CNBC
"Mortgage rates hit their highest point since 2000"
Diana Olick @IN/DIANAOLICK @DIANAOLICKCNBC @DIANAOLICK
PUBLISHED MON, AUG 21 2023
KEY POINTS
* Mortgage rates soared to the highest level since November 2000, crushing affordability for potential homebuyers.
* The average rate on the popular 30-year fixed mortgage hit 7.48%, according to Mortgage News Daily.
* The average on the 30-year fixed last year at this time was around 5.5%.
Mortgage rates jumped Monday, following a rise in bond yields driven by investors’ concerns that high interest rates and inflation will linger longer than expected.
The average rate on the popular 30-year fixed mortgage hit 7.48%, the highest level since November 2000, according to Mortgage News Daily.
It has risen 29 basis points in just the past week.
“Investors just aren’t seeing the kind of deterioration in economic data that they expected,” said Matthew Graham, chief operating officer of Mortgage News Daily.
He noted that the Federal Reserve wants to see the same deterioration before considering a policy shift, and that shift would likely favor short-term rates first.
“The net effect is that longer-term rates like 10-year Treasury yields and mortgages are bearing the brunt of the market’s negative rate sentiment."
"This won’t change until the data forces the Fed to start talking about the first rate cut.”
Higher rates are hitting potential homebuyers hard, adding insult to the injury of Covid pandemic-inflated home prices.
Rates set more than a dozen record lows in 2020, setting off a homebuying spree that caused prices to rise over 40% from the start of the pandemic to the summer of 2022.
Prices pulled back slightly at the end of last year but are now increasing again due to still-strong demand and very lean supply.
Higher mortgage rates exacerbate the supply situation.
Current homeowners are reluctant to list their homes for sale because the vast majority of them have rates around or below 3%.
To move to another home would mean more than doubling that rate.
It has created what is now being called “golden handcuffs” among potential sellers.
For a buyer today, the difference in affordability from just a year ago is dramatic.
The average on the 30-year fixed last year at this time was around 5.5%.
For someone buying a $400,000 home, with 20% down on a 30-year fixed loan, the monthly payment today, with principal and interest, is roughly $420 more than it would have been a year ago.
More borrowers are now opting for adjustable-rate loans, which offer lower interest rates for shorter fixed terms.
The average rate on a 5-year ARM last week was 6.2%, according to the Mortgage Bankers Association.
The ARM share of applications rose to 7%.
In 2020, when the 30-year fixed was setting multiple record lows, that share was less than 2%.
The nation’s homebuilders have been trying to offset higher mortgage rates by either buying down those rates for short or long terms, or by lowering home prices.
They had slowed those incentives earlier this year, as demand surged and rates fell back, but they recently ramped them up again.
Homebuilder sentiment in August, however, dropped sharply, with builders citing higher interest rates as the main reason.
https://www.cnbc.com/2023/08/21/mortgag ... -2000.html
THE HOUSING MARKET
Re: THE HOUSING MARKET
REUTERS
"US existing home sales slide again, but prices up from a year earlier"
By Safiyah Riddle
August 22, 2023
Aug 22 (Reuters) - U.S. existing home sales dropped to a six month-low in July as home owners who are locked into cheap mortgages refrained from selling their properties with the cost of new mortgages for another home at the highest levels in decades.
That limited inventory, however, helped drive prices higher on a year-over-year basis for the first time since January.
Existing home sales fell 2.2% in July to a seasonally adjusted annual rate of 4.07 million units, the lowest level since January, from an unrevised 4.16 million units in June, the National Association of Realtors said on Tuesday.
Economists polled by Reuters had forecast home sales would be little changed at 4.15 million units.
Sales fell in the Northeast, Midwest and South, but rose in the West, where home prices have fallen most sharply in the past year.
All regions experienced annual sales declines.
Home resales, which account for a big chunk of U.S. housing sales, fell 16.6% on a year-on-year basis in July.
Home prices have bottomed out after being pressured by the Federal Reserve's aggressive interest rate hikes, but the persistent shortage of properties for sale could limit any rebound as many prospective buyers are forced out of the market.
Mortgage rates have surged again recently to the highest levels in decades, with the average rate on the popular 30-year fixed-rate mortgage topping 7% in the latest week, according to mortgage finance giant Freddie Mac.
There were 1.11 million previously owned homes on the market last month, up 3.7% from a month earlier but down 14.6% from July 2022.
At July's sales pace, it would take 3.3 months to exhaust the current inventory of existing homes, up from 3.2 months a year ago.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
The median existing house price rose 1.9% from a year earlier to $406,700 in July, the fourth time it has topped $400,000.
"Two factors are driving current sales activity - inventory availability and mortgage rates," said Lawrence Yun, the NAR's chief economist.
"Unfortunately, both have been unfavorable to buyers."
'LOCK-IN EFFECT'
The dearth of existing houses on the market has helped bolster new home construction and sales in recent months.
The NAR predicted that total resales in 2023 will fall 12.9% from 2022, at the same time that total new home sales in 2023 will increase by 12.3%.
The Commerce Department will report new home sales data for July on Wednesday.
Economists polled by Reuters see a modest uptick in transactions.
New home sales have outperformed existing home sales so far this year.
Properties typically remained on the market for 20 days in July, up from 14 days a year ago.
Seventy-four percent of homes sold in July were on the market for less than a month.
First-time buyers accounted for 30% of sales, up from 29% a year ago.
Sales fell the least for homes priced at more than $1 million as supply was less constrained relative to demand than for lower-value homes, Yun said.
All-cash sales accounted for 26% of transactions compared to 24% a year ago.
Distressed sales, including foreclosures, represented 1% of transactions, essentially unchanged from June and the previous year.
Yun said it was "anyone's guess" as to when mortgage rates might begin easing, and some economists don't expect much relief until 2024.
"Forecasting mortgage rates in the near term is very difficult, but it's our expectation that mortgage rates will begin to normalize next year," said Matthew Walsh, an economist at Moody's who focuses on the housing market.
That could encourage some home owners to resell and look for more new housing, he said, but it could be a while before current rates can compete with the mortgages that the majority of existing home owners secured before interest rates climbed.
"We expect that lock-in-effect will remain for quite some time," Walsh said.
Reporting by Safiyah Riddle; Editing by Paul Simao
https://www.reuters.com/markets/us/us-e ... 023-08-22/
"US existing home sales slide again, but prices up from a year earlier"
By Safiyah Riddle
August 22, 2023
Aug 22 (Reuters) - U.S. existing home sales dropped to a six month-low in July as home owners who are locked into cheap mortgages refrained from selling their properties with the cost of new mortgages for another home at the highest levels in decades.
That limited inventory, however, helped drive prices higher on a year-over-year basis for the first time since January.
Existing home sales fell 2.2% in July to a seasonally adjusted annual rate of 4.07 million units, the lowest level since January, from an unrevised 4.16 million units in June, the National Association of Realtors said on Tuesday.
Economists polled by Reuters had forecast home sales would be little changed at 4.15 million units.
