US Housing Industry Concerned About Fed’s Monetary Policies

A housing coalition, including major industry organizations like the Mortgage Bankers Association (MBA), the National Association of REALTORS (NAR), and the National Association of Home Builders (NAHB), has expressed growing concerns to the Federal Reserve regarding the unsettling impact of the Fed’s monetary policies on the housing market. The coalition is worried that the Fed’s rate decisions, which have been shrouded in uncertainty, have led to unexpected interest rate hikes. As per MBA’s data, these rate increases have further complicated an already challenging housing market, especially with mortgage rates reaching their highest levels in 23 years. The spread between 30-year mortgage rates and the 10-year Treasury yield signals deep uncertainty about the Fed’s direction, causing increased homebuyer costs. The coalition emphasizes that these developments could pose broader risks to economic growth, potentially leading to a recession.

Beyond immediate concerns, the coalition highlights the issue of rising shelter costs as a driver of recent inflation. They suggest that the solution is to make building affordable homes easier. However, the current interest rate environment is making this goal more challenging. The coalition calls on the Fed to issue two clear statements to restore market confidence: first, that the Fed has no plans for further rate hikes, and second, that the Fed will refrain from selling any of its MBS holdings until the housing finance market stabilizes. These steps would provide more certainty about the Fed’s rate path and its plans for the MBS portfolio while reducing market volatility and ensuring the housing sector, which accounts for nearly 16% of GDP, does not trigger an undesired economic downturn.

Mortgage Credit Availability Up in September

According to a survey by the Mortgage Bankers Association (MBA), the Mortgage Credit Availability Index (MCAI) rose by 0.6% in September, indicating a minor easing of mortgage lending criteria. Both the government MCAI and the conventional MCAI increased by 0.6%. The Jumbo MCAI increased by 0.8% within the Conventional MCAI, while the Conforming MCAI increased by 0.2%. The expansion of loan programs offered by lenders in response to shifting borrower needs brought on by increased mortgage rates was credited with increased credit availability. There was an increase in ARM (adjustable-rate mortgage) loans and non-QM (non-qualified mortgage) products.

Despite the rise in credit availability, the MBA observed that industrial capacity had significantly decreased since the peak origination months of 2021. It was anticipated that the combination of high interest rates and the regular seasonal slowdown would result in additional drops in origination volume.

The MCAI serves as a barometer for the ease or difficulty of securing mortgage loans, with a decrease indicating tightening standards and an increase reflecting loosening credit. In September, the MCAI reached a level of 97.2, benchmarked at 100 in March 2012, suggesting that lending standards had eased slightly during the month.

MBA Weekly Survey Oct. 11: Mortgage Applications Rise

The Mortgage Bankers Association (MBA) announced that mortgage applications grew by 0.6% in the week ending October 6, 2023. On a seasonally adjusted basis, the Market Composite Index, which tracks home loan application volume, increased by the same amount, indicating a small rise in total applications. From the previous week, the refinance index rose by 0.3%. The seasonally adjusted Purchase Index, on the other hand, rose by 1% last week.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, noted that while most mortgage rates increased in the past week, rates on adjustable-rate mortgages (ARMs) declined, leading to an increase in ARM applications, reaching the highest share since November 2022. The yield curve has become less inverted recently, and ARM pricing has improved. The 30-year fixed mortgage rate reached 7.67%, the highest level since 2000, contributing to depressed application activity and purchase applications remaining nearly 20 percent behind last year’s pace.

The refinance share of mortgage activity slightly decreased, the ARM share increased, and interest rates for various mortgage types fluctuated in response to the challenging rate environment, with the average loan size reaching its lowest level since 2017.

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023,