Builder Confidence Falls, Signaling A Market Slowdown

Builder confidence fell eight points in May, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The HMI registered a reading of 69 in May, a significant drop from April. This is the fifth consecutive month of decline and the lowest reading since June 2020. The low reading suggests that the housing market is slowing thanks to affordability challenges. “The housing market is facing growing challenges. Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and, based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family,”  said NAHB Chief Economist Robert…

Another Week Of Rate Increases

Mortgage rates inched up to an average 5.30% last week, Freddie Mac reported Thursday. Freddie’s Primary Mortgage Market Survey (PMMS) found that the 30-year fixed-rate mortgage (FRM) averaged 5.30%. A year ago at this time, the 30-year FRM averaged 2.96%. “Homebuyers continue to show resilience even though rising mortgage rates are causing monthly payments to increase by about one-third as compared to a year ago,” said Sam Khater, Freddie Mac’s Chief Economist. “Several factors are contributing to this dynamic, including the large wave of first-time homebuyers looking to realize the dream of homeownership. In the months ahead, we expect monetary policy and inflation to discourage many consumers, weakening purchase demand and decelerating home price growth.” Affordability dropped in Q1 2022,…

Morning Roundup (4/26/2022)– Housing Bubble: Clickbait Or Is There A Bumpy Ride Ahead? 

Good Morning! Today is Tuesday, April 26. The Biden administration established a program that allows Americans to sponsor Ukrainian refugees. A New York judge held Donald Trump in contempt for refusing to turn over documents. The Boston Celtics eliminated the Brooklyn Nets in the first round of the N.B.A. playoffs. The Mortgage Note Reports Housing Bubble: Clickbait Or Is There A Bumpy Ride Ahead? Chuck Green reports trouble could be percolating in the U.S. housing market. loanDepot Shakeup: loanDepot has named Anthony Hsieh as its new Executive Chairman, while industry leader Frank Martell joins as President and CEO. Builder Profits: Builder gross profit margins fell to 18.2% in 2020, while net profits slipped to 7%, the first profit margin decline since 2008. And in other mortgage and housing news… Set To Stall: …

Builder Profits Fell In 2020, The First Drop Since 2008

Builder gross profit margins fell to 18.2% in 2020, while net profits slipped to 7%, according to NAHB Builders’ Cost of Doing Business Study. This is the first profit margin decline since 2008. The study surveyed single-family builders across the U.S. It found that builders averaged $13.7 million in revenue for the fiscal year of 2020, of which $11.2 million (81.8%) was spent on costs of sales, such as land costs and construction costs. An additional $1.5 million (11.2%) was spent on operating expenses, such as marketing, administrative expenses, and owner’s compensation.  The study notes that shutdowns related to Covid-19 played a part in the results, as well as the need to navigate work-from-home models, supply-chain disruptions, and labor shortages.…

Morning Roundup (3/2/2022)– Luxury Market, NAHB HBGI

Good Morning! Today is Wednesday, March 2. President Biden delivered a pro-democracy State of the Union speech that also touched on Covid-19 and his domestic agenda. At least 136 civilians and about 2,000 Russian soldiers have died in Ukraine. Major League Baseball postponed the start of the season because of a labor disagreement. The Mortgage Note Reports Hot Luxury Market: Demand for luxury housing rose 14.5% YOY in 2021 as the number of affluent individuals worldwide skyrocketed. NAHB HBGI: Single-family growth cooled in Q4 2021 while multifamily growth in high-density areas surged as apartment demand rises, according to NAHB’s HBGI. And in other mortgage and housing news… Labor Shortages: The construction industry needs 650,000 more workers to meet demand in 2022, according to an analysis…

Single, Multifamily Growth Trended Opposite Directions In Last Half Of 2021

Single-family growth cooled in Q4 2021 while multifamily growth in high-density areas surged, according to the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI). The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural geographies. “Multifamily production posted strong gains in all regional markets as the demand for apartments increased,” said NAHB Chief Economist Robert Dietz. “Meanwhile, supply-side constraints that include ongoing labor shortages and a lack of key housing products that include garage doors, appliances and windows has delayed single-family construction times across the nation and put upward pressure on home prices.” The price of…

New Home Applications Up From December

Mortgage applications for new home purchases fell 12.5% year-over-year in January 2022, according to the Mortgage Bankers Association’s (MBA) Builder Application Survey (BAS). However, applications rose by 10% from December 2021, as MBA estimates 66,000 new homes were sold in January compared to December’s 60,000. MBA estimated that new single-family sales were running at a rate of 821,000 units, down 7.4% from December’s 887,000 unit pace. “Purchase applications for new homes fell on an annual basis in January, but the 10% monthly gain is a positive sign to start the year. While homebuyer demand remains strong, purchase activity is being constrained by higher prices and building delays due to supply-chain pressures and building materials shortages,” said Joel Kan, MBA’s Associate…

Morning Roundup (2/17/2022)– Real Estate Investors, Climate Damage

Good Morning! Today is Thursday, February 17. The Education Department will cancel loans for students defrauded by DeVry University. Ukraine accused Russian-backed separatists of shelling a Kindergarten, calling it “a big provocation.” Retail sales rose by a seasonally adjusted 3.8% in January. The Mortgage Note Reports Office Spaces Are Not A Thing Of The Past: Despite many employees working from home and companies adopting hybrid work models, investors are still attracted to the land of cubicles. “Stronger Than Ever”: Real estate investors bought a record 18.4% of all homes sold in Q4 2021, nearly three-quarters of which were all-cash purchases. Climate Damage: More than 14.5 million single- and multifamily homes were impacted by natural disasters in 2021, causing an estimated…

Morning Roundup (2/10/2022)– Labor Market Uncertainty, Second Home Demand Remains High

Good Morning! Today is Thursday, February 10. Chuck Schumer and Nancy Pelosi suggested that they were open to banning members of Congress from trading stocks. Officials have delayed the medal ceremony for team figure skating amid reports that a Russian skater failed a drug test. A former casino executive was sentenced to a year and a day in prison for a bribery scheme to get his daughter into U.S.C. The Mortgage Note Reports Impact Of Labor Numbers On Housing Market Remains Unclear: Despite an uptick in job numbers and an increase in personal incomes, there is still uncertainty about how the latest Labor Statistics Report will impact the housing market. Second Home Demand: Second home demand outpaced primary residence demand…

Builder Confidence Dips As Costs Rise

Builder confidence dropped slightly in January, disrupting a four-month trend of rising builder sentiment despite high consumer demand, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Builder confidence in the markets for newly-built, single-family homes dropped one point to 83. Any number over 50 indicates that more builders view conditions as good than poor. Notably, the HMI has remained at 83 or 84 for the past three months, the same level as the spring of 2021. The drop was attributed to inflation concerns and ongoing supply chain disruptions. “Higher material costs and lack of availability are adding weeks to typical single-family construction times,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa,…