation, which got out of control. Now it could misjudge on the economic front.” He said the body is too focused on lagging indicators like jobs rather than early indicators like future inflation and commercial leasing activity.

“They should look ahead and stop raising interest rates,” he said.

Source: housingwire.com

Apache is functioning normally

Following a one-week downturn, mortgage application volumes inched higher to start July despite surging interest rates, the Mortgage Bankers Association said.

The MBA’s Market Composite Index, which measures weekly application volumes based on surveys of the trade group’s members, rose a seasonally adjusted 0.9% for the seven-day period ending July 7. A week earlier, the index had fallen 4.4%, while compared with the same week in 2022, volume was 30.5% lower. The week’s data included an adjustment for the July 4th holiday.

Application activity rose despite a 22 basis-point leap in the average rates for the conforming (balances under $726,000) 30-year fixed mortgage to 7.07% among MBA lenders. One week earlier, the 30-year FRM averaged at 6.85%. Points increased to 0.74 from 0.65 for 80% loan-to-value ratio loans. 

The weekly average rate hit its highest mark since last November, as investors tried to gauge the current health of spending and production and its impact on potential policy moves.

“Incoming economic data continue to send mixed signals about the economy, with the overall impact leaving Treasury yields higher last week, as markets expect that the Federal Reserve will need to hold rates higher for longer to slow inflation. All mortgage rates in our survey followed suit,” said Joel Kan, MBA vice president and deputy chief economist, in a press release. 

But inflation numbers released on Wednesday showed further deceleration in June with a 3% annual rise, the smallest increase in over two years. On a monthly basis, consumer prices went up by 0.2%. Both numbers came in lower than consensus estimates, and the data could influence the Fed’s near-term policymaking. Central bank officials are scheduled to announce a decision on whether to hike or hold interest rates on July 26. 

With the MBA reporting a reduction in credit availability for larger-sized loans for June earlier this week, the average jumbo rate also shot up to 7.04%, a record high for the series, which dates back to 2011, Kan added. Seven days earlier, the average for jumbo loans above the conforming limit had risen to 6.95%. Borrower points decreased to 0.59 from 0.64

The rise in purchase volume was offset by a drop in refinances last week, according to the survey. The seasonally adjusted Purchase Index climbed higher by 1.8%, but still landed 26.3% under its level from a year ago. Federally backed home buying activity provided an upward push, with a more-than-7% rise in government-guaranteed applications from the previous survey. 

But average purchase amounts recorded on applications still clocked in higher despite the increased volume of government loans, which are commonly used for entry-level properties. Mean purchase sizes edged up 0.6% to $426,100 from $423,500. The upward movement comes as other data released last week also showed homes now consistently selling at or above their asking price, a noticeable reversal from late 2022 trends.

Meanwhile, the average refinance size slipped 2.2% to $254,900 from $260,700. The overall average across all new applications came in at $380,200, up 0.4% from $378,800 one week prior.

The Refinance Index, likewise, dropped 4.1% from the previous week and 26.6% on a year-over-year basis as well to come in at its lowest since early June, Kan said. “Demand for rate/term and cash-out refinances remains extremely low with mortgage rates over 7%.”

At the same time, the refinance share of mortgage activity slid down to a 26.8% share relative to all applications, falling from 27.4% a week earlier. 

Government-guaranteed loan applications jumped up at a more rapid pace than conventional mortgages, with refinances increasing alongside purchases, leading them to grab a larger share of overall activity. Applications backed by the Federal Housing Administration garnered 13.3% of volume compared to 13% in the previous survey, while Department of Veterans Affairs-guaranteed loans accounted for a 12.6% share, up from 11.7%. The small slice of activity coming from U.S. Department of Agriculture programs remained at 0.4% week over week.

Like other 30-year rates, the contract fixed average for a FHA-sponsored mortgage headed up steeply and finished 18 basis points higher at 6.86% compared to 6.68% one week prior. Points increased to 1.23 from 0.98 for 80% LTV loans.

