Housing Rhythm: Home Sales Drop, Homeowners Insurance Spikes, Builder Confidence Tanks

The US housing market showed unmistakable signs of stagnation this week. Despite a decline in mortgage rates, mortgage applications and home sales were down, while the cost of homeowners insurance rose in most parts of the country.

On the Mortgage Front: Freddie Mac FMCC reported that the 30-year fixed-rate mortgage averaged 5.1% as of May 26, down from last week when it averaged 5.25%. The 15-year fixed rate mortgage averaged 4.31% with an average of 0.8 points, down from last week when it averaged 4.43%. And the 5-year Treasury-indexed adjustable-rate hybrid mortgage averaged 4.2%, up from last week when it averaged 4.08%.

“Mortgage rates decreased for the second week in a row due to the multiple headwinds facing the economy,” he said. Sam Khaterchief economist at Freddie Mac. “Despite recent rate easing, the housing market has clearly slowed, and the slowdown is spreading to other segments of the economy, such as consumer spending on durable goods.” .

The Mortgage Bankers Association (MBA) Market Composite Index, a measure of the volume of mortgage loan applications, fell 1.2% from the previous week. MBA’s purchases index managed a small rebound of 0.2%, while its refinancing index fell 4%; the latter was also 75% lower than the same week a year ago.

“As a result, most refinancing borrowers remain on the sidelines, and refinancing applications have decreased in nine of the last 10 weeks; Compared to January 2022, refinancing activity is down 66%,” he said. joel khanMBA associate vice president of economic and industrial forecasting.

“Higher mortgage rates are also weighing on purchase market conditions as the purchase index hovered near lows last seen in spring 2020, when a significant portion of activity was put on hold due to the start of the pandemic. Currently, higher rates, low inventory and high prices are keeping potential buyers out of the market.”

The MBA also found that higher mortgage rates (a spike of 80 basis points during April) coupled with accelerating home prices resulted in the average mortgage application payment increasing 8.8% from $1,736. in March to $1,889 in April. The sum covers both principal and interest. The median application payment was also $569 higher than it was in April 2021.

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On the insurance front: But mortgages aren’t the only home-related paperwork that has been overwhelmed by rising costs. QuoteWizard online insurance marketplace, a division of LoanTree TREEreported in its annual “State of Home Insurance” analysis that the average price of homeowners insurance has increased as much as 34% in some states since 2021.

Based on the analysis, the national average homeowners insurance bill is $1,766. Oklahoma has the most expensive insurance in the country ($3,735) and Hawaii has the least expensive ($412). Insurance prices have increased in 30 states from a year ago and decreased in 16 others.

“Depending on where you live, you could be paying a lot more or a lot less — we’ve seen everything from a 25% decrease in Kentucky to a 34% increase in Idaho,” he said. nick vinzantSenior Research Analyst at QuoteWizard.

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On the home sales front: But are people buying houses? Two new reports point to a decline in sales activity.

this morning, the National Association of Realtors (NAR) reported that its Pending Home Sales Index (PHSI) fell 3.9% to 99.3 in April and was also down 9.1% from a year earlier. An index of 100 is equal to the level of contract activity in 2001.

“Pending contracts are revealing as they better reflect the more timely impact of higher mortgage rates than closings,” he said. lorenzo yun, chief economist at NAR. “The latest contract signings mark six straight months of declines and are at the slowest pace in nearly a decade.”

Yun forecast that existing home sales would decline by 9% in 2022, noting that “rising mortgage rates have increased the cost of buying a home by more than 25% from the previous year, while prices higher housing prices are adding another 15% to that figure. . The vast majority of homeowners enjoy huge wealth gains and are not under financial stress with their home as a result of being locked into historically low interest rates, or because they don’t have a mortgage.

“However,” Yun added, “in this current market, prospective homebuyers face challenges and therefore may seek to mitigate rising cost of ownership by opting for a 5-year adjustable-rate mortgage or by extending your geographic search area to more affordable regions. .”

Data released earlier this week by the US Census Bureau and the Department of Housing and Urban Development found that April new single-family home sales had a seasonally adjusted annual rate of 591,000, which is 16.6% lower than the March revised rate of 709,000 and 26.9% lower than the April estimate. 2021 of 809,000. Last month was the weakest on record since April 2020, when the coronavirus pandemic crippled the US economy.

Federal data puts the median sales price of new homes sold in April at $450,600, while the median sales price was $570,300.

The decline in commercial activity does not inspire confidence among builders. The latest National Association of Home Builders (NAHB)/fargo wells WFC The housing market index found builder confidence in the market for newly built single-family homes fell eight points to 69, the fifth straight month that builder confidence sank and the lowest reading since June 2020.

“The housing market is facing increasing challenges,” said NAHB Chief Economist Robert Dietz. “Building material costs are up 19% from a year ago, in less than three months, mortgage rates have skyrocketed to a 12-year high, and under current affordability conditions, less than 50% of New and existing home sales are affordable for a typical family. Entry-level and first-time homebuyers are especially hard hit by this rapid increase in mortgage rates.”

Photo: Pexels/Pixabay.

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