Weekend Warrior by Ron Vaimberg – April 21st

Mortgage Applications for New Homes in March Increased by 10%

The Mortgage Bankers Association (MBA) reported that mortgage applications for new home purchases increased by 10% in March compared to February and by 0.6% compared to the previous year.

The MBA Builder Applications Survey estimated new single-family home sales to be at a seasonally adjusted annual rate of 666,000 units, a decrease of 3.2% from February, while unadjusted sales increased by 6.6%. Conventional loans comprised most loan applications, and the average loan size for new homes rose slightly.

Joel Kan, MBA Vice President and Deputy Chief Economist said that low inventory and high mortgage rates continue to constrain sales, and new home sales will be essential to the housing market’s recovery in 2023.

MBA Forecasts Number of Homes Available for Sale

According to the Mortgage Bankers Association, the second half of 2023 will see a slow resurgence in home purchase activity, driven by catch-up buying from 2022 and younger age cohorts becoming homeowners. Meanwhile, the rebound is contingent on conditions more conducive to affordability, such as moderated housing price increases, falling mortgage rates, and enough supply to fulfill demand.

The current supply of new and existing homes is much below historical averages, which has led to the rapid increase in home prices and the scarcity of reasonably priced starter homes. While the supply of new homes has increased, there still needs to be more starter homes that are less expensive.

Home prices have risen sharply, reaching a 19% national annual increase in late 2021 due to low supply and great demand. Mortgage payments have grown as a result, rising by 24.7% in February 2023 compared to the prior month. Due to the reluctance of homeowners with low mortgage rates to sell and purchase a property with higher rates, the inventory of existing homes is expected to be low. But the supply of new homes has grown, making up 28% of the available inventory. Less-priced starter houses, which first-time homeowners highly sought after, are still in limited supply.

Existing Home Shortage Drives Increase in New Home Sales and Builder Confidence

The National Association of Home Builders (NAHB) reported a slight increase in the NAHB/Wells Fargo Housing Market Index (HMI) for April, indicating a boost in confidence among new home builders. Sales of new homes have been supported by the lack of available pre-owned homes, with one-third of the housing inventory being new construction. However, the building industry continues to be plagued by material shortages, and the availability of AD&C loans for builders and land developers remains tight. The survey also revealed that the share of builders reducing home prices has continued to decline, with 30% doing so in April, and the use of sales incentives has been increasing.

NAHB’s chief economist Robert Dietz said, “Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10 percent. More buyers looking at new homes, along with the use of sales incentives, have supported new home sales since the start of 2023.”

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.

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