The National Association of Homebuilders (NAHB) and Wells Fargo publish the Housing Market Index (HMI) each month, otherwise known simply as "builder confidence."  This month's index came out at the 2nd lowest level since late 2023. While that might sound dramatic, it's very much in line with the prevailing trend for this report. And while the chart above may make it seem like confidence is in the gutter, it's really only about halfway in the gutter in the bigger picture. There were some interesting details inside the report. Specifically, 60% of builders said that tariffs were already impacting prices or leading to announcement of impending price increases from some suppliers.  The NAHB notes that tariff-related price increases currently average 6.3%, or $10,900 on an average home.

One would think that the pace of new residential construction largely mirrors the pace of filings for building permits. And while that is generally true in the bigger picture, there can be noticeable discrepancies month to month. This week's data from the Census Bureau is the latest example. Building permits were slightly higher at 1.482 million units (annual pace) versus 1.459 million previously. Contrast that to housing starts (the term for the ground-breaking phase of home construction) which fell to 1.342 million from 1.494 million previously. This excess volatility in housing starts can be seen in the following chart with the blue line whipping higher and lower many times over the past few years while the orange line remains relatively more steady. There was a heavy regional skew to the housing starts numbers with two regions moving higher and two moving lower as follows: Northeast +2k starts (+1.4%) Midwest +96k starts (+76.2%) South -139k starts (-17.1%) West -129k starts (-30.9%) Note: the count of housing starts account for a different percent change depending on the overall activity level in the region.  For example, starts declined more in the South than in the West, but the percent change was much lower because the South had a total level of 524k versus only 289k in the West. If you're thinking that all of the above sounds pretty boring and/or you're wondering why it even matters, you're right.  Home construction data is pretty boring--just a slow, steady grind until something big starts happening. 

The Mortgage Bankers Association's (MBA) mortgage application survey was at the highest combined level since October in last week's data--a move largely driven by the a sharp drop in interest rates (incidentally, also to the best levels since October). The rate drop was part of the initial market reaction to the April 2nd tariff announcement, but it didn't last. Panic and uncertainty can be good for rates.  In fact, it usually is.  But when there's panic and uncertainty that involves the bond market itself, rates can move paradoxically higher, as they did last week.  In fact, the average 30yr fixed rate rose by half a percent from Friday to Friday. The MBA's rate tracking is weekly and survey-based, so it won't show as much volatility as daily numbers. Nonetheless, it was up 0.20%. “Mortgage rates moved 20 basis points higher last week, abruptly slowing the pace of mortgage application activity with refinance volume dropping 12 percent and purchase volume falling 5 percent for the week. Purchase volume remains almost 13 percent above last year’s level, but economic uncertainty and the volatility in rates is likely to make at least some prospective buyers more hesitant to move forward with a purchase,” said Mike Fratantoni, MBA’s SVP and Chief Economist. In the recent context, both refi and purchase demand remain much closer to the top of the range, despite this week's pull-back. Fratantoni also noted an uptick in the prevalence of ARMs (adjustable rate mortgages), "The ARM share at 9.6 percent was the highest since November 2023, and this reflects the share of units. On a dollar basis, almost a quarter of the application volume last week was for ARMs, as borrowers with larger loans are even more likely to opt for an ARM.”

The Mortgage Bankers Association (MBA) released the latest mortgage application data this week showing a modest 1.6% decrease from the previous week.  A slight uptick in purchase applications was more than offset by a downtick in refi applications, but both remain in solid territory relative to the prevailing range and interest rate environments. Purchase demand is doing especially well in the recent context.  This week's improvement makes it one of the best 6 weeks in more than a year. The most optimistic way to approach these numbers would be to say that purchase demand looks to have bottomed out in the bigger picture and is now waiting for motivation to bounce back.  When that happens, no one is under much of an illusion that volume would go back to the highs from a few years ago, but even recapturing a fraction of that range would make for a meaningfully more active housing market. Refinance demand, as always, is very closely tied to interest rate volatility. Last week's rates moved higher and were near the highest levels in more than a month at one point.  As such, it's no surprise to see a bit of a slide in the refi index. If anything, it's refreshing to see how resilient the numbers have been. While we are no great fans of predicting the future, there's a strong possibility that next week's refi numbers will be noticeably higher.  That's not hard to imagine given that rates fell to the lowest levels since October by the end of the week. 

The National Association of Realtors' Pending Home Sales Index (PHSI) tracks purchase contract signings that have not yet turned into Existing Home Sales. Things haven't been going well for either sales metric for more than 2 years now--a problem that can be blamed on a combination of factors led by it's proximity to the sharpest interest rate spike in decades. That's the bad news. The good news is that things actually haven't gotten markedly worse after the initial swan dive in 2022. This, of course, means that the sales index is free to experience some ups and downs inside the broadly sideways, severely depressed range. The most recent installment amounts to a half smile on an otherwise perpetually sad face.  Well, maybe a quarter smile... According to NAR Chief Economist Lawrence Yun, "Despite the modest monthly increase, contract signings remain well below historical levels. A meaningful decline in mortgage rates would help both demand and supply—demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect." Here's a regional breakdown showing the percent change in Pending Sales from the previous month: Northeast: -0.9% Midwest:   +0.7% South:      +6.2% West:        -3.0% And now the percent change from the previous year: Northeast: -2.5% Midwest:   -4.7% South:      -3.4% West:        -3.5%

