Category: Mortgage Rates

Early in the pandemic (Version I) there were a lot of theories advanced about its lasting effects on housing. Some of the theories were fanciful. These included (true story) that new homes would include covered areas specifically for no-touch delivery of on-line purchases which would, of course, constitute the bulk of our shopping. Multifamily construction would have to include no-touch or self-cleaning surfaces throughout common areas. Private areas for outdoor living would be mandatory Other projections were based on early observations of housing trends. Among the ones that were most worrisome to many in the industry was the apparent desire to shift away from density. This was seen happening both in an increased demand for detached housing and a perceived exodus from larger cities. The premise was the big cities would see dramatic declines in their populations as growth exploded in smaller cities and rural areas. Vacation meccas could gain the most as workers would be able to work in the areas where they wanted to play. Another, less concerning assumption was increasing homebuyer demand for more living space to accommodate working and schooling at home.

Both refinance and purchase applications increased slightly last week, and the Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, increased 1.6 percent on a seasonally adjusted basis and 1.0 percent on an unadjusted basis from one week earlier. The Refinance Index increased 1 percent from the previous week and was 3 percent higher than the same week one year ago. The refinance share of mortgage activity remained unchanged from the previous week at 67.3 percent of total application The seasonally adjusted Purchase Index increased 3 percent, 1 percent before adjustment, from one week earlier. The unadjusted index was 16 percent lower than the same week one year ago.

The profits of independent mortgage banks and bank mortgage subsidiaries took their third straight tumble in the second quarter of this year. Those profits, however, were still stronger than historic averages. The Mortgage Bankers Association (MBA) said, in its Quarterly Mortgage Bankers Performance Report, that banks had a net gain of $2,023 on each loan they originated during the period, down from a reported gain of $3,361 in Q1. (All comparisons that follow are to the first quarter of 2021 unless otherwise notes.) The average pre-tax production profit was 73 basis points (bps), down from 124 bps in the previous quarter and 167 bps lower on a year-over-year basis. This is still higher, however, than the average in records that extend from the third quarter of 2008 to the most recent quarter, 55 bps.

New home sales recovered slightly in July after two months which saw the annual rate of sales dip by an aggregate of more than 100,000 units. The U.S. Census Bureau and Department of Housing and Urban Development say sales in August were at a seasonally adjusted annual rate of 708,000 units and June sales were higher than originally reported. Last month’s estimate of a 676,000 unit annual rate was revised to 701,000. This makes the July number a 1.0 percent month-over-month gain, the first since March. Sales in July lagged the rate in July 2020 of 972,000 units, a -27.2 percent change. A slight increase in sales had been expected. Analysts polled by Trading Economics and by Econoday had each reached a consensus estimate of a 700,000 unit annual rate.