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Homebuilder confidence may still be higher than almost any time before the pandemic, but it's now lower than any time since. The post-pandemic lows arrived abruptly with today's release of the Housing Market Index from Wells Fargo and the National Association of Homebuilders (NAHB). The month-over-month decline was the largest in 2 years and is one of only 3 other times that the index has fallen by 8 points since records began in 1985. Pain points for the housing market are no mystery with prices continuing to increase by roughly 20% year-over-year and mortgage rates hitting the highest levels since 2009 in recent weeks. The net effect is a massive hit to affordability that increasingly sidelines would-be buyers. NAHB notes less than half of new and existing homes are affordable for the average family. Things are even worse for first time and entry-level buyers. The builder confidence index has several components, and they can take turns influencing the headline number. These include current sales, expectations for sales over the next 6 months, and buyer traffic. All three dropped significantly, with a 10 point decline in the 6 month outlook edging out the 9 point drop in buyer traffic and the 8 point drop in current sales.
The volume of commercial and multifamily mortgage loan originations jumped 72 percent in the first quarter of 2022 compared to a year earlier. The Mortgage Bankers Association (MBA) said lenders reported solid increases in all categories of that lending with hotel properties leading the way at 359 percent. While multifamily lending was in fifth place, it still grew 57 percent, behind industrial properties at 145 percent, retail and health care properties (88 and 81 percent, respectively.) Office properties lending increased 30 percent. Commercial and multifamily loan volume was down by 39 percent compared to the fourth quarter of 2021, but MBA said the quarter-over-quarter change was in line with seasonal trends. “The strong momentum in commercial and multifamily borrowing and lending at the end of 2021 carried into the first quarter,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “The continued growth in lending activity is the result of the ongoing strong demand for certain property types like industrial and multifamily , as well as renewed interest in other property types that saw more dramatic declines during the early stages of the pandemic, such as hotel and retail.” “It’s likely that the rise in interest rates will take some wind out of the sails of borrowing in upcoming quarters, but strong market fundamentals, property values and investor interest should continue to support the market,” he said.
Mortgage application volume continued its recovery last week driven by a second strong increase in purchasing activity. The Mortgage Bankers Association said its Market Composite Index, a measure of that volume, gained a seasonally adjusted 2.0 percent and increased 3.0 percent on an unadjusted basis from one week earlier. The seasonally adjusted Purchase Index increased 5 percent on both a seasonally adjusted and an unadjusted basis. It lagged the same week in 2021 by 8 percent. [purchaseappschart] Refinancing, which had eked out its first gain in eight weeks in the previous period, fell back by 2.0 percent and was 72 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 32.4 percent of total applications from 33.9 percent the previous week. [refiappschart] “The increase in mortgage applications last week was driven by a strong gain in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level – 5.53 percent – since 2009,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite a slow start to this year’s spring home buying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks. More borrowers continue to utilize ARMs to combat higher rates. The share of ARMs increased to 11 percent of overall loans and to 19 percent by dollar volume.”