theMReport.com Your trusted source for mortgage banking news
After three straight weeks of declines, Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) shows that the 30-year fixed-rate mortgage (FRM) rose four basis points week-over-week, moving from an average of 6.67% to 6.71% as of June 29, 2023. A year ago at this time, the 30-year FRM averaged nearly a full percentage point lower when it averaged just 5.70%.
“Mortgage rates have hovered in the 6% to 7% range for over six months and, despite affordability headwinds, homebuyers have adjusted and driven new home sales to its highest level in more than a year,” said Sam Khater, Freddie Mac’s Chief Economist. “New home sales have rebounded more robustly than the resale market due to a marginally greater supply of new construction. The improved demand has led to a firming of prices, which have now increased for several months in a row.”
Also this week, the 15-year FRM averaged 6.06%, up from last week when it averaged 6.03%. A year ago at this time, the 15-year FRM averaged 4.83%.
Freddie Mac’s PMMS report is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.
“In addition to still-high mortgage rates and housing prices, the shortage of housing supply has worsened the conditions faced by first-time home buyers, creating an especially challenging situation for those dreaming of homeownership,” added Realtor.com Economist Jiayi Xu. “While smaller entry-level homes may not meet the criteria of a dream home, there is strong demand, but very few homes available that fit the bill. Thankfully, builders are taking note of the market need and are making efforts to catch up to demand through new construction, especially of homes at lower price tiers. After dropping below 10% in 2022, the proportion of new homes sold that are priced under $300,000 is on an upward trajectory. Early estimates in May indicate that homes within this price range constituted approximately 17% of total sales, marking the highest share since December 2021 (18%). Despite this encouraging news, there remains an urgent need for more homes at the most affordable price points, where the shortage of available inventory is most severe.”
As rates took a turn upward, so did overall mortgage application volume, as the Mortgage Bankers Association (MBA), in its Weekly Application Survey, found overall application volume rose 3% week-over-week.
“Mortgage applications rose for the third consecutive week, with both purchase and refinance activity increasing slightly,” added MBA President and CEO Robert D. Broeksmit, CMB. “While mortgage rates remain elevated, homebuilders are ramping up production, leading more buyers to turn to new homes. MBA’s data for newly-built home loan applications has increased, on a year-over-year basis, for four consecutive months–a sign that demand is stronger this summer.”
Just yesterday, the U.S. Census Bureau and the U.S. Department of Housing & Urban Development (HUD) reported that for May 2023, sales of new single‐family homes were at a seasonally adjusted annual rate of 763,000—12.2% above the revised April 2023 rate of 680,000, and is 20% above the May 2022 estimate of 636,000.
“While this increase was stronger than our most recent forecast, it is not a surprise following last week’s reported surge in housing starts," Douglas G. Duncan, Chief Economist at Fannie Mae said. "The prior increases in active existing home listings at the start of the year have since reversed over the spring homebuying season, leaving few options for would-be purchasers. The ‘lock-in effect,’ in which existing owners are disincentivized to list their homes due to not wanting to give up a mortgage rate much lower than current market rates, continues to suppress the number of listings. Therefore, homebuyers have increasingly turned toward new homes, which is consistent with the recent firming in home price growth and homebuilder optimism over the past few months.”
A positive shift in new homes came from the National Association of Home Builders (NAHB) who reported in its latest NAHB/Wells Fargo Housing Market Index (HMI), that builder confidence in the market for newly built single-family homes in June 2023 rose five points to 55—marking the sixth consecutive month that builder confidence has increased, and the first time that sentiment levels have surpassed the midpoint of 50 since July of 2022.
“Builders are feeling cautiously optimistic about market conditions given low levels of existing home inventory and ongoing gradual improvements for supply chains,” said NAHB Chairman Alicia Huey.
