National Real Estate Market Update

Courtesy of Fannie Mae:

Low Housing Inventory a National Problem

“This week offered mixed news on home building, home prices, and mortgage demand. On the bearish side, private residential construction spending fell in May for the first time in more than a year, with annual growth hitting an eight month low. The decline in spending was driven largely by the multifamily sector, which has posted back-to-back drops after hitting an expansion high in March. Annual growth for new multifamily construction spending dipped to the slowest pace in almost six years. Single-family construction spending edged lower after experiencing steady gains over the prior seven months to reach an expansion high in April. An extremely tight inventory of homes for sale continues to support home prices, with May’s CoreLogic House Price Index registering the strongest annual increase in three years. Prices have increased on a year-over-year basis every month since February 2012 but are still slightly below the April 2006 peak, according to CoreLogic.

While robust home price appreciation amid scarce supply is a boon to homeowners and home sellers, it has restrained home sales. CoreLogic’s analysis of the market by price tiers indicates that lower-priced homes experienced significantly stronger appreciation, suggesting that the starter home market is facing substantial affordability constraints. On a positive note, mortgage demand improved during the last week of June, as the first increase in purchase applications in four weeks outweighed a small drop in refinance applications.

Because of a surge in purchase applications during the first week of June, average purchase applications for the month rose for the fourth consecutive month. Recent trends in purchase applications appear to be at odds with recent changes in pending home sales, another forward-looking indicator for home sales, which fell in May for the third consecutive month, according to last week’s release from the National Association of REALTORS®.

Meanwhile, refinance applications rose in June for the second straight month amid declining mortgage rates, which fell to the lowest monthly level since November. Mortgage rates rose this week for the first time in three weeks, according to Freddie Mac, as global interest rates turned up sharply. The average rate on 30-year fixed-rate mortgages increased eight basis points, marking the largest weekly jump since March, to 3.96 percent. “

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