The 15-year contract rate accelerated 12 basis points to an average of 6.42% from 6.3% seven days earlier. Points for the 15-year mortgage also surged to 1.22 from 0.91.

The 5/1 adjustable-rate mortgage, which starts fixed before becoming variable after 60 months, leaped to 6.24% from 6%. Points increased to 1.42 from 1.23. Adjustable-rate loans, whose popularity tends to rise and fall in tandem with the direction of interest rates, also increased to a 6.6% share of total volume compared to 6.2% one week earlier.

Source: nationalmortgagenews.com

Apache is functioning normally

The Mortgage Bankers Association (MBA) reports a slight increase in the volume of mortgage applications during the week ended July 7. MBA’s seasonally adjusted Market Composite Index increased 0.9 percent on a seasonally adjusted basis from one week earlier, although it took an additional adjustment accounting for the Independence Day holiday to push it into positive territory. On an unadjusted basis, the Index dropped 19 percent compared with the previous week.

The Refinance Index decreased 1.0 percent from the previous week and was 39 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 26.8 percent of total applications from 27.4 percent.

The seasonally adjusted Purchase Index increased 2.0 percent from one week earlier but was down 19 percent before adjustment. Purchase applications were 26 percent below their level the same week in 2022.  

“Incoming economic data continue to send mixed signals about the economy, said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The overall impact [left] Treasury yields higher last week as markets expect that the Federal Reserve will need to hold rates higher for longer to slow inflation. All mortgage rates in our survey followed suit, with the 30-year fixed rate increasing to 7.07 percent, the highest level since November 2022. The jumbo rate also increased to 7.04 percent, a record high for the jumbo series, which dates back to 2011.”

Added Kan, “The rise in purchase activity was driven by increases in both FHA and VA purchase applications. The refinance index dropped to its lowest level since early June, as demand for rate/term and cash-out refinances remains extremely low with mortgage rates over 7 percent.”

Other Highlights from MBA’s Weekly Mortgage Application Survey

  • Loan sizes, which had declined for five straight weeks, rose slightly last week. The average size was $380,200 compared to $378,800 while purchase loans grew by about $2,500 to $426,100.
  • The FHA share of total applications increased to 13.3 percent from 13.0 percent and the VA share increased to 12.6 percent from 11.7 percent. USDA loan applications accounted for 0.4 percent of the total, unchanged from the prior week.
  • The 7.07 percent rate for conforming 30-year fixed-rate mortgages (FRM) was 22 basis points higher than the prior week and points increased to 0.74 from 0.65.
  • The jumbo 30-year FRM rate was up 9 basis points week-over-week. Points decreased to 0.59 from 0.64.
  • The average FHA loan rate was 6.86 percent with 1.23 points. Compared to the previous week’s 6.68 percent with 0.98 point.
  • Fifteen-year FRM rates averaged 6.42 percent with 1.22 points, up from 6.30 percent with 0.91 point.
  • The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) increased to 6.24 percent from 6.00 percent, with points increasing to 1.42 from 1.23.
  • The ARM share of activity was 6.6 percent, up from 6.2 percent the prior week.

Source: mortgagenewsdaily.com

Apache is functioning normally

The average 30-year-fixed mortgage rate slipped back down to 2.99% for the week ending Oct. 7, according to Freddie Mac’s latest PMMS survey. The week before, rates had made it above the 3% mark for the first time since June.

Sam Khater, Freddie Mac’s chief economist, said in a statement that rates remain close to 3% as a result of continued unknowns in the financial markets, as the pandemic lingers on. Mortgage rates typically move in tandem with the ten-year U.S. Treasury yield, which was 1.53 for Oct. 6.

“Mortgage rates continue to hover at around three percent again this week due to rising economic and financial market uncertainties,” said Khater. “Unfortunately, with the expectation that both mortgage rates and home prices will continue to rise, competition remains high and housing affordability is declining.”

