Weekly Economic Update-Builders Optimistic

The National Association of Home Builders said their members are “buoyed” by demand for single family houses. Still, that confidence isn’t translating into production. The Census Bureau reports builders pulled fewer permits in April and started building fewer homes.
 
Refinance has been declared dead numerous time as interest rates have risen and fallen. Maybe we are finally witnessing the end of that long-term boom.  Applications for refinancing mortgages are now at a decade long low.

New homebuilders continue to be confident in, if not wildly enthusiastic about, their business prospects. The National Association of Home Builders (NAHB) said its monthly survey to take the temperature of that category of its membership found a two-point uptick in their confidence, bringing its 100-point Housing Market Index to 70.

NAHB Chairman Randy Noel said builders are “buoyed” by growing demand for single-family houses. However, record high lumber prices are making it difficult to produce competitively priced homes for first-time buyers.

Attitudes aside, whatever builders are confident about doing, they did less of it in April. The Census Bureau and the Department of Housing and Urban Development said both permits and housing starts slipped from the strong performance levels they displayed in March. The downturn was widespread; only the South performed well.

Permitting declined 1.8% from March, construction starts fell 3.7%, and home completions, usually overlooked by the media because it isn’t a leading indicator, was the sole winner, up 2.8%.

The Residential Construction Report’s newest feature, its year-to-date numbers, were more encouraging. All three facets of construction are outpacing the year-ago end of April rates. Permitting is up 8.8% and starts have risen 9.1%. Completions are doing well here too, with 10.2% growth year-over-year.

The numbers of homes under construction has remained remarkably consistent over the past year, probably not an encouraging sign for inventories. While inching up steadily, the estimate of 1.074 million homes being built in April of last year has only grown by 50,000 units in this week’s report.

Shrinking Shares

The Mortgage Bankers Association has a member survey too, in this case a weekly one, to find, among other things, the volume of mortgage applications submitted each week for home purchase and for refinancing.

As interest rates have risen, the volume of applications for the latter have, as expected, drifted lower as has the refinancing portion of the total. Refinancing made up the lion’s share of mortgage activity for most weeks after the recovery took hold, constituting more than 2/3 of the volume for months at a time. There were only a handful of weeks between the end of 2012 and the beginning of this year when that share was less than half. Last week, both the volume of refinancing applications and their 35.9% share were at their lowest level since August 2008.

05.18.2018

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