Blog posted On July 27, 2018
Mortgage rates trended slightly upward this week. Low available for-sale inventory continues to impact housing activity. Existing home sales and new home sales each declined. Refinance mortgage application submissions increased, but new purchase mortgage application submissions dropped.
Existing home sales or resales make up the majority of real estate transactions, up to 90% of total sales. In June, existing home sales fell 0.6% month-over-month to a seasonally adjusted annual rate of 5.38 million. Year-over-year sales are down 2.2%. Based on this data, it would take 4.3 months to exhaust all available inventory, up slightly from May’s pace of 4.1 months. Buying and selling homes tends to pick up during the spring and summer.
The Mortgage Bankers Association (MBA) weekly mortgage application survey tracks week to week changes in new purchase and refinance mortgage applications. For the week ending 7/20, new purchase applications declined 1% and refinance applications increased 1%. Mortgage application activity has been somewhat volatile lately, despite a lack of significant mortgage rate movement.
New home sales, or the sales of newly constructed homes account for a smaller share of real estate activity, and tend to have a larger margin of error. New home sales declined 5.3% month-over-month, but are up 2.4% year-over-year. At the current sales pace, it would take 5.7 months to exhaust all available inventory, closer to the 6-month mark.
The National Association of Realtors (NAR) attributes these declines to the rising cost of materials combined with land and labor shortages, making it difficult for home builders to replenish inventory. However, construction activity is picking up. In a report this week, the NAR suggests that given the increase in supply, purchase demand should be rising more. If you are looking to purchase a home this year, get preapproved for mortgage financing before you start shopping. Mortgage preapproval shows the buyer you are a serious candidate and jumpstarts the financing process ensuring a smooth and speedy transaction.