Is Housing Set For A Rebound?
An update on the frozen housing sector
Housing has been noticeably absent from the headlines over the past month. That should come as no surprise when you consider how the talk of tariffs and the stock market correction has been all anyone has been taking about.
Housing has taken a back seat in the financial news media.
So where does housing stand? Is the sector still frozen? Or is it set for a rebound?
Let’s take a look at some of the recent data.
Did know that U.S. mortgage rates have dropped for 6 consecutive weeks? They’re now at the lowest level since December.
As of today the 30-year fixed mortgage rate is at 6.78%. It’s almost right in the middle of the range of 7.52% to 6.11% over the past year.
At least mortgage rates aren’t rising. They’re slowly dropping. I still believe one of the unlocks to this frozen housing market, is if mortgage rates can get back down under 6%.
One area that continues to rise is the median asking price of newly listed homes. Last week saw the price rise 6.1% YOY for $421,225. Another new all-time high.
Even with higher mortgage rates, price have remained stable and are still slowly growing.
Here is how the housing markets are for the 50 largest U.S. metro areas.
This is a look at the Case-Shiller 20-City U.S. Home Price Index. You can so most of these cities are still at or just below all-time highs.
Now we are seeing contracts to buy U.S. homes under severe pressure. In fact, it's fallen to an all-time low. Not very good news.
Now that looks bad, but could that be indicating the bottom?
Data this week showed that U.S. single family housing starts went up to 92,000. That’s the best month since February 2024.
This is big news because it doesn’t spell any kind of fears or worries over housing, which to me shows another reason that the word recession shouldn’t be discussed.
Now to that point, the level of new homes for sale is at the highest point since 2008. When you talk housing, you don’t want any charts or data that compares or looks anything like 2008.
The NAHB Housing Market Index declined for a 2nd straight month to 39. That’s the lowest since August. Anything below 50 is viewed as poor.
Then I think this is the most important charts or data point that came out this week. Take a look at the mortgage refinance rejections. 42% of mortgage refis are being rejected. That’s the highest rate in the 12 years that data is available.
Tighter credit markets and higher than usual mortgage rates aren’t helping. Could this be that consumers are stretched a little thin? Do they owe too much on their homes relative to the equity in it? Could it be that their debt to income ratio aren’t where banks feel comfortable extending credit to them? We know their home values are at all-time highs. That’s why this chart has me a bit stumped.
We’ve seen that when mortgage rates are near 7%, housing is just frozen. It isn’t working at that rate. If that rate can get down under 6% I think you may unlock a lot.
It seems that with what homebuilders are doing, they think something may rebound. The single family home starts are coming at a time with soft demand and quite a bit of unsold inventory. They must feel comfortable in what we may see into spring and summer. It’s the only thing that makes sense when they’re breaking ground on new units when many that are built haven’t sold yet.
They’re seeing something on the horizon. An unfreezing and a possible rebound? We will have to wait and see.
The Coffee Table ☕
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Source: Visual Capitalist
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