Despite mortgage interest rates being the highest in ten months, homebuyers led the 4.5 percent increase in mortgage application activity in the week of January 19th. Purchase applications for home mortgages rose on a seasonally adjusted basis by 6.0 percent from the week prior. This increase left the year on year gain in the unadjusted Purchase Index unchanged from the previous week’s 7 percent. Applications for refinancing, which is usually more sensitive to interest rates, rose one percent from the previous week. The refinancing share of mortgage activity was down 0.8 percentage points to 49.4 percent.
FHFA House Price Index
Home prices rose a solid 0.4 percent in November with the year on year at 6.5 percent for the FHFA’s house price index. October’s monthly rate is revised 1 tenth higher to 0.6 percent with the yearly rate revised two tenths higher to 6.8 percent. This index has held near the 7 percent rate through much of last year.
Existing Home Sales
Lack of supply continues to be an issue in the housing market as it pulled down existing home sales in December and may possibly pull down sales in January as well. Existing homes sales fell 3.6 percent in December to an annualized rate of 5.570 million which is at the low end of what economists predicted after seeing a solid 5.6 percent jump in sales to a 5.810 million annualized rate. November did however get revised by a small amount to a 5.780 million rate, it remains still the best month of the expansion. Supply in December’s market fell a very steep 11.4 percent in the month to only 1.480 million homes. On a sales basis, supply fell from 3.5 months in November to 3.2 months which is a 19-year record low. Prices softened slightly, the median slipped 0.2 percent in the month to $246,800 for a year on year increase of 5.8 percent. This year on year price rate is well above the 1.1 percent gain in overall sales pointing to perhaps future price concessions and even less supply. On a yearly basis supply is down a sizable 10.3 percent. Sales for condos show weakness as they were down 11.6 percent on the months to a 610,000 annualized rate. Single family sales fell a monthly 2.6 percent to 4.960 million. The lack of supply will be a serious obstacle moving forward and is very likely to effect existing home sales.
New Home Sales
Despite the headline 9.3 percent decline in new homes sales for December, the report is actually a solid new home sales report. December’s 625,000 annualized rate is the fourth best of the expansion following November’s revised 689,000 rate which is the best. Most importantly supply has finally moved into the market, up 3.9 percent at 295,000 units. On a sales basis, supply improved to 5.7 months from November’s 4.9 months. Prices were steady in the month, the median edged up 0.1 percent to $335,400 for a modest year on year improvement of only 2.6 percent. Given the sales supply is up 15.2 percent and sales rate up 14.1 percent prices may have room to grow. This report shows upward sales momentum, incoming supply and room for prices to move higher. Residential investment has been dragging GDP down in recent quarters, this report points to this sector finally adding a solid contribution in the GDP report.