Sales fell in the Northeast, Midwest and South, but rose in the West, where home prices have fallen most sharply in the past year.
All regions experienced annual sales declines.
Home resales, which account for a big chunk of U.S. housing sales, fell 16.6% on a year-on-year basis in July.
Home prices have bottomed out after being pressured by the Federal Reserve's aggressive interest rate hikes, but the persistent shortage of properties for sale could limit any rebound as many prospective buyers are forced out of the market.
Mortgage rates have surged again recently to the highest levels in decades, with the average rate on the popular 30-year fixed-rate mortgage topping 7% in the latest week, according to mortgage finance giant Freddie Mac.
There were 1.11 million previously owned homes on the market last month, up 3.7% from a month earlier but down 14.6% from July 2022.
At July's sales pace, it would take 3.3 months to exhaust the current inventory of existing homes, up from 3.2 months a year ago.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
The median existing house price rose 1.9% from a year earlier to $406,700 in July, the fourth time it has topped $400,000.
"Two factors are driving current sales activity - inventory availability and mortgage rates," said Lawrence Yun, the NAR's chief economist.
"Unfortunately, both have been unfavorable to buyers."
'LOCK-IN EFFECT'
The dearth of existing houses on the market has helped bolster new home construction and sales in recent months.
The NAR predicted that total resales in 2023 will fall 12.9% from 2022, at the same time that total new home sales in 2023 will increase by 12.3%.
The Commerce Department will report new home sales data for July on Wednesday.
Economists polled by Reuters see a modest uptick in transactions.
New home sales have outperformed existing home sales so far this year.
Properties typically remained on the market for 20 days in July, up from 14 days a year ago.
Seventy-four percent of homes sold in July were on the market for less than a month.
First-time buyers accounted for 30% of sales, up from 29% a year ago.
Sales fell the least for homes priced at more than $1 million as supply was less constrained relative to demand than for lower-value homes, Yun said.
All-cash sales accounted for 26% of transactions compared to 24% a year ago.
Distressed sales, including foreclosures, represented 1% of transactions, essentially unchanged from June and the previous year.
Yun said it was "anyone's guess" as to when mortgage rates might begin easing, and some economists don't expect much relief until 2024.
"Forecasting mortgage rates in the near term is very difficult, but it's our expectation that mortgage rates will begin to normalize next year," said Matthew Walsh, an economist at Moody's who focuses on the housing market.
That could encourage some home owners to resell and look for more new housing, he said, but it could be a while before current rates can compete with the mortgages that the majority of existing home owners secured before interest rates climbed.
"We expect that lock-in-effect will remain for quite some time," Walsh said.
Reporting by Safiyah Riddle; Editing by Paul Simao
https://www.reuters.com/markets/us/us-e ... 023-08-22/
Re: THE HOUSING MARKET
REUTERS
"U.S. 30-year mortgage shoots up to decades-long high - Freddie Mac"
By Safiyah Riddle
AUGUST 24, 2023
(Reuters) - Rates on the most popular U.S. home loan hit the highest level since 2001 on Thursday, according to Freddie Mac’s weekly mortgage market survey.
The popular 30-year mortgage rates rose to an average of 7.23% this week, the highest level in over two decades, up from 7.09% last week, which was the first time the rate passed 7% in 2023.
Earlier this week, the Mortgage Brokers Association reported that decades-high borrowing costs drove mortgage applications to a 28-year low over the same period.
The yield on the 10-year Treasury note, which acts as a benchmark for mortgage rates, has increased throughout the month as resilient economic data stokes concerns that the Federal Reserve’s interest rate hiking campaign is not over.
Although expensive borrowing forced home sales to plummet last year, an acute lack of inventory has threatened a housing market recovery.
Freddie Mac chief economist Sam Khater said more increases could be on the horizon if strong consumer spending and the labor market continue to be this robust.
“This week, the 30-year fixed-rate mortgage reached its highest level since 2001 and indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term,” said Khater.
Reporting by Safiyah Riddle; Editing by Chizu Nomiyama
https://www.reuters.com/article/usa-eco ... SL1N3A526N
"U.S. 30-year mortgage shoots up to decades-long high - Freddie Mac"
By Safiyah Riddle
AUGUST 24, 2023
(Reuters) - Rates on the most popular U.S. home loan hit the highest level since 2001 on Thursday, according to Freddie Mac’s weekly mortgage market survey.
The popular 30-year mortgage rates rose to an average of 7.23% this week, the highest level in over two decades, up from 7.09% last week, which was the first time the rate passed 7% in 2023.
Earlier this week, the Mortgage Brokers Association reported that decades-high borrowing costs drove mortgage applications to a 28-year low over the same period.
The yield on the 10-year Treasury note, which acts as a benchmark for mortgage rates, has increased throughout the month as resilient economic data stokes concerns that the Federal Reserve’s interest rate hiking campaign is not over.
Although expensive borrowing forced home sales to plummet last year, an acute lack of inventory has threatened a housing market recovery.
Freddie Mac chief economist Sam Khater said more increases could be on the horizon if strong consumer spending and the labor market continue to be this robust.
“This week, the 30-year fixed-rate mortgage reached its highest level since 2001 and indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term,” said Khater.
Reporting by Safiyah Riddle; Editing by Chizu Nomiyama
https://www.reuters.com/article/usa-eco ... SL1N3A526N
Re: THE HOUSING MARKET
REUTERS
"US homebuilder confidence falls to lowest since April, says NAHB"
By Amina Niasse
September 18, 2023
NEW YORK, Sept 18 (Reuters) - U.S. homebuilder confidence fell for a second month in September, with optimism dropping to the lowest since April as high interest rates cut into affordability for prospective buyers.
The National Association of Home Builders/Wells Fargo homebuilder sentiment index fell to 45 this month from a reading of 50 in August, when builder sentiment had fallen for the first time since December.
The fall in optimism was accompanied by a decrease of traffic of prospective buyers.
Confidence was below a Reuters poll showing the median expectation among economists was for a reading of 50.
“High mortgage rates are clearly taking a toll on builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase until long-term rates move lower,” said Robert Dietz, chief economist at the NAHB.
“Putting into place policies that will allow builders to increase the housing supply is the best remedy to ease the nation’s housing affordability crisis and curb shelter inflation.”
With homeowners discouraged from selling due to higher interest rates, the homebuilder market had shown signs of recovering during the first half of 2023 as demand for new home construction increased.
The latest data, though, suggest that recovery has faltered.
Since the Federal Reserve began hiking interest rates in March 2022, mortgage rates have risen, and have held above 7% since early August, the highest level since 2002.
Sales expectations among builders fell in September amid lower pricing, with the six-month outlook for home sales falling to 49 from 55 the month prior.
Thirty-two percent of builders cut prices in September, the highest since December 2022.
