Both applications for builder-home loans and new-house sale estimates dropped in February, despite the fact that residential construction starts surged during the month, moving at the fastest pace since 2006.
The number of borrowers applying for loans to fund new-home purchases fell 3.9% compared to a year ago and was down 1% from January. The seasonally-adjusted, annual rate of builder-home sales was 791,000 units, down 3.7% from
During the same month, single- and multifamily starts jumped 6.8% on a consecutive-month basis to a seasonally-adjusted annualized rate of 1.77 million, according to a report jointly released by the Department of Housing and Urban Development and the Census Bureau. Single-family starts increased by 5.7% (1.22 million SAAR).
In combination, these housing numbers suggest that while consumers remain eager to buy and builders are making headway in creating more inventory, costly construction materials and
“The inventory of existing homes for sale remains near a historic low, and a new home at the right price, is a pretty good substitute,” said First American Chief Economist Odeta Kushi, in an email. “Yet, as building input costs go up, they are often being passed on to the buyer in the form of higher new home prices at a time when mortgage rates are rising..”
The average new-home loan size increased to $432,359 in February from $426,954 in January, reflecting the rising cost of housing, according to the MBA. Nearly 77% of builder mortgage applications were conventional loans. The remaining applications were for government products like Federal Housing Administration-insured loans (12.9%), and financing guaranteed by the Department of Veterans Affairs (9.9%).
“Over the last three months, mortgage rates have increased over 70 basis points, and combined with elevated sales prices, that is putting a weight on purchase activity,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press release.
Nevertheless, some home construction companies have reported robust consumer interest through February.
However, overall single-family builder confidence dropped by two points in March to 79, according to the NAHB/Wells Fargo Housing Market Index.
The surge in starts likely reflects, in part, a jump in home sales and
“What remains to be seen, however, is how housing reacts moving forward as the effects of upward-moving mortgage rates begin to be felt,” he said in an email. “Given the historical relationship to mortgage rate changes, we wouldn’t expect recent rises to meaningfully dampen housing demand for some months.”
Regional housing activity could remain buoyant through the first half of the year, according to Cristian deRitis, deputy chief economist at Moody's Analytics.
"Some markets may experience a burst of activity during the spring selling season as buyers look to lock in rates before they rise even higher. But this will be short lived with home price appreciation moderating in the second half of the year and into 2023," he said.
