These are very noisy data series, so they could easily jump again next month, but the higher mortgage rates and rising house prices are a double whammy for home purchasers, especially first-time buyers.
Here’s the data from today:
Home prices are high, listings are lean and potential buyers are frustrated. There is plenty of demand, but it is not translating into home sales.
Mortgage applications dropped 2.5 percent last week, seasonally adjusted, according to the Mortgage Bankers Association. The weakness was driven entirely by a lack of buyers. Total volume was 12 percent lower than the same week one year ago.
Mortgage applications to purchase a home fell 5 percent for the week and were just 1 percent higher compared with a year ago. Home prices continue to rise at more than twice the rate of income growth, and bidding wars are the rule rather than the exception for entry-level homes. New buyers are clearly struggling, and that is apparent in the type of loans for which they are applying.
Starts declined 12.3% from May while residential building permits fell 2.2%
U.S. housing starts fell starkly in June after making solid gains the prior month, as single-family home construction and apartment building dropped from May.
Housing starts declined 12.3% in June from the prior month to a seasonally adjusted annual rate of 1.173 million, the Commerce Department said Wednesday. This was the largest monthly percent drop since November 2016, in part representing bounce back from stronger 4.8% starts growth seen in May.
Meanwhile, residential building permits, which can signal how much construction is in the pipeline, also declined, falling 2.2% from May to an annual pace of 1.273 million last month.
Economists surveyed by The Wall Street Journal had expected a 2.2% decline for starts, but a 2.2% gain for permits in June.
The sharp starts drop in June was also driven by construction declines in all regions of the U.S. for almost all types of housing.
This is how housing bubbles end…weaker volume, a final push higher for prices, then exhaustion sets in, inventories begin to climb while prices languish for a bit, and then prices finally slide.
Has it started? There’s a good chance, especially if the Fed keeps up with the rate hikes.