Reporting by Amina Niasse; Editing by Andrea Ricci
https://www.reuters.com/markets/us/us-h ... 023-09-18/
"US homebuilder confidence falls to lowest since April, says NAHB"
By Amina Niasse
September 18, 2023
NEW YORK, Sept 18 (Reuters) - U.S. homebuilder confidence fell for a second month in September, with optimism dropping to the lowest since April as high interest rates cut into affordability for prospective buyers.
The National Association of Home Builders/Wells Fargo homebuilder sentiment index fell to 45 this month from a reading of 50 in August, when builder sentiment had fallen for the first time since December.
The fall in optimism was accompanied by a decrease of traffic of prospective buyers.
Confidence was below a Reuters poll showing the median expectation among economists was for a reading of 50.
“High mortgage rates are clearly taking a toll on builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase until long-term rates move lower,” said Robert Dietz, chief economist at the NAHB.
“Putting into place policies that will allow builders to increase the housing supply is the best remedy to ease the nation’s housing affordability crisis and curb shelter inflation.”
With homeowners discouraged from selling due to higher interest rates, the homebuilder market had shown signs of recovering during the first half of 2023 as demand for new home construction increased.
The latest data, though, suggest that recovery has faltered.
Since the Federal Reserve began hiking interest rates in March 2022, mortgage rates have risen, and have held above 7% since early August, the highest level since 2002.
Sales expectations among builders fell in September amid lower pricing, with the six-month outlook for home sales falling to 49 from 55 the month prior.
Thirty-two percent of builders cut prices in September, the highest since December 2022.
Reporting by Amina Niasse; Editing by Andrea Ricci
https://www.reuters.com/markets/us/us-h ... 023-09-18/
Re: THE HOUSING MARKET
REUTERS
"US housing starts hit three-year low; surge in permits point to underlying strength"
By Lucia Mutikani
September 19, 2023
Summary
* Single-family housing starts drop 4.3% in August
* Single-family building permits increase 2.0%
* Overall housing starts plunge 11.3%; permits up 6.9%
WASHINGTON, Sept 19 (Reuters) - U.S. homebuilding plunged to a more than three-year low in August as a resurgence in mortgage rates weighed on demand for housing, but a jump in permits suggested new construction remained supported by a dearth of homes on the market.
The decline in housing starts reported by the Commerce Department on Tuesday was the largest in a year and occurred across the board.
The report followed on the heels of news on Monday that homebuilders' confidence slumped to a five-month low in September, with more builders reporting they were cutting prices and offering other incentives to lure buyers.
Home building, together with new home sales, have been the bright spots for the housing market, the sector hardest hit by the Federal Reserve's aggressive monetary policy tightening.
The U.S. central bank is expected to leave interest rates unchanged on Wednesday, having raised its policy rate by 525 basis points since March 2022 to the current 5.25%-5.50% range.
"August's home construction data appear to be showing some cracks in the armor of what has been one of the few strong indicators in the housing market recently," said Daniel Vielhaber, an economist at Nationwide in Columbus, Ohio.
"Still, it's important to note that there could be a noise component here as much of the sharp decline in starts came from the multifamily sector, which is notoriously volatile."
Housing starts tumbled 11.3% to a seasonally adjusted annual rate of 1.283 million units last month, the lowest level since June 2020.
Data for July was revised lower to show starts accelerating to a rate of 1.447 million units instead of the previously reported 1.452 million units.
Economists polled by Reuters had forecast starts would slip to a rate of 1.440 million units.
Single-family housing starts, which account for the bulk of homebuilding, dropped 4.3% to a rate of 941,000 units last month.
Single-family homebuilding dropped in the Northeast and Midwest and slumped 26.9% in the West, which was blamed on Hurricane Hilary.
It rose in the densely populated South.
Demand for new construction has been boosted by an acute shortage of previously owned homes on the market, with homebuilding rising for much of this year and breathing life into the housing market.
But a recent surge in mortgage rates, in tandem with higher U.S. Treasury yields, is pushing buyers to the sidelines.
The average rate on the popular 30-year fixed mortgage is hovering around 7.18%, the highest since March 2002, according to data from mortgage finance agency Freddie Mac.
Sentiment among homebuilders is also taking a hit.
A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market Index dropped below the break-even mark of 50 in September for the first time in five months.
Stocks on Wall Street were trading lower.
The dollar fell against a basket of currencies.
U.S. Treasury yields rose as higher commodity prices, including oil, fanned concerns that the recent progress in slowing inflation could be undone.
REBOUND EXPECTED
Starts for housing projects with five units or more plunged 26.3% to a rate of 334,000 units in August, the lowest level since August 2020.
Multi-family housing construction appears to have peaked in April 2022, when it was fueled by demand for rental accommodation as higher mortgage rates priced out potential home buyers.
Tighter financial conditions, which are limiting credit access for builders, as well as a huge stock of multi-family housing under construction are slowing activity.
Permits for future homebuilding jumped 6.9% to a rate of 1.543 million units, the highest since October 2022.
They were boosted by a 14.8% surge in multi-family housing permits to a rate of 535,000 units.
Single-family housing permits rose 2.0% to a rate of 949,000 units, the highest since May 2022.
Residential investment has contracted for nine straight quarters, the longest such stretch since the housing bubble burst, triggering the 2008 global financial crisis and the Great Recession.
August's slump in homebuilding prompted economists at Goldman Sachs to lower their gross domestic product growth estimate for the third quarter by one-tenth of a percentage point to a 3.2% annualized rate.
The economy grew at a 2.1% pace in the second quarter.
"The decline in starts in August overstates the weakness in housing construction and we look for some reversal of the decline in September," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
The number of houses approved for construction that are yet to be started rebounded 5.6% to 282,000 units.
The single-family homebuilding backlog increased 2.9% to 142,00 units, while the completions rate for this segment dropped 6.6% to 961,000 units, the lowest level since January 2022.
The stock of housing under construction fell 0.2% to a rate of 1.688 million units.
The inventory of single-family housing under construction dipped 0.1% to a rate of 676,000 units, the lowest level since May 2021.
The stock of multi-family housing under construction eased 0.2% to 995,000 units, still at record highs, suggesting limited scope for further increases in multi-family housing construction despite the rise in building permits for this segment.
Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to bridge the inventory gap.
"The undersupply of single-family homes on the market could provide growth opportunities for home builders, especially the companies building entry-level homes for the large cohort of millennials looking to buy," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Paul Simao and Andrea Ricci
https://www.reuters.com/world/us/us-sin ... 023-09-19/
"US housing starts hit three-year low; surge in permits point to underlying strength"
By Lucia Mutikani
September 19, 2023
Summary
* Single-family housing starts drop 4.3% in August
* Single-family building permits increase 2.0%
* Overall housing starts plunge 11.3%; permits up 6.9%
WASHINGTON, Sept 19 (Reuters) - U.S. homebuilding plunged to a more than three-year low in August as a resurgence in mortgage rates weighed on demand for housing, but a jump in permits suggested new construction remained supported by a dearth of homes on the market.
The decline in housing starts reported by the Commerce Department on Tuesday was the largest in a year and occurred across the board.
