Market Forecast: Mortgage Apps, Housing Market Index, Housing Starts and Building Permits

Blog posted On January 15, 2018

Markets are closed today in observance of Martin Luther King Jr. Day.  Mortgage rates are trending upward, heading into 2018.  This week’s important housing reports include the Mortgage Bankers Association’s (MBA) weekly mortgage application survey, the National Association of Home Builders’ (NAHB) housing market index, and housing starts and building permits.

The MBA weekly mortgage application survey tracks changes in new purchase and refinance applications from week to week.  For the week ending 1/5, new purchase applications increased 5.0% and refinance applications increased 11.0% for a composite increase of 8.3%.  Mortgage rates are expected to continue to rise this year, but home price appreciation is expected to continue less rapidly. 

The NAHB housing market index is based on builders’ perceptions of current sales conditions, expectations for the next six months, and buyer foot traffic.  Home builders have been largely optimistic for most of last year, any reading above 50 is considered positive.  In December, the index read 74, with current sales up to 81, sales expectations up to 79, and buyer foot traffic up to 58. 

Housing starts track ground broken on residential projects and building permits track permits issued.  Housing starts and building permits are used to predict future housing market activity like new home sales.  In November, housing starts increased 3.3% to a level of 1.297 million and building permits dropped 1.4% to a level of 1.298 million.

Despite changes to property tax deductions and mortgage-interest tax deductions, home builders are optimistic about corporate tax cuts.  Housing professionals expect home price acceleration to slow as mortgage rates increase, balancing the cost of housing.  The Federal Open Market Committee (FOMC) has forecast three rate hikes for 2018. 

Sources: Bloomberg, MarketWatch, Mortgage News Daily