POST TAGSMortgage News
Blog posted On March 17, 2023
It was a good week in housing news. From mortgage application submissions to home builder confidence to housing starts and building permits – there were a lot of positive signs that experts think mortgage rates will appreciate.
First, we had the Mortgage Bankers Association (MBA) release its weekly mortgage application survey showing that mortgage demand increased for the second consecutive week. Demand for purchases increase 7% while refinance demand increased 5%. Overall, mortgage application submissions rose 6.5%. This likely was a result of the downward trend in rates resulting from recent banking news.
Future hope for rates was buoyed by some key construction reports that were released. The National Association of Home Builders (NAHB) housing market sentiment index revealed that home builder confidence is soaring this month. Despite the expected decline, builder confidence climbed by two points to reach level of 44 in March. Why does it matter? A lot of times builder confidence and mortgage rates are closely intertwined. For example, when rates plummeted a few years ago, builder confidence soared. Lower rates not only increase affordability, but they suggest that more buyers will be interested in a home purchase.
The main event was released yesterday – housing starts and building permits for February. This report hugely outperformed expectations. Building permits surged a giant 13.8% month-over-month to a level of 1.524 million. They were expected to fall to a level of 1.340 million. Housing starts also surged, up 9.8% month-over-month to a level of 1.450 million – they were projected to decline as well. Typically, stronger economic data leads to higher-trending rates. So why did this data give a breath of hope to the market?
“The answer is simple: The best way to fight inflation long-term is to add more supply,” writes Housingwire Lead Analyst, Logan Mohtashami. “Destroying demand is a short-term fix, but longer-term supply is the natural economic way.” As we’ve mentioned before, inflation is generally bad for rates, which you may have noticed over the past year. Last summer, inflation was hovering near 40-year highs. Rates were red-hot as well.
With more housing starts, building permits, and housing completions, the market will also receive a much-needed wave of inventory. “What we see in this latest starts report is encouraging, as a record number of 5-units are still in construction and anything that gets finished is positive against inflation,” adds Mohtashami. As the supply of homes for sale inches higher, it can hopefully put some downward pressure on prices.
Long story short, more supply will greatly aid the fight against long-term inflation – a fight that isn’t finished yet despite recent inflation reports.
If you have any questions, let us know!
Sources: Bloomberg, HousingWire, HousingWire