November 29 2024

The Mortgage Bankers Association (MBA) released its weekly application survey results on Wednesday.  The highlight was a 12.43% increase in purchase applications from the previous week.  That brought the purchase index to the highest levels since February. As has been and continues to be the case, there's an obvious counterpoint to any of these periodic surges: the broader context.  In other words, yes, these are the highest levels since February, but even if we go back to February 2023, the range since then is historically low and sideways. With that in mind, we're equipped to digest the refinance index with a grain of salt.  At first glance, we might lament the evaporation of the recent surge in September. But the broader context suggests that we can simply be in a perpetual state of lamenting refi demand for more than 2 years now. Other highlights from this week's application data (current week change % vs previous week): Refinance share of total apps 38.8  vs 41.0 FHA share of total apps 16.0 vs 16.6 VA share of total apps 12.4 vs 13.6 Week over week change in interest rates Conforming 30yr fixed 6.86 vs 6.90 Jumbo 30yr 6.97  vs 7.03 FHA 30yr 6.61 vs 6.68

November 26 2024

Even on a good day, the Census Bureau's New Residential Sales report has a notoriously wide margin of error.  But today's 12.8% margin of error isn't even the best counterpoint to today's ostensibly alarming 17.3% month over month decline.  After all, that would still be at least a 4.5% decline. Another counterpoint--also not remotely the best one--would be that home sales continue to operate in the same sideways range that's been intact for nearly 2 years now: So what is the best "yeah but?"  It's very simple, and it should become clear when you take a look at the geographical distribution of this month's losses.   For those that gloss over at the sight of big tables of numbers, the critical observation here is whopping 27.7% decline in home sales in the South, as well as the fact that the outright number of sales is far below any other month going back to October 2023. In fact, every other region has at least 3 other months in the past 12 that have come in lower. Connecting the dots, many of us will remember that October brought the uniquely disruptive category 5 Hurricane Milton.  Long story short, it would have been a surprise NOT to see a massive drop in home sales activity in the south in October.  Really, the only curiosity here is that economic forecasters didn't have weather effects priced into their models. 

November 26 2024

There are two key, big picture home price indices in the U.S.  They come out every month, but with a 2 month lag.  That means we're getting September's prices today.   The two indices are: S&P Case Shiller, which focuses on a smaller data set that tends to detect trends sooner, but also in a more volatile way FHFA, a U.S. government agency that ultimately captures about as many transactions as could possibly be captured, thus producing the broadest and most authoritative update on home prices.  For this reason, it serves as the foundation for updating the annual conforming loan limit. What happened with September's data? The more volatile Case Shiller data declined by 0.3% in September while FHFA's broader data set showed 0.7% growth.  These discrepancies aren't uncommon.  Moreover, both are reflecting a mid-4% rate of appreciation in annual terms. What are the implications for conforming loan limits, and what even is a conforming loan limit (CLL)? The CLL is the highest loan amount that can be guaranteed by housing agencies Fannie Mae and Freddie Mac. Their guarantee allows for several advantages ranging from standardized automated underwriting capabilities to generally lower interest rates.  There is a base loan limit, but some of the most expensive counties can be 150% of that limit. The previous loan limit was $766,550.