The report followed on the heels of news on Monday that homebuilders' confidence slumped to a five-month low in September, with more builders reporting they were cutting prices and offering other incentives to lure buyers.
Home building, together with new home sales, have been the bright spots for the housing market, the sector hardest hit by the Federal Reserve's aggressive monetary policy tightening.
The U.S. central bank is expected to leave interest rates unchanged on Wednesday, having raised its policy rate by 525 basis points since March 2022 to the current 5.25%-5.50% range.
"August's home construction data appear to be showing some cracks in the armor of what has been one of the few strong indicators in the housing market recently," said Daniel Vielhaber, an economist at Nationwide in Columbus, Ohio.
"Still, it's important to note that there could be a noise component here as much of the sharp decline in starts came from the multifamily sector, which is notoriously volatile."
Housing starts tumbled 11.3% to a seasonally adjusted annual rate of 1.283 million units last month, the lowest level since June 2020.
Data for July was revised lower to show starts accelerating to a rate of 1.447 million units instead of the previously reported 1.452 million units.
Economists polled by Reuters had forecast starts would slip to a rate of 1.440 million units.
Single-family housing starts, which account for the bulk of homebuilding, dropped 4.3% to a rate of 941,000 units last month.
Single-family homebuilding dropped in the Northeast and Midwest and slumped 26.9% in the West, which was blamed on Hurricane Hilary.
It rose in the densely populated South.
Demand for new construction has been boosted by an acute shortage of previously owned homes on the market, with homebuilding rising for much of this year and breathing life into the housing market.
But a recent surge in mortgage rates, in tandem with higher U.S. Treasury yields, is pushing buyers to the sidelines.
The average rate on the popular 30-year fixed mortgage is hovering around 7.18%, the highest since March 2002, according to data from mortgage finance agency Freddie Mac.
Sentiment among homebuilders is also taking a hit.
A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market Index dropped below the break-even mark of 50 in September for the first time in five months.
Stocks on Wall Street were trading lower.
The dollar fell against a basket of currencies.
U.S. Treasury yields rose as higher commodity prices, including oil, fanned concerns that the recent progress in slowing inflation could be undone.
REBOUND EXPECTED
Starts for housing projects with five units or more plunged 26.3% to a rate of 334,000 units in August, the lowest level since August 2020.
Multi-family housing construction appears to have peaked in April 2022, when it was fueled by demand for rental accommodation as higher mortgage rates priced out potential home buyers.
Tighter financial conditions, which are limiting credit access for builders, as well as a huge stock of multi-family housing under construction are slowing activity.
Permits for future homebuilding jumped 6.9% to a rate of 1.543 million units, the highest since October 2022.
They were boosted by a 14.8% surge in multi-family housing permits to a rate of 535,000 units.
Single-family housing permits rose 2.0% to a rate of 949,000 units, the highest since May 2022.
Residential investment has contracted for nine straight quarters, the longest such stretch since the housing bubble burst, triggering the 2008 global financial crisis and the Great Recession.
August's slump in homebuilding prompted economists at Goldman Sachs to lower their gross domestic product growth estimate for the third quarter by one-tenth of a percentage point to a 3.2% annualized rate.
The economy grew at a 2.1% pace in the second quarter.
"The decline in starts in August overstates the weakness in housing construction and we look for some reversal of the decline in September," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
The number of houses approved for construction that are yet to be started rebounded 5.6% to 282,000 units.
The single-family homebuilding backlog increased 2.9% to 142,00 units, while the completions rate for this segment dropped 6.6% to 961,000 units, the lowest level since January 2022.
The stock of housing under construction fell 0.2% to a rate of 1.688 million units.
The inventory of single-family housing under construction dipped 0.1% to a rate of 676,000 units, the lowest level since May 2021.
The stock of multi-family housing under construction eased 0.2% to 995,000 units, still at record highs, suggesting limited scope for further increases in multi-family housing construction despite the rise in building permits for this segment.
Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to bridge the inventory gap.
"The undersupply of single-family homes on the market could provide growth opportunities for home builders, especially the companies building entry-level homes for the large cohort of millennials looking to buy," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Paul Simao and Andrea Ricci
https://www.reuters.com/world/us/us-sin ... 023-09-19/
Re: THE HOUSING MARKET
REUTERS
"US weekly jobless claims drop to eight-month low; labor market remains tight"
By Lucia Mutikani
September 21, 2023
Summary
* Weekly jobless claims fall 20,000 to 201,000
* Continuing claims drop 21,000 to 1.662 million
* Existing home sales slip 0.7% in August
* Median house price increases 3.9% from year ago
WASHINGTON, Sept 21 (Reuters) - The number of Americans filing new claims for unemployment benefits dropped to an eight-month low last week, pointing to persistent labor market tightness even as job growth is cooling.
The report from the Labor Department on Thursday also showed unemployment rolls in early September were the smallest since January.
It was published a day after the Federal Reserve held interest rates steady but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy to be kept significantly tighter through 2024 than previously expected.
"This economy is just not showing any sign of slowing down which hints that inflation will not be coming back down to target," said Christopher Rupkey, chief economist at FWDBONDS in New York.
"The Fed was wise to keep another interest rate hike in their back pockets just in case, and it now looks like another rate hike is warranted."
Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 201,000 for the week ended Sept. 16, the lowest level since January.
Economists polled by Reuters had forecast 225,000 claims for the latest week.
Claims are in the lower end of their 194,000-265,000 range for this year.
Claims could, however, increase in the coming weeks as a partial strike by the United Auto Workers (UAW) union forces automobile manufacturers to temporarily lay off workers because of shortages of some materials.
The UAW last week launched a targeted strike against Ford, GM and Stellantis, impacting one assembly plant at each company.
It has threatened to broaden the work stoppages, which for now only involve about 12,700 of the affected 146,000 UAW members.
Though striking workers are not eligible for unemployment benefits, the walkout has snarled supply chains.
Ford has furloughed 600 workers who are not on strike, while GM expected to halt operations at its Kansas car plant, affecting 2,000 workers.
Chrysler parent Stellantis said it would temporarily lay off 68 employees in Ohio and expects to furlough another 300 workers in Indiana.
Unadjusted claims rose by only 67 to 175,661 last week.
There were notable declines in filings in Indiana and California, which mostly offset sizeable increases in South Carolina, New York and Georgia.
Fed Chair Jerome Powell said on Wednesday that "the labor market remains tight, but supply and demand conditions continue to come into better balance."
Employment growth has been slowing and job openings falling.
Labor market resilience is propping up the economy even as recession fears linger.
The leading indicator, a gauge of future U.S. economic activity, fell 0.4% in August after dropping 0.3% in July, the Conference Board said in a second report on Thursday.
It has dropped for 17 straight months.
Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.
The claims data together with the Fed's hawkish stance pushed stocks on Wall street lower.
The dollar gained versus a basket of currencies.
U.S. Treasury prices fell, with the yield on the benchmark 10-year bond rising to a nearly 16-year high.
