Market Update: Rates Fall Toward 3-Month Lows; NAHB Housing Market Index, Housing Starts and Building Permits, and Existing Home Sales Coming Up This Week

Blog posted On December 19, 2022

Last week brought a whirlwind of good news for mortgage rates, starting with the consumer price index. The consumer price index for November showed that inflation is continuing to cool, which is good news for the bond market, which influences rates. It also is good news for the Federal Reserve because it shows that their rate hikes have been working. Therefore, the central bank decided to slow its pace of rate hikes, which was although expected, was another wave of positive news for rates. Consequently, they trended lower and were brushing fresh 3-month lows. This week, there’s a great deal of housing reports coming up, starting with the NAHB index.

The National Association of Home Builders’ (NAHB) housing market sentiment index is based on a survey of home builders’ perceptions on current sales activity, sales expectations for the next six months, and buyer foot traffic. Any reading above 50 is considered positive. In November, the NAHB index slipped to a level of 33 as higher interest rates continued to impact their outlook. Experts predict that this level will rise to 36 in December.

Housing starts track ground broken on residential projects and building permits track permits issued.  In October, housing starts and building permits fell 4.2% and 3.3%, respectively. “The report is further evidence that continued increases in interest rates from the Federal Reserve, along with the resulting spike in mortgage rates, are having an effect on the housing sector,” writes Tim Smart, contributing editor of U.S. News and World. It’s possible that last week’s news from the Federal Reserve and consumer price index (and subsequent falling rates) could help builders in the coming months.

Existing home sales or resales track the sales of previously constructed homes and make up approximately 90% of residential real estate transactions. In October, existing home sales slumped 5.9% to a seasonally adjusted annual rate of 4.43 million. As many homeowners are comfortable with their pandemic-level interest rates, few are looking to sell – leaving buyers with limited options. But the ones who do find availability have been seeing price drops, seller concessions, rate buydowns, and more benefits from buying this time of year.

Things are cooling down for the holidays, but the new year will be here before we know it. And this new year could be a great time to connect with your agent and explore your options like our construction financing program. Builders are looking to build, winter is notoriously slower for builders, and fewer existing homes are on the market. While many people get concerned about the upfront costs of construction, our financing program has lower upfront costs. Plus, buyers close on their mortgage AFTER construction is complete, which allows you to benefit from the mortgage rates of next year. Learn more here or by connecting with us!

Source: Bloomberg, Mortgage News Daily, Mortgage News Daily, U.S. News and World