Blog posted On January 17, 2020
Mortgage rates did not move significantly and remain historically low. Mortgage applications reacted and the Mortgage Bankers Association (MBA) weekly mortgage application survey showed a strong increase in both new purchase and refinance mortgage application submissions. The National Association of Home Builders’ (NAHB) housing market sentiment index dropped by one point and remains overwhelmingly positive. Housing starts climbed to a 13-year high. Building permits declined month-over-month but increased year-over-year.
For the week ending 1/10, both new purchase and refinance mortgage application submissions increased for a composite increase of 30.2%. New purchase applications increased 16.0% and refinance applications increased 43.0% week-over-week. MBA economist, Joel Kan, commented, “home buyers were active the first week of the year. Low rates and the solid job market continue to encourage prospective buyers to enter the market.”
The NAHB housing market index slipped slightly in January, down to a reading of 75, still one of the highest levels in 20 years. Current sales conditions declined to a level of 81, sales conditions for the next six months were unchanged, and buyer foot traffic increased to a level of 58. The shortage of available homes for sale has presented an opportunity for home builders needed to replenish housing inventory. The signing of the recent US-Mexico-Canada Agreement on trade could also alleviate some of the cost barriers related to importing building supplies from Canada and Mexico.
Housing starts jumped to a 13-year high in December, exceeding expectations. Housing starts climbed 16.9% and 40.8% year-over-year to a seasonally adjusted annual rate of 1.608 million units. Building permits declined 3.9% month-over-month to a seasonally adjusted annual rate of 1.416 million. Single-family home building growth was driven by the Midwest, up 57%, and the South, up 11.3%. The Northeast and West each saw declines in housing starts, down 8% and 5% respectively.
Construction activity is likely to pick up early this year, with motivated home buyers competing over limited for-sale homes. If you’re planning to buy a home this year, get preapproved for mortgage financing before your start shopping. Your mortgage preapproval gives you a competitive advantage over other buyers who have not started the financing process and will take longer to close on the home.