HOUSING FALTERING
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September's employment report.
The strike is unlikely to have an impact on payrolls as it started towards the end of the survey week.
Workers most likely received pay for that week.
Claims fell between the August and September survey period.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in September.
The so-called continuing claims declined 21,000 to 1.662 million during the week ending Sept. 9, also the lowest level since January, the claims report showed.
That suggests laid-off workers are quickly finding employment.
While the labor market remains unbowed, the housing market is faltering after showing signs of stabilizing earlier this year as mortgage rates resume their upward trend in tandem with the 10-year Treasury note, which has spiked on worries soaring oil prices could hamper the Fed's fight against inflation.
Existing home sales slipped 0.7% last month to a seasonally adjusted annual rate of 4.04 million units, the National Association of Realtors said in a third report.
Existing home sales are counted at the closing of a contract.
Last month's sales likely reflected contracts signed in July, before the recent run-up in mortgage rates, which lifted the rate on the popular 30-year fixed mortgage above 7%.
Home sales last month were restrained by persistently tight supply, with inventory falling 14.1% from a year earlier to 1.1 million, the lowest on record for any August.
As a result, the median house price accelerated 3.9% from a year earlier to $407,100, the fourth-highest reading.
It hit a record $413,000 in June 2022.
"The prospects for improved sales in the coming months look bleak," said Ben Ayers, senior economist at Nationwide in Columbus, Ohio.
"2023 could end in a whimper for the real estate sector as any substantial pull-back in rates is likely far off into 2024."
News on manufacturing was downbeat.
Manufacturing together with housing have borne the brunt of the Fed's aggressive monetary policy tightening.
A fourth report from the Philadelphia Fed showed factory activity in the mid-Atlantic region slumped in September.
Firms in the region that covers eastern Pennsylvania, southern New Jersey and Delaware reported decreases in new orders and shipments.
They continued to report a decline in employment.
The Philadelphia Fed's business conditions index fell to -13.5 this month from 12.0 in August.
It was the index's 14th negative reading in the past 16 months.
"Softer demand for goods and higher borrowing costs are hurdles for activity," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
"But re-shoring of supply chains, infrastructure projects and a stabilization in demand could provide support to manufacturing output over time."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Paul Simao and Andrea Ricci
https://www.reuters.com/markets/us/us-w ... 023-09-21/
"US weekly jobless claims drop to eight-month low; labor market remains tight"
By Lucia Mutikani
September 21, 2023
Summary
* Weekly jobless claims fall 20,000 to 201,000
* Continuing claims drop 21,000 to 1.662 million
* Existing home sales slip 0.7% in August
* Median house price increases 3.9% from year ago
WASHINGTON, Sept 21 (Reuters) - The number of Americans filing new claims for unemployment benefits dropped to an eight-month low last week, pointing to persistent labor market tightness even as job growth is cooling.
The report from the Labor Department on Thursday also showed unemployment rolls in early September were the smallest since January.
It was published a day after the Federal Reserve held interest rates steady but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy to be kept significantly tighter through 2024 than previously expected.
"This economy is just not showing any sign of slowing down which hints that inflation will not be coming back down to target," said Christopher Rupkey, chief economist at FWDBONDS in New York.
"The Fed was wise to keep another interest rate hike in their back pockets just in case, and it now looks like another rate hike is warranted."
Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 201,000 for the week ended Sept. 16, the lowest level since January.
Economists polled by Reuters had forecast 225,000 claims for the latest week.
Claims are in the lower end of their 194,000-265,000 range for this year.
Claims could, however, increase in the coming weeks as a partial strike by the United Auto Workers (UAW) union forces automobile manufacturers to temporarily lay off workers because of shortages of some materials.
The UAW last week launched a targeted strike against Ford, GM and Stellantis, impacting one assembly plant at each company.
It has threatened to broaden the work stoppages, which for now only involve about 12,700 of the affected 146,000 UAW members.
Though striking workers are not eligible for unemployment benefits, the walkout has snarled supply chains.
Ford has furloughed 600 workers who are not on strike, while GM expected to halt operations at its Kansas car plant, affecting 2,000 workers.
Chrysler parent Stellantis said it would temporarily lay off 68 employees in Ohio and expects to furlough another 300 workers in Indiana.
Unadjusted claims rose by only 67 to 175,661 last week.
There were notable declines in filings in Indiana and California, which mostly offset sizeable increases in South Carolina, New York and Georgia.
Fed Chair Jerome Powell said on Wednesday that "the labor market remains tight, but supply and demand conditions continue to come into better balance."
Employment growth has been slowing and job openings falling.
Labor market resilience is propping up the economy even as recession fears linger.
The leading indicator, a gauge of future U.S. economic activity, fell 0.4% in August after dropping 0.3% in July, the Conference Board said in a second report on Thursday.
It has dropped for 17 straight months.
Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.
The claims data together with the Fed's hawkish stance pushed stocks on Wall street lower.
The dollar gained versus a basket of currencies.
U.S. Treasury prices fell, with the yield on the benchmark 10-year bond rising to a nearly 16-year high.
HOUSING FALTERING
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September's employment report.
The strike is unlikely to have an impact on payrolls as it started towards the end of the survey week.
Workers most likely received pay for that week.
Claims fell between the August and September survey period.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in September.
The so-called continuing claims declined 21,000 to 1.662 million during the week ending Sept. 9, also the lowest level since January, the claims report showed.
That suggests laid-off workers are quickly finding employment.
While the labor market remains unbowed, the housing market is faltering after showing signs of stabilizing earlier this year as mortgage rates resume their upward trend in tandem with the 10-year Treasury note, which has spiked on worries soaring oil prices could hamper the Fed's fight against inflation.
Existing home sales slipped 0.7% last month to a seasonally adjusted annual rate of 4.04 million units, the National Association of Realtors said in a third report.
Existing home sales are counted at the closing of a contract.
Last month's sales likely reflected contracts signed in July, before the recent run-up in mortgage rates, which lifted the rate on the popular 30-year fixed mortgage above 7%.
Home sales last month were restrained by persistently tight supply, with inventory falling 14.1% from a year earlier to 1.1 million, the lowest on record for any August.
As a result, the median house price accelerated 3.9% from a year earlier to $407,100, the fourth-highest reading.
It hit a record $413,000 in June 2022.
"The prospects for improved sales in the coming months look bleak," said Ben Ayers, senior economist at Nationwide in Columbus, Ohio.
"2023 could end in a whimper for the real estate sector as any substantial pull-back in rates is likely far off into 2024."
News on manufacturing was downbeat.
Manufacturing together with housing have borne the brunt of the Fed's aggressive monetary policy tightening.
A fourth report from the Philadelphia Fed showed factory activity in the mid-Atlantic region slumped in September.
Firms in the region that covers eastern Pennsylvania, southern New Jersey and Delaware reported decreases in new orders and shipments.
They continued to report a decline in employment.
The Philadelphia Fed's business conditions index fell to -13.5 this month from 12.0 in August.
