New listings rise and mortgage rates drop, giving homebuyers a break

For more than a year now, the housing market has been a perfect storm for sellers, but the winds may finally be shifting, according to CNBC. Strong demand and record-low supply are starting to ease, and mortgage rates are coming down off their recent highs. While home prices are still surging, these new market dynamics will likely take some of the heat out of those gains as well.

“Many buyers have backed away from the housing market and are waiting until more and better homes are listed,” said Daryl Fairweather, Redfin’s chief economist. “Buyers don’t have the same sense of urgency that they did at the beginning of the year. They aren’t racing to buy before prices increase, because asking prices have already increased and stabilized.”

A monthly housing sentiment survey in June from Fannie Mae found that 64% of respondents said it’s a bad time to buy a home, up from 56% in May. On selling, 77% of respondents said it’s a good time to sell, up from 67% in May.

Potential sellers had been holding properties off the market, not wanting people coming through their homes while the pandemic was raging. They were also concerned they wouldn’t be able to find something else to buy.

“First-time buyers are hitting a wall in many places around the country as the pace of home-price rises outpace the benefits of lower borrowing costs. Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,” said Frank Martell, president and CEO of CoreLogic.

“They [buyers] aren’t racing to buy before mortgage rates go up, because rates have dropped back below 3% and are likely to stay low. With more new listings starting to come on the market, buyers who threw in the towel may want to look again because the market is tilting more in their favor,” added Fairweather.

“Despite the pessimism in homebuying conditions, we expect demand for housing to persist at an elevated level through the rest of the year,” said Doug Duncan, Fannie Mae’s chief economist.

NAHB urges Congress to enact policies to help builders boost housing production

According to LBM Journal, National Association of Home Builders (NAHB) CEO Jerry Howard testified before Congress on Wednesday, July 14 and called on lawmakers to enact key policy proposals that will help home builders to expand the housing supply, reduce the housing deficit, and improve housing affordability for all Americans.

During a hearing before the House Ways and Means Subcommittee on Oversight on the topic of expanding housing access to all Americans, Howard noted that rising home prices, apartment rents and construction costs represent additional risks to housing affordability for prospective home buyers and renters.

“Over the past decade, the residential construction industry has underbuilt and not kept pace with demand due to several supply-side constraints,” said Howard. “These include a lack of skilled labor and buildable lots, tight lending conditions, shortages and rapidly rising prices for building materials, and excessive regulatory burdens that have added approximately 25 percent to the cost of a single-family home and 33 percent to a multifamily unit. Progress must be made on all fronts to ease the supply-side challenges that are holding back housing production.”

With the persistent lack of housing stock representing the most significant challenge for prospective home buyers, Howard called on Congress and the Biden administration to take the following steps to expand access to affordable housing.

  • Fix the building materials supply chain

The U.S. must immediately engage with Canada to adopt a new softwood lumber agreement and stop the imposition of harmful tariffs on Canadian lumber that increase prices and price volatility. “Commerce Secretary Gina Raimondo has committed to holding a summit of industry stakeholders to examine supply chain issues for lumber and other materials and to explore policy solutions. We look forward to participating in that process,” said Howard.

  • Improve the Low-Income Housing Tax Credit

Congress needs to enact H.R. 2573, the Affordable Housing Credit Improvement Act. The bill would finance more than 2 million additional multifamily units over the next decade by increasing the amount of credits allocated to each state and expanding the number of affordable housing projects that can be built using private activity bonds.

  • Reformulate current homeownership tax incentives

Recent tax changes have undermined the effectiveness of the mortgage interest deduction, resulting in fewer middle-class taxpayers itemizing and incentives flowing more to high-income households. A shift away from the mortgage interest deduction to a permanent homeownership tax credit that is targeted to lower- and middle-income Americans would make homeownership more accessible to hardworking American families. Additionally, a permanent, first-time home buyer tax credit would complement this shift and could provide some relief to the challenge of accumulating a down payment.

Mortgage applications jump 16% last week

After several consecutive weeks of drops, mortgage applications jumped 16% for the week ending July 9, 2021, according to the latest report from the Mortgage Bankers Association.

As reported by HousingWire, the sudden increase in applications was driven “heavily” by increased refinancing as mortgage rates dipped again, said Joel Kan, MBA associate vice president of economic and industry forecasting.

These lower rates may be helping some homebuyers close on their purchases, especially first-time homebuyers.

We continue to see ebbs and flows as housing demand remains strong, but for-sale inventory remains low,” Kan said. “The year-over-year comparisons were down significantly for both purchase and refinance applications.”

The sheer amount of bidding wars decreased from May to June, per a study released this week from Redfin, as more homes for sale have slowly hit the market in the past month. Overall inventory is still low, of course, but a cooling of the market could lead to more would-be buyers and an increase in mortgage applications soon, experts said.

Weekly Mortgage Rate Update

The summer swoon in mortgage rates continues as the 30-year fixed-rate mortgage fell for the third consecutive week. Since their peak at 3.18% in April, mortgage rates have declined by thirty basis points. While this decline is not large, it provides modest relief to borrowers who are purchasing in a market with strong home appreciation and scant inventory.

The Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 2.88%, which is 0.02 points lower than last week, and down 0.10 points from this time last year.

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Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.