U.S. housing and mortgage market: Even with declines in mortgage rates to 2-year lows, total (new + existing) home sales declined 2.9% in August, with both existing and new home sales declining over the month. Existing home sales for August fell to the lowest level since October 2010, and new home sales fell to 716,000. Slower sales have coincided with inventory picking up. Months’ supply of existing homes was 4.2 months in August, the highest level since July 2019.
Lower mortgage rates in September helped breathe some life back into the housing market, as evidenced by the slight uptick in the pending home sales index to 70.6 from last month’s historic low of 70.2. However, in early October, the strong jobs report has pushed long-term rates, including mortgage rates, higher which will add to affordability challenges. Despite affordability challenges, the demand for housing has been bolstered by the demographic tailwind from Millennials and Gen Z, who are at prime home-buying age. We take a deeper dive on first-time homebuyers in our spotlight section this month.
Given declining mortgage rates, housing construction picked up in August. Single-family housing starts increased 15.8% from July, reversing the losses seen in July. While single-family completions fell 5.6%, multifamily completions increased 36.5% from July and almost 80% from last August. Homebuilder confidence inched up to 41, according to the National Association of Home Builders’ Housing Market Index. Though increasing for the first time in five months, the index remains below 501 indicating that building conditions are expected to remain poor in the near term.
House price appreciation continues to slow from the highs we saw in 2022. As measured by the FHFA House Price Index, U.S. house prices rose 0.1% in July 2024 and 4.5% from last year. All nine census divisions showed annual increases, ranging from 7.5% in the East North Central division to 1.6% in the West South-Central division.
While overall mortgage delinquency rates remain low as we highlighted in the September Outlook, it’s important to understand the reasons for the delinquencies. Research has found that it is usually life events which account for a larger share of defaults.2 As per the FHFA Foreclosure Prevention and Refinance Report, the top reason for delinquency as of Q2 2024 was curtailment of income at 27%.3 This was followed by excessive obligations (17%) and unemployment (15%) as of Q2 2024. Illness of the primary mortgagor or family member was also cited as a reason for delinquency at 11%. National emergency declaration, which was what had happened during COVID and was the main reason for delinquency from Q2 2020 through Q3 2023, was the least common reason in the last couple of quarters at 4%.
Mortgage rates continued to decline and reached a two-year low during the last week of September at 6.08%. The 30-year fixed-rate mortgage as measured by Freddie Mac’s Primary Mortgage Market Survey® averaged 6.18% in September. The Mortgage Bankers Association (MBA) Weekly Application Survey has shown refinance activity steadily increasing as rates continued to drop in September. Refinance activity accounted for about 55% of total application activity as of the month, a significant increase from August.
