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New Housing Data: Two Steps Forward, One Step Back

Phil Hall
Nov 18, 2015
The latest housing and mortgage data from industry and federal sources presented a strange picture, with encouraging and discouraging news presented together in the same breath

The latest housing and mortgage data from industry and federal sources presented a strange picture, with encouraging and discouraging news presented together in the same breath. As a result, it appears the market is not recovering with any great speed, but it is also not falling back into a state of crisis.

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 13 presented mixed results between seasonally adjusted and unadjusted data analysis. The Market Composite Index increased 6.2 percent on a seasonally adjusted basis from one week earlier—but on an unadjusted basis, the index decreased 6 percent compared with the previous week.

Likewise, the seasonally adjusted Purchase Index increased 12 percent from one week earlier, but the unadjusted Purchase Index decreased three percent compared with the previous week—but it was also 19 percent higher than the same week one year ago. And the Refinance Index increased two percent from the previous week, but the refinance share of mortgage activity decreased to 58.6 percent of total applications from 59.8 percent the previous week.

Separately, new data from the U.S. Census Bureau and the U.S. Department of Housing & Urban Development (HUD) determined that single-family housing starts in October were at a rate of 722,000, which is 2.4 percent below the revised September figure of 740,000. Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,060,000, which is 11 percent below the revised September estimate of 1,191,000 and is 1.8 percent below the October 2014 rate of 1,079,000.

However, single-family authorizations in October were at a rate of 711,000, which is 2.4 percent above the revised September figure of 694,000. And privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,150,000, which is 4.1 percent above the revised September rate of 1,105,000 and is 2.7 percent above the October 2014 estimate of 1,120,000.

But on the other hand, single-family housing completions in October were at a rate of 640,000, a 0.5 percent drop from the revised September rate of 643,000. And privately-owned housing completions in October were at a seasonally adjusted annual rate of 965,000, a six percent fall from the revised September estimate of 1,027,000 but a 5.2 percent increase from the October 2014 rate of 917,000.

In other developments, new data from Ellie Mae concluded that credit scores on closed loans fell last month to their lowest level since the Pleasanton, Calif.-based company began reporting data in August 2011. The average FICO score on all closed loans fell to 722, marking the fifth consecutive month of decline, while the average FHA refinance FICO score fell seven points to 654 and the average VA purchase loan FICO score declined to 705, its lowest point since April. And front-end and back-end debt-to-income (DTI) ratios have loosened materially to 25/39, the highest percentages since January 2014.

However, more than two-thirds of loan applications closed in October—the fourth consecutive month that this level was reached. The closing rate on purchase loans was 71 percent last month.

"It is still too early to see if there will be impacts stemming from the Know Before You Owe changes that went into effect just last month," said Jonathan Corr, president and CEO of Ellie Mae. "The time to close loans remained a constant 46 days for yet another month, while the closing rate on purchased loans has stayed above 70 percent. We may begin to see time to close increase in the November data as the new closing disclosures are utilized for the first time."

Meanwhile, home builders displayed an autumnal apprehension in the state of the housing market, as builder confidence in the market for newly constructed single-family homes slipped three points to 62 in November from an upwardly revised October reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Two of the three HMI components posted losses in November: the index measuring sales expectations in the next six months fell five points to 70 and the component gauging current sales conditions decreased three points to 67. However, the index charting buyer traffic rose one point to 48.

“The November report is pullback from an unusually high October, and is more in line with the consistent, modest growth that we have seen throughout the year,” said NAHB Chief Economist David Crowe, who added that there was no reason to worry. “A firming economy, continued job creation and affordable mortgage rates should keep housing on an upward trajectory as we approach 2016.”

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