By Ryan Casey Stephens, FPQP®
Special Contributor
The sweltering days of summer that North Texas has become infamous for have arrived, and they’re here to stay! Have you noticed that above 98 degrees, every summer day here feels identical to the one before? When I think about this season, I think of one hot day after the next for weeks on end, with very few storms or events to break the monotony.
Well, the mortgage market is experiencing something similar. Interest rates don’t seem to budge, mortgage bonds aren’t gaining support, and no headlines seem to change things. That’s why in this week’s Three Things to Know, we’ll spend some time looking at other headlines that might help us create some contrast in this hot summer housing market.
Let’s Get This Out of The Way
Despite what I said above, we do need to take one glance at the state of mortgage interest rates. Frankly, it’s a confusing picture. The pieces are in place for lower rates — inflation slashed in half from one year ago, the Fed acknowledged that fact last week with a rate hike pause, and unemployment is rising.
These metrics, among others, were our gauge for hoping we’d see lower rates by summer. Rates have persisted near their highs, however, and now many experts are shifting their timeline for easing rates to the end of the year.
First Thing to Know:
The mean of expert forecasts had the 30-year fixed rate somewhere between 6 and 6.5 percent by summer, but with rates still hovering near 7 percent we can only speculate about the arrival of much-needed lower rates.
Huge News on Housing Starts
Housing Starts and Permits were just released for the month of May, and I am thrilled. Builders and developers who read these editorials will know I believe they are a big part of the solution for affordable American housing. I’m convinced that higher housing costs are largely due to competition for single-family residences in major cities, not inflation. If builders had greater incentive to create more 1-4 family units in desirable locations, the chances are good we’d see competition ease.
This week’s news is just one step towards the balance we all crave. May housing starts saw an increase of more than 21 percent, and permits (which are an indicator of future starts) were also up more than 5 percent. Perhaps just as crucial — the positive sentiment of homebuilders reached its highest level since last July.
Second Thing to Know:
In the face of headwinds such as higher interest rates and low mortgage demand, homebuilders finally feel emboldened to create new inventory. They play a pivotal role in our national housing shortage, and we look forward to seeing positive figures on this front in the months ahead.
Healthy Housing Market Not a Given
I’m proud of our nation. We are a resilient people with leadership that more often than not does what is necessary to preserve a strong standard of living. This week I read a startling piece in The New York Times about the crashing home prices people are experiencing in New Zealand. According to the St. Louis Fed, the median home price has fallen roughly 9 percent since the final quarter of 2022. Based on Fed Chairman Powell’s comments last week, that may be the bottom here at home. Other countries haven’t been so lucky. New Zealand is reporting an 18 percent crash in prices that has eliminated more than $6 billion in equity.
Known for their intense housing competition, New Zealanders have become accustomed to high prices. Due to their tough zoning practices and the cost of getting materials necessary for construction, the nation hasn’t kept up with the demand for new construction. The median home price has reached $780,000 there, and now it seems most would-be home buyers can’t afford to step into the arena. Now at a tipping point, prices appear to be naturally adjusting to reach the living standard and wages of the citizens there. It’s playing out in many other countries as well, and it will be interesting to see the long-term effect this has on their economies.
Third Thing to Know:
We face our fair share of difficulties here at home, but we’re lucky to be avoiding some of the macro issues facing homeowners of nations around the world. High-interest rates and stubborn inflation are grave threats, but so far home buyers in North Texas seem to be able to weather the storm.
Ryan Casey Stephens FPQP® is a mortgage banker with Watermark Capital. You can reach him at [email protected].
