Tag: mortgages

It looks more like a project at NASA than a home construction site.

Just outside Austin, Texas, massive machines are squeezing out 100 three- and four-bedroom homes, in the first major housing development to be 3D-printed on site.

One of the nation’s largest homebuilders, Lennar, is partnering with ICON, a 3D printing company, to develop the project. Lennar was an early investor in ICON, which has printed just about a dozen homes in Texas and in Mexico. These homes will go on the market in 2023, starting in the mid-$400,000 range.

“This is the first 100 homes, but we expect to be able to bring this to scale, and at scale we really bring cycle times down and we also bring cost down,” said Stuart Miller, executive chairman of Lennar.

ICON claims it can build the entire wall system of the home, which includes mechanical, electrical and plumbing, two to three times faster than a traditional home and at up to 30% of the cost.

“We exceed code requirements for all the different kinds of strength, wind, compressive strength by about 4x. We’re about two and a half times more energy efficient,” said Jason Ballard, co-founder and CEO of ICON.

The printers are designed to operate 24 hours a day, but they don’t because of area noise restrictions. They are almost fully automated, with just three workers at each home. One monitors the process on a laptop, and one checks the concrete mixture, which has to be adapted to the current weather conditions. Another works in support, misting the area with water or adding new material into the system.

“The promise of robotic construction is a promise of automation, reducing labor – therefore reducing labor costs,” Ballard said.

ICON aims to get the number of operators down to two over the next 12 months, Ballard added. Eventually, he wants even fewer operators. “I think the sort of Holy Grail is where one person can watch a dozen systems you need one person to watch a dozen systems,” Ballard said.

Mortgage rates rose again last week, throwing even more cold water on demand from both current homeowners and potential homebuyers. Weekly application volume fell 0.1% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 7.14% from 7.06%, with points increasing to 0.77 from 0.73 (including the origination fee) for loans with a 20% down payment.

“Mortgage rates edged higher last week following news that the Federal Reserve will continue raising short-term rates to combat high inflation. The 30-year fixed rate remained above 7 percent for the third consecutive week, with increases for most loan types,” said Joel Kan, MBA’s deputy chief economist.

Refinance demand, which has been positively crushed by the sharp rise in interest rates, fell another 4% for the week and was down 87% compared with the same week one year ago. Mortgage rates started this year around 3%, so there are very few borrowers left who could benefit from a refinance at today’s higher rates. Refinance demand is now at a 22-year low.

Mortgage applications to purchase a home increased 1% for the week. While that wasn’t a major move, it was the first increase in six weeks. Purchase demand, however, is still down 41% from a year ago and close to a seven-year low.

The adjustable-rate mortgage (ARM) share of activity increased to 12% of all applications. ARMs offer lower interest rates, and while they are considered riskier loans, their rates can be fixed for up to 10 years.

Mortgage rates have been moving sideways to start this week, but that could change Thursday, as investors await the October reading from the government’s consumer price index.

The historic run-up in home prices during the first two years of the pandemic gave homeowners record amounts of new home equity.

Since May, however, about $1.5 trillion of that has vanished, according to Black Knight, a mortgage software and analytics company. The average borrower has lost $30,000 in equity.

Homeowner equity peaked at $17.6 trillion collectively last May, after home prices jumped 45% since the start of the pandemic.

At the end of September, prices were still up 41%, and equity was still quite strong. Borrowers who bought their homes before the pandemic collectively have $5 trillion more than they did before the pandemic hit. That translates to a gain of $92,000 more equity per borrower than in February of 2020.

“While additional declines may be on the horizon, homeowner positions remain broadly strong,” noted Ben Graboske, Black Knight’s president of data and analytics.

But home prices began to weaken as mortgage rates rose in the spring, making it a lot less affordable to buy. The monthly payment on the average home, with a 20% down payment on a mortgage, is up nearly $1,000 since the start of the year.

In 10% of major markets — including Las Vegas, Miami, Los Angeles, Phoenix, Tampa and San Diego — homeowners have to spend twice the long-term average amount of median household income to make their monthly payments.

That’s why home sales began dropping sharply back in May — and why prices have been following suit.

Home prices fell in September on a month-to-month basis for the third month in a row, though the decline wasn’t as steep as in July and August. While prices usually drop from summer to fall due to the seasonal slowdown, they fell much more sharply than usual in 2022.

Prices are now down 2.6% since the end of June, which is the first three-month drop since late 2018 and the steepest such drop since the financial crisis of early 2009. Since July, the median home price is down by $11,560. Prices, however, are still 10.7% higher than they were in September 2021.

As of the end of September, the amount of collective equity available to borrowers while still keeping 20% equity in the home fell by $1.17 trillion since May. That’s the first decline in so-called tappable equity in three years.

