Stronger Mortgage Demand Suggests Tailwind for Housing Market

A home is offered for sale in Rutledge, Ga. on Dec. 12, 2019. John Bazemore/AP Photo

The number of applications for home mortgages rose sharply last week, according to the Mortgage Bankers Association (MBA), dovetailing with recent federal data showing a surge in building permits and pointing to a likely boost in future home sales.

Total mortgage application volume rose 4.9 percent last week, according to MBA’s composite index that tracks mortgage originations. The rise follows a minor 0.3 percent uptick the week prior and a 1.9 percent decline two weeks ago, with the trend suggesting tailwinds for the housing market.

Mortgage rates remain at historic lows, with the benchmark 30-year fixed mortgage rate at 2.86 percent as of Sept. 16, according to Freddie Mac. The 30-year hit a record high of 18.63 percent in 1981.

“Homeowners can capitalize on this prolonged period of ultra-low mortgage rates by refinancing and generating meaningful monthly savings to absorb the rising household costs seen in other areas,” Bankrate Chief Financial Analyst Greg McBride told The Epoch Times in an emailed statement.

Building permits—a leading indicator for future construction—climbed 6.0 percent in August to 1.728 million, the highest number since April 2021, according to a Sept. 21 Commerce Department report (pdf), reinforcing an optimistic view of homebuilding activity going forward.

The gains were mostly concentrated in the multi-family home segment, however, which saw permits rise 19.7 percent over the month, while single-family house construction permits rose by a far less robust 0.6 percent.

“We conjecture that this strength in multi-family may be a response to the strong increase in asking rents and the low vacancy rates in rental units,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

Home construction saw a better-than-expected rebound in August after a contraction a month earlier, though the strength was all on the back of sharp gains in apartment building, while the single-family house sector saw declines.

Housing starts rose 3.9 percent in August to a seasonally adjusted annual rate of 1.615 million units, after falling by a revised 6.2 percent in July, the Commerce Department report showed.

But while multi-family starts rose by a sharp 21.6 percent over the month in August, single-family starts posted their third consecutive month of declines, falling 2.8 percent.

Homebuilder confidence inched up in September after falling to its lowest reading in 13 months in August, according to the NAHB/Wells Fargo Housing Market Index (HMI), though optimism was held down by hiring difficulties and building material supply chain issues.

“The September data show stability as some building material cost challenges ease, particularly for softwood lumber,“ NAHB Chairman Chuck Fowke said in a statement. ”However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers.”

Job openings in the United States surged to a record high of 10.9 million on the last day of July, according to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), including 321,000 unfilled openings in construction.

“While building material challenges persist, the rate of cost growth has eased for some products, but the job openings rate in construction is trending higher,” Robert Dietz, the NAHB’s chief economist, said in a statement.

Reuters contributed to this report.