In a recent segment of CNBC’s “Worldwide Exchange,“ HousingWire lead analyst Logan Mohtashami and anchor Frank Holland dive into last week’s spike in mortgage applications as well as housing permit levels.
According to recent data from the Mortgage Bankers Association, mortgage applications for new homes increased by 0.7% year over year in June 2024. This increase stems from recent declines in mortgage rates, which neared the 7% mark on Friday at HousingWire’s Mortgage Rates Center.
As a result, homebuilders and developers are also more confident that rates will continue to decline in the next six months, causing an uptick in housing starts and permits. But Mohtashami notes that it’s too early for lower interest rates to impact the market.
Meanwhile, construction labor is another issue facing the market. Recent data shows that building permits for single-family and multifamily homes are historically low.
“We’re worried about construction labor,” Mohtashami said. “Multifamily permits are near recession lows and single-family permits have been falling, so you want to keep an eye on single-family permits when the housing starts data comes out … and see if the decline in the last few months has settled down any.”
According to recent Federal Reserve data, housing starts in June stood at a seasonally adjusted annual rate of 1.353 million, which was 3% more than in May. Inventory has also grown in recent years, with single-family housing supply at 650,000 units last week, according to Altos Research data. Price growth should slow down in the second half of 2024, and homebuyers will have more choices if rates cool down.
“If mortgage rates go down toward 6% or lower, we’re going to have many more choices for Americans,” Mohtashami said. “We’re ready for lower rates if it happens, where we weren’t ready for lower rates in 2022 and 2023.”
Despite the inventory growth, Mohtashami said that affordable housing is still somewhat of a “myth“ in America. Mortgage rates and home prices would need to decrease before housing becomes more affordable, but this is likely be a multiyear process if today’s inventory levels remain steady.