The share of borrowers who owe more on their mortgages than their homes are worth is still quite low, at just 0.85%. But the numbers are beginning to rise.

Less than 500,000 borrowers are currently underwater on their mortgages, but that is still double what it was in May. Those who purchased their homes in the past year will be most at risk of going underwater since they bought at the peak of the market.

“This is obviously a situation that demands careful, ongoing monitoring, but to put that into context, just 3.6% of nearly 53 million U.S. mortgage holders are either underwater or have less than 10% equity in their homes roughly half the share coming into the pandemic” Graboske said.

After more than two years of a historically lean housing market, listings are starting to rise − and swiftly.

Active inventory nationally jumped 33.5% in October from the same time last year, according to Realtor.com. That puts supply at the highest level in two years.

It’s not that sellers are rushing into the market; newly listed homes dropped 16% from a year ago, and pending listings are down 30%. But supply is growing because the homes that are on the market aren’t selling as fast as they did just six months ago.

The average number of days it takes to sell a home is now 51, up by six days compared with a year ago.

“As the rapid runup in rates reshapes housing market dynamics this fall, both buyers and sellers are taking a step back to recalibrate their plans,” said Danielle Hale, chief economist at Realtor.com.

Mortgage rates have climbed so high and so fast that home shoppers are rushing to the sidelines. Already, affordability was rough with home prices up more than 40% since the start of the Covid-19 pandemic. But with rates now more than twice what they were in January, at just over 7%, potential buyers are looking at a monthly payment that is nearly $1,000 higher than it would have been at the start of the year.

Housing availability varies by city, depending on demand and affordability.

In Phoenix, inventory jumped a striking 174% in October. The city saw a mad rush of buyers over the past two years as employees who could suddenly work from anywhere moved out of pricey markets in California. Now, sales in the city are down more than 30% from a year ago, according to Redfin. 

Inventory is also up 167% in Raleigh, North Carolina, and up 145% in Nashville, Tennessee, markets that also saw an influx of buyers during the pandemic. Inventory is still down in Chicago, Milwaukee and Hartford, Connecticut, but those markets did not see the same surge in demand over the last two years.

The slowdown in demand for homes has caused sellers to cut their prices. A full 20% of listings now on Realtor.com have had a price reduction − about twice the share as a year ago.

Still, home prices are not exactly falling yet. The price gains from a year ago are, however, shrinking at the fastest pace on record, according to several surveys.

And with prices still high, more buyers appear to be widening their searches. Just over 60% of listings views on Realtor.com in the third quarter of this year came from shoppers outside of a listing’s area. That’s up from 57% in the second quarter and 52% in the same quarter of 2021.

“For buyers with the flexibility, relocating to a lower-priced market could help offset higher mortgage costs. There’s also a takeaway for sellers in these areas – on a well-priced home, you could still see strong interest from these out-of-towners,” added Hale.

Home prices are still higher than they were a year ago, but gains are shrinking at the fastest pace on record, according to one key metric, as the housing market struggles under sharply higher interest rates.

Prices in August were 13% higher nationally compared with August 2021, according to the S&P CoreLogic Case-Shiller Home Price Index. That is down from a 15.6% annual gain in the previous month. The 2.6% difference in those monthly comparisons is the largest in the history of the index, which was launched in 1987, meaning price gains are decelerating at a record pace.

The 10-city composite, which tracks the biggest housing markets in the United States, rose 12.1% year over year in August, versus a 14.9% gain in July. The 20-city composite, which includes a broader array of metropolitan areas, was up 13.1%, compared with a 16% increase the prior month.

“The forceful deceleration in U.S. housing prices that we noted a month ago continued in our report for August 2022,” wrote Craig Lazzara, managing director at S&P DJI, in a release. “Price gains decelerated in every one of our 20 cities. These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since.”

Leading the price gains in August were Miami, Tampa, Florida, and Charlotte, North Carolina, with year-over-year increases of 28.6%, 28% and 21.3%, respectively. All 20 cities reported lower price rises in the year ended in August versus the year ended in July.

The West Coast, which includes some of the costliest housing markets, saw the largest monthly declines, with San Francisco (-4.3%), Seattle (-3.9%) and San Diego (-2.8%) falling the most.

A quick jump in mortgage rates from record lows this year has turned the once red-hot housing market on its heels. The average rate on the popular 30-year fixed home loan started this year right around 3%. By June it stretched over 6% and is now just more than 7%, according to Mortgage News Daily.

“With monthly mortgage payments 75% higher than last year, many first-time buyers are locked-out of housing markets, unable to find homes with budgets that have lost $100,000 in purchasing power this year,” said George Ratiu, senior economist at Realtor.com.

He also noted that higher home prices combined with higher interest rates are keeping would-be sellers from listing their houses. They appear to be locked in to their lower rates.