Main Topic: Decline in builder sentiment in the homebuilding market due to rising mortgage rates and high construction costs.
Key Points:
1. Builder sentiment dropped 6 points to 50 in August, the first decline in seven months.
2. Rising mortgage rates and high construction costs are impacting builder sentiment.
3. Buyer traffic and sales expectations have also declined, leading to more builders using sales incentives.
New home sales in the US increased by 4.4% in July, outperforming expectations and highlighting the continued demand for new construction due to a shortage of existing affordable homes. Despite rising mortgage rates, buyers are turning to new homes, causing a decline in sales in the resale market. However, as mortgage rates continue to rise, builder sentiment may be negatively impacted and prices may need to be adjusted to attract buyers.
Mortgage rates topping 7% have led to a significant drop in mortgage applications for home purchases, with last week seeing the smallest volume in 28 years. The increase in rates, driven by concerns of high inflation, has priced out many potential buyers and contributed to low housing supply and high home prices. As a result, sales of previously owned homes have declined, and homeowners are reluctant to sell their properties due to the higher rates. Some buyers are turning to adjustable-rate mortgages to manage the increased costs.
US mortgage applications for home purchases fell to their lowest level in 28 years, while refinancing also declined, as mortgage rates reached a 23-year high, according to data from the Mortgage Bankers Association.
The average mortgage rate in the U.S. has surpassed 7% for the first time in over two decades, leaving homeowners feeling trapped by their low interest rates.
Homebuyers' purchasing power has been negatively impacted by rising mortgage rates, which averaged 7.2% in August, the highest level since 2001, resulting in a decline in existing home sales and a shift towards new-construction homes.
Prospective home buyers can still secure a lower mortgage rate in today's market by improving their credit score, shopping around for lenders, considering an adjustable-rate mortgage, buying mortgage points, locking in a rate, and making a large down payment.
Buyers of newly built homes are enjoying lower mortgage rates, as home builders are allocating a portion of the sale proceeds to permanently buy down the rates, leading to higher new home sales.
Mortgage payments in the US are at their highest since the mid-1980s, making housing deeply unaffordable, but surprisingly, rising mortgage rates have not led to a decline in house prices as supply of properties has fallen almost in lockstep with demand and locked-in homeowners have invested more in fixing up their current homes, leading to a robust housing market despite the economic challenges.
The average rate on 30-year fixed-rate mortgages decreased to its lowest point in three weeks, with most loan types experiencing a double-digit decline.
The housing market is entering its slow season and home sales may be impacted by high mortgage rates, but home builder stocks could remain strong.
Average 30-year mortgage rates are still elevated at 6.94% in August, but they are expected to come down by the end of the year; however, a significant drop that will boost homebuying demand is not likely until 2024 or 2025, but there are advantages to buying a home even when rates are high, such as less competition.
The average 30-year fixed mortgage rate has jumped to 7.19%, the second-highest rate since November, signaling a decline in U.S. housing affordability; experts predict varying future rates, with some expecting a decline and others projecting rates to remain relatively high.
U.S. homebuilders are feeling pessimistic about their business due to high mortgage rates, leading to a decrease in builder confidence and an increase in price cuts.
US homebuilders are losing confidence in the housing market as mortgage rates remain high, causing a decline in buyer purchasing power and a negative outlook for the industry.
U.S. homebuilding fell to a three-year low in August due to higher mortgage rates, but permits for new construction increased, signaling support from a shortage of homes on the market.
New home sales dropped in August due to high mortgage rates, with sales of newly constructed homes decreasing by 8.7%.
The consumer confidence of American consumers decreased in September, particularly in regards to future expectations, amid concerns of elevated interest rates and a potential recession within a year.
Overall mortgage lending declined in 2022 due to the increase in interest rates and fees, resulting in reduced affordability, a higher percentage of borrowers paying discount points, and more denials for insufficient income; cash-out refinances saw a significant reduction while home-equity lines of credit increased.
The average rate on a five-year fixed mortgage in the UK has dropped below 6% for the first time since July, providing some hope for borrowers, although rates are still higher than they were a few months ago, and experts do not expect rates to reach the ultra-low levels seen in the past.
Mortgage rates have reached a 23-year high, causing a decline in homebuying demand and leading to a potential slowdown in the housing market.
Mortgage approvals for house purchases have reached a six-month low in August, signaling a decline in lending and making it harder for buyers to secure homes due to rising interest rates; however, there is still hope that the market can recover if the Bank of England stops increasing interest rates and both buyers and vendors become more realistic.
30-year mortgage rates experienced their largest one-day drop since early March, falling almost three-tenths of a point to a record low, following a surge to a 23-year high the day before, prompting potential homebuyers to shop around for the best mortgage option.
Rising mortgage rates are impacting home affordability, which has been declining since early 2021, causing some sellers to reduce their asking prices, but the lack of available properties remains a challenge for most buyers.
Home buying demand drops as U.S. mortgage rates reach highest level since 2000, leading to a decline in mortgage application volume.
Mortgage rates in the U.S. housing market are approaching 8%, causing concern and potentially discouraging home-buying demand due to higher monthly mortgage payments relative to incomes.
Sentiment in the US housing market declined due to rising mortgage rates, with buyers anticipating higher home prices in the future, according to Fannie Mae data.
Higher mortgage rates are adding strain to prospective homebuyers as elevated home prices and a lack of inventory make it difficult to find affordable housing, with the 30-year fixed-rate mortgage now at its highest level since December 2000.
Mortgage rates are expected to fall in the coming months, offering homebuyers more affordability and potentially boosting the housing market.
High mortgage rates are expected to fall over the next year, with rates projected to decrease to 6.1% by the end of 2024 and the 30-year mortgage rate falling to 5.5% by the end of 2025, driven by a slowing U.S. economy and signs of a weakening economy, according to the Mortgage Bankers Association.
Mortgage rates dropped at the end of the week, with the 30-year fixed-rate average at 8.07%, significantly lower than the previous week's historic high of 8.34%.
Average 30-year mortgage rates are expected to trend down in the next few months, but more substantial drops are not likely until next year, making the end of 2024 a better time for potential homebuyers to start the process, while current homeowners may have an opportunity to refinance in the next year or two.
Homebuilder pessimism deepened in October as mortgage rates reached a 23-year high, according to the National Association of Home Builders (NAHB) and Wells Fargo Housing, however, the sentiment index may not reflect the experiences of larger builders who are better capitalized to take advantage of market dynamics.
