Low inventories coupled with higher mortgage rates weighed on new home purchase applications in February, reports the Mortgage Bankers Association (MBA). The MBA's Builder Application Survey revealed that mortgage applications for new home purchases fell 3.9% from a year ago, down 1% monthly from January. "New home purchase activity slowed in February, as for-sale inventories remained tight, and mortgage rates increased to their highest levels since 2019. February is typically the start of the spring home buying season, but applications to purchase a new home were down on a monthly and annual basis," said spokesperson Joel Kan.
The cost of housing continues to increase due in part to supply constraints, low inventories and higher mortgage rates. And when borrowing costs for homeownership rise people tend to look to renting which has driven that cost to a record high. The average monthly asking rent in the U.S. jumped 15% year over year to a record high of $1,901 in February, reports Redfin. The national median monthly mortgage payment for homebuyers surged 31% year over year to $1,716, also the biggest increase. "The cost of housing is going up for homebuyers and renters, but it’s going up more quickly for homebuyers," said Redfin Chief Economist Daryl Fairweather. "That’s because mortgage rates have increased sharply and will likely continue to do so."
Fed Chair Powell was speaking in front of the National Association of Business Economists yesterday on the U.S. economy saying that the Fed may have to be more aggressive in hiking rates which could see 50bp hikes at future meetings. Up until just recently, the Fed seemed to be moving slowly on the inflation front but has now stepped up its stance. The bond Fed Fund Futures are now showing a 66% probability of a 50bp hike at the May FOMC meeting. The old EF Hutton quote, "When EF Hutton talks, people listen." That can now read, "When Fed Chair Powell talks, people listen."
New home purchase applications decline. Cost of housing rises.
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