It was the index's 14th negative reading in the past 16 months.
"Softer demand for goods and higher borrowing costs are hurdles for activity," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
"But re-shoring of supply chains, infrastructure projects and a stabilization in demand could provide support to manufacturing output over time."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Paul Simao and Andrea Ricci
https://www.reuters.com/markets/us/us-w ... 023-09-21/
Re: THE HOUSING MARKET
REUTERS
"US consumer confidence dives to four-month low; home sales tumble"
By Lucia Mutikani
September 26, 2023
Summary
* Consumer confidence index drops to 103.0 in September
* Labor market differential widens to 27.3 from 26.7
* New home sales fall 8.7% in August; home prices up in July
WASHINGTON, Sept 26 (Reuters) - U.S. consumer confidence dropped to a four-month low in September, weighed down by persistent worries about higher prices and rising fears of a recession, though households remained generally upbeat about the labor market.
The second straight monthly decline in confidence reported by the Conference Board on Tuesday also reflected higher interest rates and concerns about the political environment.
The nation faces a potentially disruptive shutdown of the federal government on Saturday amid political wrangling.
Confidence fell across all age groups, and was most pronounced among consumers with annual incomes of $50,000 or more.
"Inflation is slowing, but prices are still higher than they were before the pandemic and this is taking a toll on consumer confidence," said Christopher Rupkey, chief economist at FWDBONDS in New York.
The Conference Board said its consumer confidence index dropped to 103.0 this month, the lowest reading since May, from an upwardly revised 108.7 in August.
Economists polled by Reuters had forecast the index easing to 105.5 from the previously reported 106.1.
Consumers' perceptions of the likelihood of a recession over the next year ticked back up.
A sharp decrease in the expectations measure accounted for the decline in confidence, which economists partially attributed to the looming government shutdown, with Congress so far failing to pass any spending bills to fund federal agency programs in the fiscal year starting on Oct. 1.
Hundreds of thousands of federal workers will be furloughed and a wide range of services, from economic data releases to nutrition benefits, suspended beginning on Sunday.
"Consumers also expressed concerns about the political situation and higher interest rates," said Dana Peterson, chief economist at The Conference Board in Washington.
The cutoff date for the preliminary survey was Sept. 18.
Millions of Americans will also start repaying their student loans in October and most have run down their pandemic savings.
The survey showed consumers increasingly concerned about their family finances.
The Federal Reserve last week left its benchmark overnight interest rate unchanged at the 5.25%-5.50% range.
The U.S. central bank, however, stiffened its hawkish stance, projecting another rate hike by year end and monetary policy staying significantly tighter through 2024 than previously expected.
The Fed has hiked the policy rate by 525 basis points since March 2022.
Though consumers continued to fret over the higher cost of living, their inflation expectations over the next year remained stable and they showed no intentions of drastically pulling back on purchases of motor vehicles and other big-ticket items like television sets and refrigerators over the next six months.
Fewer, however, expected to buy a house, with the rate on the popular 30-year fixed-mortgage the highest in more than 22 years and home prices reaccelerating.
Consumers' 12-month inflation expectations were unchanged at 5.7% for the third straight month.
Consumer spending remains underpinned by a tight labor market, which is keeping wage growth elevated.
The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, widened to 27.3 this month compared to 26.7 in August.
This measure correlates to the unemployment rate in the Labor Department's closely followed employment report.
Stocks on Wall Street fell.
The dollar rose against a basket of currencies.
U.S. Treasury prices were lower.
HOUSE PRICES ACCELERATE
A separate from the Commerce Department showed new home sales plunged 8.7% to a seasonally adjusted annual rate of 675,000 units in August after racing to a 17-month high in July.
Economists had forecast new home sales, which account for a small share of U.S. home sales, falling to a rate of 700,000 units.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market.
They, however, can be volatile on a month-to-month basis.
Sales increased 5.8% on a year-on-year basis in August.
Though new home sales remain supported by a dearth of previously owned homes on the market, the resurgence in mortgage rates is reducing affordability for prospective home buyers.
The rate on the 30-year fixed mortgage vaulted above 7% in August and climbed to an average of 7.19% last week, the highest since July 2001, according to data from mortgage finance agency Freddie Mac.
Mortgage rates are rising in tandem with U.S. Treasury yields, which have surged on worries that soaring oil prices could hamper the Fed's fight against inflation.
"While we expect higher rates to hurt new home sales, we think they will be more resilient than existing home sales as builders seem willing to scale up their use of incentives to motivate sales," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
A third report from the Federal Housing Finance Agency showed annual home price growth quickened for a second straight month in July, largely reflecting the tight supply in the market for previously owned homes.
House prices jumped 4.6% on a year-over-year basis in July after rising 3.2% in June.
Prices shot up 0.8% month-on-month after advancing 0.4% in June.
The resurgence in house prices was seen feeding through to higher inflation, likely giving the Fed cover to maintain its hawkish posture for some time.
"The Fed will see the reacceleration of house prices as a reason to keep interest rates higher for longer," said Bill Adams, chief economist at Comerica Bank in Dallas.
"Renting households are seeing some relief in new lease prices, but since two thirds of Americans are homeowners, the Fed cannot afford to look past house prices' influence on the cost of living."
Reporting by Lucia Mutikani; Additional reporting by Amina Niasse; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-c ... 023-09-26/
"US consumer confidence dives to four-month low; home sales tumble"
By Lucia Mutikani
September 26, 2023
Summary
* Consumer confidence index drops to 103.0 in September
* Labor market differential widens to 27.3 from 26.7
* New home sales fall 8.7% in August; home prices up in July
WASHINGTON, Sept 26 (Reuters) - U.S. consumer confidence dropped to a four-month low in September, weighed down by persistent worries about higher prices and rising fears of a recession, though households remained generally upbeat about the labor market.
The second straight monthly decline in confidence reported by the Conference Board on Tuesday also reflected higher interest rates and concerns about the political environment.
The nation faces a potentially disruptive shutdown of the federal government on Saturday amid political wrangling.
Confidence fell across all age groups, and was most pronounced among consumers with annual incomes of $50,000 or more.
"Inflation is slowing, but prices are still higher than they were before the pandemic and this is taking a toll on consumer confidence," said Christopher Rupkey, chief economist at FWDBONDS in New York.
The Conference Board said its consumer confidence index dropped to 103.0 this month, the lowest reading since May, from an upwardly revised 108.7 in August.
Economists polled by Reuters had forecast the index easing to 105.5 from the previously reported 106.1.
Consumers' perceptions of the likelihood of a recession over the next year ticked back up.
A sharp decrease in the expectations measure accounted for the decline in confidence, which economists partially attributed to the looming government shutdown, with Congress so far failing to pass any spending bills to fund federal agency programs in the fiscal year starting on Oct. 1.
Hundreds of thousands of federal workers will be furloughed and a wide range of services, from economic data releases to nutrition benefits, suspended beginning on Sunday.
