Housing beat for September 1: A changing market with problematic data

      Comments Off on Housing beat for September 1: A changing market with problematic data
ErikaWittlieb /Pixabay

Housing industry news this week showed a continued deceleration in mortgage applications, the first time-on-market increase in more than two years and a troubling report of mortgage denial rates for buyers black.

On the mortgage front

Freddie Mac (OTCMKTS:FMCC) reported that the 30-year fixed rate mortgage averaged 5.66% as of September 1, up from last week when it averaged 5.55%. The 15-year fixed rate mortgage averaged 4.98%, up from last week when it averaged 4.85%.

Get the full Ray Dalio series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email it to co-workers

Q2 2022 Hedge Fund Letters, Talks & More

Hedge funds remain significantly overweight in value terms despite return to growth

Screenshot 199Value investors have been touting the outperformance of value stocks for several quarters, but it looks like the growth names are starting to regain the upper hand. The latest data on hedge fund 13F deposits reveals that fund managers are returning to growth stocks amid the factor’s outperformance. However, they remain more overweight than usual on the value Read more

And the 5-year Treasury-indexed hybrid variable-rate mortgage averaged 4.51%, up from last week when it averaged 4.36%.

“Renewed market perception of more aggressive monetary policy has pushed mortgage rates to almost double what they were a year ago,” said Sam Khater, chief economist at Freddie Mac.

“The increase in mortgage rates comes at a particularly vulnerable time for the housing market, as sellers recalibrate prices due to weaker buying demand, which will likely lead to a continued deceleration in price growth. “

As mortgage rates continued to climb, mortgage applications fell for the fourth consecutive week, remaining at their lowest level in 22 years.

The Mortgage Bankers Association (MBA) composite market index fell 3.7% on a seasonally adjusted basis for the week ending August 1.

26 while the unadjusted index was down 5%. The unadjusted refinancing index was down 8% from the previous week and was 83% lower than the same week a year ago.

“The volume of applications fell and remained at a multi-decade low last week, driven by an 8% drop in refinance applications, which now represent only 30% of all applications,” said

Joel Kan, MBA Associate Vice President of Economic and Industrial Forecasting. “Purchase orders have declined in eight of the past nine weeks as demand continues to decline due to higher rates and a weaker economic outlook.

However, rising inventories and slowing home price growth could potentially bring some buyers back into the market later this year. »

In other mortgage-related news, LendingTree (NYSE:TREE) released data that found the mortgage purchase rejection rate for Black homebuyers was twice as high as the rejection rate for the entire population of mortgage borrowers in each of the nation’s 50 largest metros.

On average, 18% of Black homebuyers are refused a mortgage, which was nine percentage points higher than the average refusal rate for the entire population of 9%.

Denial rates for black borrowers are highest in Detroit, Miami and Jacksonville and lowest in San Francisco, Seattle and Sacramento.

In Detroit, Miami and Jacksonville, LendingTree found that the average rejection rate for black borrowers is 25.52%, more than double the average rejection rate of 12.55% in San Francisco, Seattle and Sacramento.

“While discriminating against a homebuyer on the basis of their race is illegal, it still happens,” said Jacob Channel, senior economist at LendingTree. It is for this reason that both lenders and individuals must learn to spot the signs of discrimination in order to better avoid it.

On the frontline of buying a house

Last month marked the first time since June 2020 that an increase in time on market was recorded. According to Realtor.com, homebuyers in August had more active listings to choose from than last year (+26.6%), although new sellers continued to decline.

Realtor.com, which is operated by News Corp (NASDAQ:NWS)(NASDAQ:NWSA) subsidiary Move Inc., noted that a typical home spent 42 days on the market in August, five days longer than the last year and the first increase since June 2020, but still 22 days faster than in 2017-2019, on average.

Time-to-market was lower in the 50 largest U.S. cities (37 days, average) compared to the national median, but also slowed from the August 2021 pace (+5 days) on the same markets.

“For many buyers today, the rise in options for houses to sell takes away the sense of urgency they felt over the past two years when inventory was scarce,” said Danielle Hale, economist in chief for Realtor.com.

“Because of this change coupled with higher mortgage rates, competition continued to cool in August, with listing price trends indicating that homebuyers are tightening their purse strings.

As we take advantage of the last days of summer, the housing market is starting to strike a better balance between buyer friendliness and still favorable selling conditions.

Homebuyers looking for XL-priced homes might notice that available properties are getting smaller. Zillow Group Inc (NASDAQ:ZG) reported that homes sold at or near $1 million shrunk nearly 500 square feet, from a peak of 3,021 in mid-2020 to a depth of 2,530 at the start of 2022. However, home sizes rebounded before July and are now 2,624 square feet, down 397 square feet from the 2020 peak.

“Buyers with seven-figure budgets who were buying homes during the pandemic were doing so coming out of the longest period of economic growth in U.S. history and with the help of historically low interest rates,” said Anushna Prakash, economic data analyst at Zillow.

“Sales of expensive homes soared as buyers in the heat of competition accepted smaller layouts.”

In other data news, home prices rose 17.7% between the second quarter of 2021 and the second quarter of 2022 according to the Federal Housing Finance Agency (FHFA). Prices increased by 4% compared to the first quarter of 2022.

“Housing prices rose rapidly for most of the second quarter of 2022, but a deceleration was evident in monthly data for June,” said William Doerner, supervising economist at FHFA’s Research and Statistics Division. . “The pace of growth has slowed recently, which is consistent with other recent housing data.”