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Fannie Mae: Consumers might be adjusting to high rates and pricy homes
Plus: Jobs increase by 209,000 in June
Good morning and Happy Monday! This is Mortgage Nuggets, your mortgage news tour guide. Keeping you updated every Mon, Wed & Fri. Let’s dive in!
Disclaimer: Average mortgage rates as of July 7, 2023. © MND's Daily Rate Index.
1. Jobs increased by 209,000 in June
Payrolls climbed by 209,000 in June, below economists’ forecasts but still rising at a healthy clip. The unemployment rate fell to 3.6%. Average hourly earnings rose 4.4% year-over-year, up from a 4.3% pace in May.
The relatively strong job gains, along with the re-acceleration of wages and the drop in unemployment cements the case for a Fed hike this month and will add to the conversation about more tightening being needed later this year.
Most industries added jobs, with health care and government driving gains. The leisure and hospitality industry added a meager 21,000 jobs, while construction employment rose by 23,000.
Representative estimates for nonbank mortgage banker and broker payrolls inched up by 2,700, according to the Bureau of Labor Statistics. The small gain came almost entirely from lender additions while broker numbers plateaued.
2. Fannie Mae: Consumers might be adjusting to high rates
The Fannie Mae Home Purchase Sentiment Index® (HPSI) remained mostly flat in June, increasing by only 0.4 points to 66.0. Consumers' view of homebuying conditions improved marginally, with 22% believing it is a good time to buy a house, up from 19% in May.
“Confidence in the housing market appears to have plateaued at a relatively low level, suggesting that many consumers may be coming to terms with elevated mortgage rates and high home prices,”
About 16% of respondents expect mortgage rates to decrease in the next 12 months, a decline from May's figure of 19%.
“A larger share of respondents think mortgage rates will stay the same over the next year, whereas mid-to-late last year, most thought rates would continue going up. This seems to signal that consumers are adapting to the idea that higher mortgage rates will likely stick around for the foreseeable future,”
3. More Nuggets
According to a Redfin report, the average sale-to-list price ratio hit 100.1% during the four weeks ending July 2, marking the first time in nearly a year the average U.S. home is selling for more than its asking price. LINK
According to the Treasury, the Homeowners Assistance Fund (HAF), a program designed to offer financial help to homeowners impacted by the COVID-19 pandemic, has kept more than 300,000 homeowners in their homes by curing defaults and keeping them out of foreclosure. LINK
Change Company, a mortgage lender set up to focus on poor and minority borrowers, has been accused by a former employee in a lawsuit of lying to the government and its bondholders about who is actually receiving loans. LINK
4. Charted: The lock-in effect
Among U.S. mortgage borrowers, 96.3% have a mortgage rate below 6%, and they aren’t willing to give it up. The result is the fewest U.S. homes for sale since 2012.
26% have a rate under 3.00%
70.7% have a rate under 4.00%
91% have a rate under 5.00%
96.3% have a rate under 6.00%
5. That leads us to…. tight inventory
Housing market inventory is so tight that only one of the nation’s 100 largest markets saw a home price decline in May.
Last fall, 92 of these markets had seen a month-over-month home price decline. At the time, many economists thought it was the start of a housing market reckoning, or as Fed Chair Jerome Powell put it last fall, a “difficult [housing] correction.”
However, the market has demonstrated remarkable resilience in the first half of 2023, with house prices quickly stabilizing. Nationally, seasonally adjusted house prices rose by 0.71% between April and May.
“Though demand has suffered under the weight of home affordability at near 37-year lows, the persistent lack of available inventory continues to push home prices higher, despite Fed efforts to cool the market by raising rates,”
The biggest one-month gains were found in Midwestern and East Coast markets such as Madison (+1.65%), Hartford (+1.58%), and Milwaukee (+1.41%). Among the 100 largest markets tracked by Black Knight, only Austin (–0.33%) saw a seasonally adjusted home price decline between April and May.
☀️ See you on Wednesday!
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