"Consumers also expressed concerns about the political situation and higher interest rates," said Dana Peterson, chief economist at The Conference Board in Washington.
The cutoff date for the preliminary survey was Sept. 18.
Millions of Americans will also start repaying their student loans in October and most have run down their pandemic savings.
The survey showed consumers increasingly concerned about their family finances.
The Federal Reserve last week left its benchmark overnight interest rate unchanged at the 5.25%-5.50% range.
The U.S. central bank, however, stiffened its hawkish stance, projecting another rate hike by year end and monetary policy staying significantly tighter through 2024 than previously expected.
The Fed has hiked the policy rate by 525 basis points since March 2022.
Though consumers continued to fret over the higher cost of living, their inflation expectations over the next year remained stable and they showed no intentions of drastically pulling back on purchases of motor vehicles and other big-ticket items like television sets and refrigerators over the next six months.
Fewer, however, expected to buy a house, with the rate on the popular 30-year fixed-mortgage the highest in more than 22 years and home prices reaccelerating.
Consumers' 12-month inflation expectations were unchanged at 5.7% for the third straight month.
Consumer spending remains underpinned by a tight labor market, which is keeping wage growth elevated.
The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, widened to 27.3 this month compared to 26.7 in August.
This measure correlates to the unemployment rate in the Labor Department's closely followed employment report.
Stocks on Wall Street fell.
The dollar rose against a basket of currencies.
U.S. Treasury prices were lower.
HOUSE PRICES ACCELERATE
A separate from the Commerce Department showed new home sales plunged 8.7% to a seasonally adjusted annual rate of 675,000 units in August after racing to a 17-month high in July.
Economists had forecast new home sales, which account for a small share of U.S. home sales, falling to a rate of 700,000 units.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market.
They, however, can be volatile on a month-to-month basis.
Sales increased 5.8% on a year-on-year basis in August.
Though new home sales remain supported by a dearth of previously owned homes on the market, the resurgence in mortgage rates is reducing affordability for prospective home buyers.
The rate on the 30-year fixed mortgage vaulted above 7% in August and climbed to an average of 7.19% last week, the highest since July 2001, according to data from mortgage finance agency Freddie Mac.
Mortgage rates are rising in tandem with U.S. Treasury yields, which have surged on worries that soaring oil prices could hamper the Fed's fight against inflation.
"While we expect higher rates to hurt new home sales, we think they will be more resilient than existing home sales as builders seem willing to scale up their use of incentives to motivate sales," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
A third report from the Federal Housing Finance Agency showed annual home price growth quickened for a second straight month in July, largely reflecting the tight supply in the market for previously owned homes.
House prices jumped 4.6% on a year-over-year basis in July after rising 3.2% in June.
Prices shot up 0.8% month-on-month after advancing 0.4% in June.
The resurgence in house prices was seen feeding through to higher inflation, likely giving the Fed cover to maintain its hawkish posture for some time.
"The Fed will see the reacceleration of house prices as a reason to keep interest rates higher for longer," said Bill Adams, chief economist at Comerica Bank in Dallas.
"Renting households are seeing some relief in new lease prices, but since two thirds of Americans are homeowners, the Fed cannot afford to look past house prices' influence on the cost of living."
Reporting by Lucia Mutikani; Additional reporting by Amina Niasse; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-c ... 023-09-26/
Re: THE HOUSING MARKET
REUTERS
"Mortgage rates reach highest since November 2000 - MBA"
By Amina Niasse
October 4, 2023
NEW YORK, Oct 4 (Reuters) - U.S. mortgage interest rates rose to the highest since November 2000 last week, helping to drive home loan application volumes to the lowest in 27 years, a report on Wednesday said.
The average weekly rate on a 30-year fixed mortgage hit 7.53% in the week ended Sept. 29 from the week prior's 7.41%, according to data released by the Mortgage Bankers Association (MBA).
The increased rate was accompanied by a 6% fall in home loan applications.
“Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields," said Joel Kan, the MBA's vice president and deputy chief economist.
“As a result, mortgage applications ground to a halt, dropping to the lowest level since 1996."
Yields on the 10-year Treasury note, which is the main benchmark for determining mortgage rates, have climbed to their highest since the global financial crisis, hitting 4.8% this week.
Moreover, the spread between 10-year note yields and 30-year mortgage rates are near record-wide levels, which has also exacerbated the rise in borrowing costs for prospective homebuyers.
After the Federal Reserve launched its aggressive rate hike campaign in March 2022, the spread has progressively widened, and currently stands around 3 percentage points.
Last week also marked the fourth consecutive week that mortgage rates rose.
The share of activity for adjustable-rate mortgages rose to 8% - the highest since March - from 7.5% a week earlier as buyers searched for affordable payment options, Kan said.
ARMs typically have a lower introductory rate but then reset after a period.
Reporting by Amina Niasse; Editing by Andrea Ricci
https://www.reuters.com/markets/us/mort ... 023-10-04/
"Mortgage rates reach highest since November 2000 - MBA"
By Amina Niasse
October 4, 2023
NEW YORK, Oct 4 (Reuters) - U.S. mortgage interest rates rose to the highest since November 2000 last week, helping to drive home loan application volumes to the lowest in 27 years, a report on Wednesday said.
The average weekly rate on a 30-year fixed mortgage hit 7.53% in the week ended Sept. 29 from the week prior's 7.41%, according to data released by the Mortgage Bankers Association (MBA).
The increased rate was accompanied by a 6% fall in home loan applications.
“Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields," said Joel Kan, the MBA's vice president and deputy chief economist.
“As a result, mortgage applications ground to a halt, dropping to the lowest level since 1996."
Yields on the 10-year Treasury note, which is the main benchmark for determining mortgage rates, have climbed to their highest since the global financial crisis, hitting 4.8% this week.
Moreover, the spread between 10-year note yields and 30-year mortgage rates are near record-wide levels, which has also exacerbated the rise in borrowing costs for prospective homebuyers.
After the Federal Reserve launched its aggressive rate hike campaign in March 2022, the spread has progressively widened, and currently stands around 3 percentage points.
Last week also marked the fourth consecutive week that mortgage rates rose.
The share of activity for adjustable-rate mortgages rose to 8% - the highest since March - from 7.5% a week earlier as buyers searched for affordable payment options, Kan said.
ARMs typically have a lower introductory rate but then reset after a period.
Reporting by Amina Niasse; Editing by Andrea Ricci
https://www.reuters.com/markets/us/mort ... 023-10-04/
Re: THE HOUSING MARKET
CNBC
"Housing industry urges Powell to stop raising interest rates or risk an economic hard landing"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, OCT 10 2023
KEY POINTS
* The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors wrote to the Fed “to convey profound concern” about the industry.
* The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities.
Top real estate and banking officials are calling on the Federal Reserve to stop raising interest rates as the industry suffers through surging housing costs and a “historic shortage” of available homes for sale.
In a letter Monday addressed to the Fed Board of Governors and Chair Jerome Powell, the officials voiced their worries about the direction of monetary policy and the impact it is having on the beleaguered real estate market.
