Dana Anderson of Redfin reports that mortgage rates have dropped to their lowest level since February, providing some relief to homebuyers. Despite this, pending home sales saw their largest decline in eight months. Rising supply, with new listings up 6.4% year-over-year, offers more options for buyers. However, demand remains tepid, partly due to buyers waiting for further rate cuts.
Source: Redfin (July 2024)
Chen Zhao, Redfin’s economic research lead, comments:
“Now that it’s looking increasingly likely the Fed will cut interest rates by the end of the year, some house hunters believe mortgage rates will fall more and are waiting for that to happen before they buy…But they may be waiting in vain; it’s unlikely mortgage rates will drop much lower in the next few months, as markets are already pricing in the expectation of a rate cut in September, followed by several more at the end of 2024 and into 2025. In fact, now may be the right time for house hunters to get serious about making offers before prices increase even more and they lose some power.”
Flávia Furlan Nunes of HousingWire reports that mortgage applications increased by 3.9% for the week ending July 12, driven by a rate decline and a surge in refinance applications. The average 30-year conforming loan rate fell to 7.04%. Despite the drop in rate, purchase applications decreased by 3% from the previous week and were down 14% year-over-year.
The Mortgage Bankers Association (MBA) Builder Application Survey for June 2024 shows a 0.7% year-over-year increase in mortgage applications for new home purchases but a 16% decrease from May 2024. The average loan size decreased for the second month, and FHA applications rose to 28.7%. New home sales were estimated at a seasonally adjusted annual rate of 626,000 units, the slowest in four months.
Overall, MBA reports that mortgage applications rose by 3.9% from the previous week, with a significant 15% increase in refinance applications. The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.87%. Joel Kan, MBA’s deputy chief economist, comments:
“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower. The 30-year fixed rate declined to 6.87 percent, the lowest rate since March 2024…Application activity was up 4 percent, driven by a 15 percent jump in refinances to the highest level since August 2022. While FHA and VA refinance applications accounted for a significant share of the increase, these are likely recently originated loans with even higher than current offered rates.”
Jiayi Xu of Realtor.com reports that the average 30-year mortgage rate dropped to 6.77% last week. The recent cooling in inflation and moderate jobs report are positive signs for potential rate cuts. Although mortgage rates are trending down, home prices remain higher than last year. Increased inventory is expected to gradually reduce price growth and lower borrowing costs.
Source: Realtor.com (July 2024)
Multifamily construction and distress
According to The Real Deal, building permit applications for multifamily construction projects have risen significantly, while single-family starts have declined, indicating a shift in the market. New construction overall is up 3%, however, multifamily starts jumped 20%.
Further, Maddy McCarty of Bisnow reports on multifamily completions, highlighting that the number of completed multifamily developments increased annually by 40.2% in June. This confirms the anticipated surge in supply that multifamily owners and developers have been concerned about. 656,000 housing developments with five or more units were delivered in June, marking a 26.2% increase from the previous month.
Demand for multifamily units surged in the second quarter of 2024, absorbing 138,000 units and marking the strongest quarter since 2000, according to Philippa Maister of Globe St. With year-to-date absorption nearing last year’s total and vacancies at their lowest since mid-2021, the market is poised for a strong recovery, driven by a resilient labor market and growing wages.
Leslie Shaver of Multifamily Dive reports on the rise in multifamily commercial mortgage-backed securities (CMBS) delinquency rates, which increased by 2% in June. The delinquency rate increased by 66 basis points to 2.36%, while the servicing rate fell to 5.17%. The office sector accounted for half of the newly delinquent loans, with distressed multifamily properties seeing a 35% decline in valuations.
Ashley Fahey of The Business Journals reports on the growing distress in the multifamily sector due to debt issued during periods of low interest rates coming due. Between January and June, the distress rate for multifamily CMBS loans increased from 2.6% to 7.4%. An estimated $669 billion in multifamily loans is expected to mature between 2024 and 2026. The distress is primarily from loans issued in 2021 and 2022, with significantly higher interest rates.
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According to Jeff Andrews of HousingWire, Texas housing inventory skyrocketed by 40.8% in Q2 2024, hitting its highest supply level in eight years, yet median home prices remained flat, edging up just 0.6% to $345,000. Despite this surge in listings, home sales dipped 3% compared to last year, as buyers seemingly took a breather amidst the abundance. The trend varies across the major metro areas of Texas. In Dallas, active listings increased by 44.7%, causing the months of supply to rise to 3.8. In Houston, inventory increased by 42.5%, resulting in the months of supply growing to 4.2. In San Antonio, listings jumped by 43.4%, bringing the months of supply to 5.2.
Julie Taylor of Realtor.com reports that the median rent in the 50 largest metros for June was $1,743, which is $7 less than in June 2023. However, certain cities are still seeing rising prices. Rental prices rose the most annually in Indianapolis, by 4.4%, with average rents at $1,353 a month. Milwaukee and Minneapolis also saw increases, with Milwaukee’s median rent reaching $1,717 and Minneapolis at $1,549 per month. Southern cities have seen the most inflation, with the median asking rent in Tampa, FL, up 39.5% since 2019. Miami saw a 39.2% increase since 2019, with monthly rents up by $673.
Ysabelle Kempe of Multifamily Dive comments on Seattle’s new law encouraging office-to-residential conversions to address the housing shortage as downtown office vacancies soar to 25%. The legislation, signed by Mayor Bruce Harrell, allows developers to bypass design standards and affordable housing requirements. Despite these incentives, officials predict fewer than a dozen conversion projects, adding 1,000 to 2,000 housing units over seven years.
Matt Yan of the New York Times reports that Charleston, S.C., topped RentCafe’s list as the best city for renters due to its strong economy, affordable living, spacious apartments, and abundant green spaces. Despite higher living costs, Atlanta and Scottsdale also ranked high for job opportunities and quality of life. Meanwhile, Newark landed at the bottom, plagued by high costs and small apartment sizes, alongside Detroit, Sunnyvale, Manhattan, and Anaheim.
Source: NYT (July 2024)
Finally, Neil Pierson of HousingWire reports that Raleigh and Nashville have become millennial homebuyer hot spots, according to a SmartAsset report, with millennials buying homes up to 13 times more than in other areas. As the largest homebuying group in the country, millennials are flocking to these cities due to their vibrant economies, affordable housing, and appealing quality of life.
