Talking about mortgage applications decreasing, housing starts and building permits for April 2017, mortgage delinquencies decline and much more…
The Mortgage Bankers Association (MBA) Builder Applications Survey (BAS) data for April 2017 shows mortgage applications for new home purchases decreased 4.3 percent compared to April 2016. Compared to March 2017, applications decreased by 20 percent relative to the previous month. This change does not include any adjustment for typical seasonal patterns.
Lynn Fisher, MBA’s Vice President of Research and Economics said:
For the first time this year, mortgage applications for new homes in April were lower than the same month a year ago. Mortgage applications for new homes fell more than 20 percent in April after peaking in March, as they have the past 2 years. A relatively strong March may have pulled forward some applications from April, exacerbating the normal seasonal fall-off. On net, year to date applications for new homes are running about 3 percent above the same period from 2016. Despite steady demand for housing, homebuilders continue to face rising costs for labor and materials which will continue to moderate the pace of building.
Strange that new home purchase mortgage applications would fall if demand is strong.
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,229,000. This is 2.5% below the revised March rate but is 5.7% above the April 2016 rate. Single-family authorizations in April were 4.5% below the revised March figure of 826,000.
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,172,000. This is 2.6% below the revised March but is 0.7% above the April 2016 rate. Single-family housing starts in April were 0.4% above the revised March figure.
Privately-owned housing completions in April were at a seasonally adjusted annual rate of 1,106,000. This is 8.6% below the revised March estimate but 15.1% above the April 2016 rate. Single-family housing completions in April were 4.5% below the revised March rate.
Again, I must ask if demand is strong, why were permits and starts weak?
The delinquency rate for mortgage loans on one- to four-unit residential properties decreased to a seasonally adjusted rate of 4.71 percent of all loans outstanding at the end of the first quarter of 2017. The delinquency rate was down nine basis points from the previous quarter, and was six basis points lower than one year ago.
The percentage of loans on which foreclosure actions were started during the first quarter was 0.30 percent, an increase of two basis points from the previous quarter, but five basis points lower than one year ago.
Marina Walsh, MBA’s Vice President of Industry Analysis said:
Mortgage delinquencies decreased overall in the first quarter of 2017, driven by a drop in both the FHA and VA delinquency rates from the previous quarter as the conventional delinquency rate held constant. We saw an increase in foreclosure starts for the first time since the fourth quarter of 2014, but this increase was accompanied by a sizable drop in loans that were 90 days or more past due. All 50 states and the District of Columbia saw a decrease in the 90-day or more delinquency rate.
Growth expectations for 2017 remain at 2.0 percent, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s May 2017 Economic and Housing Outlook. For the fourth consecutive year, first quarter growth slowed from the fourth quarter, partly reflecting ongoing seasonality issues. However, incoming data suggest that consumer spending growth will pick up this quarter.
Meanwhile, businesses will likely increase production in an effort to rebuild inventories, turning inventory investment into a positive for, instead of a large drag on, growth. Given the tight labor market, the ESR Group continues to expect rate hikes in June and September. Housing was a bright spot during the first quarter, and home sales performed well going into the spring season, thanks to solid labor market conditions and a recent retreat in mortgage rates.
Fannie is predicting:
- Single family starts will increase 9.6% YoY in 2017
- New single family homes sales will increase 10.3% YoY in 2017
- Existing home sales will increase 2.7% YoY in 2017
Sounds good but considering the weak housing starts and building permits, I do not see new single family homes increasing this much.
Millennials Face a Tough Road to Homeownership
Collectively, high prices, rising interest rates, and a heavy student loan burden has priced most Millennials out of the most desired neighborhoods. This imbalance will force Millennials seeking a single-family home to either rent or move into more distant suburbs.
Nothing ground breaking as most of us already know the tough economy is especially hard on younger generations. But I would not write off home ownership if I was in this generation.
It just means that Millennials will start later, need to start slow and take baby steps. Nothing good comes easy.
But it really isn’t that hard to qualify for a mortgage as this chart shows:
According to the April 2017 S&P/Experian Consumer Credit Default Indices, consumer credit defaults improved. The indices represent a comprehensive measure of changes in consumer credit defaults and show that the composite rate dropped four basis points from last month to 0.90%. In addition, the bank card default rate increased four basis points from March to 3.35%, auto loan defaults decreased 10 basis points from the previous month to 0.90%, and the first mortgage default rate dropped six basis points from March to 0.69%.
David M. Blitzer, Managing Director & Chairman of the Index Committee at S&P Dow Jones Indices said:
Default rates on first mortgages are steady as home prices continue to rise in most parts of the country and sales of both new and existing homes increase. The Fed survey reported little change in either demand for mortgage loans or mortgage lending standards. The level of outstanding mortgage debt bottomed in the second quarter of 2014 and has been increasing steadily since then. After almost three years, outstanding mortgage debt is 9% below the peak seen in the first quarter of 2008. Some analysts question if continuing increases in home prices presage a new housing bubble. Given conditions in the mortgage markets, this is not a current concern.
Another mention of a bubble. You may remember in my post 2 days ago I talked about some signs that we are NOT in another a housing bubble.
If there is one reality that is denied or obscured by the Status Quo, it is that the economy no longer works as it did in the past. This is the fundamental economic context of our current slide into political-social disintegration.
The Status Quo narrative is: the policies that worked for the past 70 years are still working today. Boiled down to its Keynesian state-corporate essence, the Status Quo economic narrative is simple:
All we need to do to escape a “soft patch” (recession) is for governments to borrow and spend more money to temporarily boost incomes and demand until the private sector gets back on its feet and starts borrowing and spending more.
There is no doubt we are headed into what could be a very tumultuous period in human history.
U.S. Treasury Secretary Steven Mnuchin has taken pains to stress that the Trump administration isn’t out to kill Americans’ beloved mortgage-interest tax deduction — but a side effect of the plan could turn it into a perk for only the wealthy.
President Donald Trump has proposed rewriting the tax code to raise the standard federal deduction to a level where about 25 million homeowners would no longer take advantage of the century-old break. A married couple would need a home-loan balance of about $608,000 — almost triple the mortgage on a median-priced U.S. home — before using it would make sense, according to a new analysis by property-data provider Trulia. That would be up from about $322,000 today.
The proposal “is a backdoor way of rendering the mortgage interest deduction close to worthless,” said Mark Zandi, chief economist for Moody’s Analytics Inc.
Does this mean that some people will not buy a home? I doubt it.
Is it even possible that the proposed changes could happen?
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