The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors said they wrote the letter “to convey profound concern shared among our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”
The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities at least until the housing market has stabilized.
“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the group said.
The letter comes as the Fed is weighing how it should proceed with monetary policy after raising its key borrowing rate 11 times since March 2022.
In recent days, several officials have noted that the central bank could be in a position to hold off on further increases as it assesses the impact the previous ones have had on various parts of the economy.
However, there appears to be little appetite for easing, with the benchmark fed funds rate now pegged in a range between 5.25%-5.5%, its highest in some 22 years.
At the same time, the housing market is suffering through constrained inventory levels, prices that have jumped nearly 30% since the early days of the Covid pandemic and sales volumes that are off more than 15% from a year ago.
The letter notes that the rate hikes have “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume."
"These market challenges occur amidst a historic shortage of attainable housing.”
At recent meetings, Powell has acknowledged dislocations in the housing market.
During his July news conference, the chair noted “this will take some time to work through."
"Hopefully, more supply comes on line.”
The average 30-year mortgage rate is now just shy of 8%, according to Bankrate, while the average home price has climbed to $407,100, with available inventory at the equivalent of 3.3 months.
NAR officials estimate that inventory would need to double to bring down prices.
“The speed and magnitude of these rate increases, and resulting dislocation in our industry, is painful and unprecedented in the absence of larger economic turmoil,” the letter said.
The groups also point out that spreads between the 30-year mortgage rate and the 10-year Treasury yield are at historically high levels, while shelter costs are a principal driver for increases in the consumer price index inflation gauge.
As part of an effort to reduce its bond holdings, the Fed has reduced its mortgage holdings by nearly $230 billion since June 2022.
However, it has done so through passively allowing maturing bonds to roll off its balance sheet, rather than reinvesting.
There has been some concern that the Fed might get more aggressive and start actively selling its mortgage-backed securities holdings into the market, though no plans to do so have been announced.
https://www.cnbc.com/2023/10/10/housing ... rates.html
"Housing industry urges Powell to stop raising interest rates or risk an economic hard landing"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, OCT 10 2023
KEY POINTS
* The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors wrote to the Fed “to convey profound concern” about the industry.
* The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities.
Top real estate and banking officials are calling on the Federal Reserve to stop raising interest rates as the industry suffers through surging housing costs and a “historic shortage” of available homes for sale.
In a letter Monday addressed to the Fed Board of Governors and Chair Jerome Powell, the officials voiced their worries about the direction of monetary policy and the impact it is having on the beleaguered real estate market.
The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors said they wrote the letter “to convey profound concern shared among our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”
The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities at least until the housing market has stabilized.
“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the group said.
The letter comes as the Fed is weighing how it should proceed with monetary policy after raising its key borrowing rate 11 times since March 2022.
In recent days, several officials have noted that the central bank could be in a position to hold off on further increases as it assesses the impact the previous ones have had on various parts of the economy.
However, there appears to be little appetite for easing, with the benchmark fed funds rate now pegged in a range between 5.25%-5.5%, its highest in some 22 years.
At the same time, the housing market is suffering through constrained inventory levels, prices that have jumped nearly 30% since the early days of the Covid pandemic and sales volumes that are off more than 15% from a year ago.
The letter notes that the rate hikes have “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume."
"These market challenges occur amidst a historic shortage of attainable housing.”
At recent meetings, Powell has acknowledged dislocations in the housing market.
During his July news conference, the chair noted “this will take some time to work through."
"Hopefully, more supply comes on line.”
The average 30-year mortgage rate is now just shy of 8%, according to Bankrate, while the average home price has climbed to $407,100, with available inventory at the equivalent of 3.3 months.
NAR officials estimate that inventory would need to double to bring down prices.
“The speed and magnitude of these rate increases, and resulting dislocation in our industry, is painful and unprecedented in the absence of larger economic turmoil,” the letter said.
The groups also point out that spreads between the 30-year mortgage rate and the 10-year Treasury yield are at historically high levels, while shelter costs are a principal driver for increases in the consumer price index inflation gauge.
As part of an effort to reduce its bond holdings, the Fed has reduced its mortgage holdings by nearly $230 billion since June 2022.
However, it has done so through passively allowing maturing bonds to roll off its balance sheet, rather than reinvesting.
There has been some concern that the Fed might get more aggressive and start actively selling its mortgage-backed securities holdings into the market, though no plans to do so have been announced.
https://www.cnbc.com/2023/10/10/housing ... rates.html
Re: THE HOUSING MARKET
REUTERSMS. YELLEN. Thank you, Mr. Chairman.
I will try to be brief because, like President Broaddus, I would like to take a little extra time in our next go-around concerning price objectives for monetary policy.
The key questions today are identical to those at our last meeting.
Will aggregate demand really moderate in the second half of the year, and are we about to see an uptick in core inflation due to increasing wage pressures in already tight labor markets and the feedback of higher food prices into wage demands?
With respect to the slowdown in aggregate demand, I confess both ignorance and concern.
I agree with the Greenbook that aggregate demand will probably slow toward trend, for all of the reasons that are by now familiar, and will probably do so with the usual long and variable lags.
Higher interest rates and a somewhat stronger dollar will eventually take some toll on housing, associated consumer durables, and net exports.
The influence on growth of inherently transitory factors like the rebuilding of auto inventories will soon wane, and the data already point to a slowing pace of noncomputer investment spending, consistent with predictions of the accelerator.
But I admit there is only scanty evidence that housing markets are poised to cool.
- Meeting of the Federal Open Market Committee, July 2, 1996
"Yellen says she believes US housing inflation will still ease over time"
By David Lawder and Andrea Shalal
October 13, 2023
MARRAKECH, Morocco, Oct 13 (Reuters) - U.S. Treasury Secretary Janet Yellen told Reuters on Friday that she still believes U.S. shelter inflation will continue to ease despite new consumer price data on Thursday showing a jump in housing costs, but the process may take some time.
"We do definitely believe that's coming down over time," Yellen said in an interview on the sidelines of the International Monetary Fund and World Bank meetings in Morocco.
After generally easing through much of the year, shelter costs rose in September by the most in six months, interrupting that downward trend for the moment at least and acting as the largest contributor to a higher-than-expected overall inflation print for the month.
Recent comments from Federal Reserve officials, and minutes of their latest meeting last month released on Wednesday, have shown policymakers beginning to fret that the resilience of the housing market was a possible risk to their otherwise optimistic outlook that inflation will over time return to the central bank's 2% target.
Yellen has long said that housing costs, will ease over time, helping to bring down core inflation, and said Thursday's CPI report has not deterred her from that view.
"I think we have very good reason to believe, with lags, that will come down, and I don't think there's anything in the report that would cause us to think that's a mistake in judgment," Yellen said.
"It's just a lengthy process."
Reporting by David Lawder and Andrea Ricci Editing by Marguerita Choy
https://www.reuters.com/markets/us/yell ... 023-10-13/