The previous week, the average 30-year-fixed mortgage rate rose 13 basis points to 3.01%.

A year ago at this time, the 30-year fixed-rate mortgage averaged 2.87%. The 15-year fixed-rate mortgage averaged 2.23%, down from last week when it averaged 2.28%.

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Mortgage rates have been kept low in part because of the Federal Reserve’s massive monthly purchases of $120 billion in U.S. Treasury bonds and mortgage-backed securities. The central bank has signaled that will eventually come to an end, however, and it is expected to begin to taper off its purchases when substantial further progress is made in the labor market.

Although rates remain at historic lows for now, market observers do expect rates to climb upward, eventually. Even a modest increase in rates could deter borrowers from seeking to refinance their mortgages.

This week, a sharp decline in refinances in turn led to an overall decrease in mortgage application volume, per a report from the Mortgage Bankers Association. The refinance index dropped 10% from the week prior, its lowest level in three months. Purchase activity, meanwhile, decreased a modest 2% from the previous week.

Overall, the mortgage application index was down 15% compared to the same time last year, driven by a larger year-over-year decrease in the refinance index and a more modest decrease in the purchase index.

Joel Kan, MBA’s associate vice president of economic and industry forecasting, said that “higher rates are reducing borrowers’ incentive to refinance, as declines were seen across all loan types.”

Source: housingwire.com

Apache is functioning normally

It’s no surprise it’s a bad time to buy a home, but June was close to the worst month for affordability in 37 years, a Black Knight analysis found.

Homebuyers last month had to contribute 35.7% of the median household income to afford the monthly payment and interest for an average-priced home, according to Black Knight’s May Mortgage Monitor. Alongside high mortgage rates, home prices are showing signs of reheating despite mild inventory gains. 

“As it stands, housing affordability remains dangerously close to the 37-year lows reached late last year, despite the Federal Reserve’s attempts to cool the market,” said Andy Walden, president of enterprise research at Black Knight, in a press release.

Under Black Knight’s scenario, a 30-year fixed rate mortgage with a 20% downpayment and a 6.67% rate as of June 22, homebuyers had to pay $2,258 per month in P&I. That’s higher than the $2,234 figure from last October, before income levels grew this year.

Mortgage rates meanwhile continue to hover over 6.7% as the spread between 10-year Treasurys and 30-year fixed-rate mortgages remains just under 300 basis points. Lenders are also tightening credit while loan-to-values ratios fell across all product types, Black Knight said. 

Borrowers are putting more money toward their home loans, sending the prepayment rate up 23.1% month-over-month to 0.54% overall, the highest rate since last September. They’re also paying on-time more often, sending the delinquency rate down 11 basis points month-over-month to near record lows at 3.10%, Black Knight found. 

Homeowners with government-insured loans however are showing signs of distress. Federal Housing Administration loans account for 43% of all delinquencies, the largest share on record since 2000, according to Black Knight. Department of Veterans Affairs mortgages also accounted for 9% of delinquent mortgages in recent months, its highest share in 21 years. Foreclosures were also up 2.2% from April to May, with 25,400 starts, but are down 41% from pre-pandemic levels.

Over two dozen of the nation’s largest metros, mostly in the Midwest and Northeast, are seeing home prices reach previous peaks or reach new heights, as values continue to inch up. The seasonally adjusted price rose 0.7% in May, according to Black Knight. 

Much-needed inventory is on the way, although single-family residential units only make up 40% of the pipeline alongside multifamily properties of 5 units or greater. Inventory has also decreased in 95% of major markets so far this year, according to Black Knight. Overall for-sale inventory is still over 50% down from pre-pandemic pipelines. 

Rising rates have kept potential home sellers at bay, further exacerbating the home price problem, Walden said. 

“At this point, even if rates come down, but not so sharply as to entice potential sellers out of their sub-3.5% mortgages, it could risk a widespread reheating of home prices across the U.S.,” he said. 

Source: nationalmortgagenews.com