Builder Confidence Rises in June as Housing Market Recovers

CF Funding is glad to see that builder confidence is rising again, as the NAHB/Wells Fargo Housing Market Index rose 4 points this month to a score of 49. A score of 50 or higher means more builders than not feel confident about the state of the housing industry. Limited availability of labor and other factors contributed to scores in the lower 40’s over the past few months, but Kevin Kelly says “a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry.”

As CF Funding has mentioned previously on the lender’s blog, the HMI results measure factors such as current sales, sales expected over the next 6 months, and traffic of prospective buyers. Builders’ responses from the survey are used to calculate a score from 1 to 100. The survey has now been conducted for 30 years.

All three indexes showed positive results in June, with current sales conditions increasing by 6 points to a score of 54. Expected sales conditions over the next 6 months rose 3 points to a score of 59. Buyer traffic increased 3 points to a score of 36. Although CF Funding is disappointed to see the buyer traffic score and overall score under 50 points, the lender is looking forward to further gains in builder confidence and expects all three indexes to rise in the coming months.

Regional HMI scores are also calculated, with the Midwest showing similar results as the overall survey, an increase of 4 points to reach 49 this month. The Northeast currently holds the lowest regional score of 33, and the West holds the highest regional score at 53.  On a 3-month average, the South and Northeast rose 1 point to 49 and 34. The west was unchanged at a score of 47. The Midwest fell 1 point to a score of 46.  NAHB Chief Economist David Crowe explained in a press release that “Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase… builders are reacting accordingly, and are moving cautiously in adding inventory.” Unfortunately for buyers, lower inventory usually means higher home prices due to less competition from other sellers.

Luckily, interest rates remain at historic lows, with slight decreases seen today in both 30-year and 15-year fixed-rate mortgages, as well as JUMBO and ARMs. CF Funding will keep readers updated on interest rate changes and the state of the housing industry on the lender’s Twitter page at www.twitter.com/CF_Funding.

Purchase and Refinance Applications Increase

CF Funding shares positive news for the housing market today, as both refinance and purchase applications have increased for the week ending June 6. The Market Composite Index by the MBA reported yesterday that mortgage applications increased by 10.3 percent last week, which is a 22 percent increase from the previous week (on a seasonally adjusted basis). Readers should note that Memorial Day fell on the previous week, however, data was adjusted to reflect the holiday.  

The refinance index saw an increase of 11 percent from the previous week, and the purchase index saw an increase of 9 percent from the previous week, on a seasonally adjusted basis. The purchase index increased by 19 percent compared to the previous week on an unadjusted basis. However, unadjusted purchases were still 13 percent lower than the same week last year. CF Funding is confident that both purchase and refinance indexes will continue to rise as the housing market improves this year.

Refinances are still representing a large percent of mortgage activity, as the refinance share increased to 54 percent on the index last week, from 53 percent the previous week. Adjustable-rate mortgages were unchanged, representing 8 percent of total applications on the index. Interest rates increased slightly last week, as the reported 30-year fixed contract interest rate (for loans $417,000 or less) was 4.34 percent, up from the previous week’s 4.26 percent. Jumbo 30-year fixed rates also increased, at 4.27 percent last week in comparison to the previous week’s 4.22 percent.

The average interest rate reported for 30-year FHA loans increased slightly, from 3.99 percent to 4.06 percent. 15-year fixed-rate mortgage interest rates also increased from 3.39 to 3.43 percent. CF Funding is pleased to see that the increase in interest rates has not slowed down applications, as rates are still historically low and home affordability is rising. As seen in the graph, current rates near 4.5 percent are much lower than rates seen 5 years ago near 5.5 percent.

Today, rates saw a slight decrease with the best-execution 30 year fixed rate mortgage near 4.21 percent, in comparison to yesterday’s 4.25 percent. The 52-week low is about 3.97 percent, according to Mortgage News Daily, and the 52 week high is about 4.85 percent. Those interested in mortgage rate updates may find up-to-date information through the CF Funding website at www.cffunding.com/index.php/mortgage-rates.

Housing Market Index at Highest Since Q1 2008

The National Association of Home Builders released their 55+ Housing Market Index yesterday, and CF Funding is pleased to share that the Q1 2014 rating is now at its highest level since 2008. The 55+ HMI has now seen improvements for 10 consecutive months year-over-year. According to Steve Bomberger, chairman of the 50+ Housing Council, “Rising house prices and low interest rates are helping baby boomers sell their existing homes at a favorable price and in turn, purchase a new home more suited to their current lifestyles.” As CF Funding has mentioned previously on their blog, rising equity and low rates have also allowed many 55+ homeowners to buy second homes or remodel.

The Housing Market Index measures builder sentiment in regards to current sales, prospective buyer traffic, and anticipated six-month sales for both the single-family home market and multifamily condominiums. The results are measured on a scale of 1-100, so a result above 50 means more builders than not view conditions as “good” or traffic as “high.” This quarter, present sales rose 6 points (year-over-year) to reach 52. Expected sales for the next six months rose by 9 points (year-over-year) to reach 62. Traffic of prospective buyers remained the same from the previous quarter and year-over-year at 41.

The multifamily condo HMI rose one point to reach 39, which is the highest first-quarter reading in the 55+ HMI’s history. In Q4 2008 the multifamily condo HMI was as low as 12, and the all-time low was reached in Q2 2010 at a score of 7. Present Sales in multifamily condos saw a year-over-year increase of 4, and sales expected in the next 6 months saw a year-over-year increase of 5. Unfortunately, traffic of prospective buyers decreased year-over-year by -6, however, this quarter held steady with Q4 2013’s score of 32.

Multifamily rental indices saw a slight decrease in present production to reach 42 this quarter. Future demand increased one point to reach 59. CF Funding agrees with NAHB Chief Economist David Crowe’s statement that “The 55+ segment of the housing market is stronger now than it was a year ago… but there are still some headwinds hampering a stronger recovery.” Crowe also stated in a press release that “builders in many markets are facing tight credit conditions and lack of lots and labor.” CF Funding would like to remind those who are looking to refinance or remodel that credit guidelines have changed and those who were previously not eligible may qualify for a new mortgage or construction loan. Contact the lender today at (888)344-4080 for more information.