This week's update on refinance application demand accurately reflects the fact that rates came into the week near their recent highs, but managed to fall in line with recent lows several days later. The net effect for the Mortgage Bankers Associations (MBA) Refinance Index was a modest drop from last week while remaining elevated relative to the trend seen between November and late February. MBA's purchase index is far less concerned with short term rate fluctuations, and managed to move up to the best levels since early February. In addition, purchase activity is holding in the upper portion of the range that's been intact for nearly 2 years. “Purchase applications saw the strongest weekly pace in almost two months and were 7 percent higher than a year ago. Last week’s purchase activity was driven primarily by a 6 percent increase in FHA applications, as the combination of loosening housing inventory and slowly declining mortgage rates have presented this segment of buyers with more opportunities,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Additionally, VA purchase applications saw a modest increase over the week. Overall applications declined, however, as refinance applications were down 5 percent to its lowest level in a month.”

It's not uncommon for certain medications to come with warnings about avoiding certain activities like driving or operating heavy machinery due to the risk of drowsiness. But medications aren't the only causes of such sleepiness.  Just ask the latest New Home Sales report from Census Bureau! There are several ways to establish the soporific nature of this data. First off, the market is always most interested in data when it falls far from the consensus among economic forecasters. At an annual pace of 676k homes versus a median forecast of 680k, this one was about as close as they come. Perhaps more importantly, the sales count hasn't been more than 70k higher or lower than that for the past 2 years.  70k might sound like a lot, but consider that it only took a few months to see sales jump more than 400k in 2020, or that the peak to trough move during the financial crisis was over 1 million homes per year. In other words, sales may be exhibiting some month to month volatility, but they've been almost perfectly sideways, on average, for just over 2 years now. In regional terms, The Midwest and the South did all of the heavy lifting, adding 13k and 27k homes respectively.  The Northeast brought the national tally down by 6k and the West did the most damage at 22k.  The latest news release from the Census Bureau is always available here: https://www.census.gov/construction/nrs/pdf/newressales.pdf

There are two dominant home price indices released each month in the U.S.  The Federal Housing Finance Agency (FHFA) is responsible for the most all-inclusive tally of home prices via its Home Price Index (HPI).  S&P Case Shiller provides the private sector's largest HPI, which tends to capture more volatility than FHFA. Both indices have been remarkably close to one another in annual terms for more than a year now. This is not uncommon during times of stable price appreciation. The chart below shows that each index is suggesting year-over-year price growth of just under 5% on average.  A chart of price changes in percent terms can underrepresent the reality of home price growth at times like this.  After all, a flat line around 5% means that home prices are greatly outpacing inflation (reported at 2.5% year over year just this morning).  If we instead focus on the outright level of one of these price indices, the actual trend is obvious. In other words, for any drama that might exist in the housing market these days (elevated rates, lower sales, etc.) home price growth remains relatively drama-free.   As always, keep in mind that these indices represent averages and that geographical variations can be pronounced.  The following table shows the monthly and yearly percent change for the individual metro areas in the Case Shiller data. The fastest-appreciating metros were north of 6% annually, while the slower areas were under 2%.

As is the case with a majority of housing and mortgage market data these days, the Existing Home Sales data from NAR is heavily dependent on context. To be sure, the headline is true. You'd have to go back to report that came out in February, 2024 to see a higher annual pace of sales. (NOTE: the table above contains initially-reported numbers.  NAR subsequently revised  the 3/31/24 report up to 4.31m) And if you were to chart these values only, the chart would probably look pretty good for the present month, but it would also belie the situation in the trenches.  Home sales certainly aren't in freefall in the bigger picture, but they're generally still sideways at long term lows. Realtors credited an uptick in inventory for the uptick in sales. Additional details are available at NAR's release page here: https://www.nar.realtor/newsroom/existing-home-sales-accelerated-4-2-in-february

The Mortgage Bankers Association conducts a weekly survey on the level of mortgage applications, both for purchases and refinances.  Both data series continue to be a tale of two decidedly different eras for the mortgage market.  If we focus on the present era, for a moment, refi demand continued to enjoy a relative boom thanks to rates that remain much lower than they had been several weeks ago. The most recent levels were logically a bit lower as the average lender's rates were a bit higher this time around.  If you were overcome with indignation at seeing someone refer to refi demand with the word "boom" in 2025, don't worry.  We know about the context.  The present era is a barren wasteland compared to bygone eras when a boom meant roughly 5 times as many refis as today. The "2 era" phenomenon is less extreme when it comes to purchases, which tend to respond to rates only very gradually.  This has made for a much steadier level of purchase demand over the past few years.  In addition, the boomier era only saw twice as many purchase apps.  Other highlights from the data: Refis accounted for 42% of apps, down from 45.6% last week MBA's survey showed a conventional 30yr fixed rate increase from 6.72 from 6.67 the previous week FHA rates rate about 0.30% lower ARM rates were 5.84% but only account for 6.7% of applications