Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey ^®(PMMS^®), showing that the 30-year fixed-rate mortgage (FRM) averaged 5.25 percent.

“Economic uncertainty is causing mortgage rate volatility,” said Sam Khater, Freddie Mac’s Chief Economist. “As a result, purchase demand is waning, and homebuilder sentiment has dropped to the lowest level in nearly two years. Builders are also dealing with rising costs, meaning this posture is likely to continue.”

News Facts

• 30-year fixed-rate mortgage averaged 5.25 percent with an average 0.9 point as of May 19, 2022, down from last week when it averaged 5.30 percent. A year ago at this time, the 30-year FRM averaged 3.00 percent.
• 15-year fixed-rate mortgage averaged 4.43 percent with an average 0.9 point, down from last week when it averaged 4.48 percent. A year ago at this time, the 15-year FRM averaged 2.29 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.08 percent with an average 0.2 point, up from last week when it averaged 3.98 percent. A year ago at this time, the 5-year ARM averaged 2.59 percent.

The PMMS^® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

The prices of goods used in residential construction ex-energy climbed 1.5% in December (not seasonally adjusted), according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. The index was driven higher by large price increases for wood products.

Building materials prices increased 15.9% in 2021 and have risen 18.6% since December 2020. Since declining 1.8% between July and August 2021, the index has climbed 4.5%.

The price index of services inputs to residential construction increased 0.4% in December following a five-month period over which the index declined 13.6%.  The index is 9.6% higher than it was 12 months prior and 19.6% higher than the January 2020 reading.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) increased 24.4% in December and has gained 44.5% since September.  According to Random Lengths data, the “mill price” of framing lumber has roughly tripled since late August.

The PPI of most durable goods for a given month is largely based on prices paid for goods shipped, not ordered, in the survey month. This can result in lags relative to cash market prices, suggesting another sizable increase in the softwood lumber producer price index may be in the next PPI report.

Record-high volatility of softwood lumber prices continues to be as problematic as high prices. The monthly change in softwood lumber prices averaged 0.3% between 1947 and 2019. In contrast, the percent change of the index has averaged 12.0% since January 2020—the highest 24-month average since data first became available 1947 and nearly triple the previous record.

Steel Products

Steel mill products prices rose 0.2% in December, the smallest monthly increase since September 2020. Monthly price increases have slowed in each of the past five months.

The last monthly price decrease in steel mill products occurred in August 2020, and the index has climbed 152.2% in the months since–with more than 80% of that increase taking place in 2021.

Ready-Mix Concrete

The PPI for ready-mix concrete (RMC) gained 0.9% in December after increasing 1.1% in November.  The index for RMC increased 6.5% between January and December 2021 and is 9.3% higher than the January 2020 level.

At the regional level, prices increased in the South (+1.0%) and West (+1.1%) as prices declined in the Midwest (-0.1%).  The price of RMC held steady in the Northeast.

 Gypsum Products

In December, the PPI for gypsum products decreased 0.5%–the second consecutive monthly decline.  Gypsum products prices ended the year 18.2% higher than they were in January.

Paint

The PPIs for exterior architectural coatings (i.e., paint) increased 1.6% in December while the price of interior paint was unchanged. Neither index has declined since January 2021 and the January-to-December price increases of architectural coatings is unprecedented–exterior and interior paint prices climbed 19.8% and 10.9%, respectively, in 2021.

Other Building Materials

The chart below shows the 12-month and year-to-date price changes of other price indices relevant to the residential construction industry.

Building Materials Wholesaling and Retailing

In contrast to the PPI for building materials retailing—which increased 0.4% in December—the Producer Price Index for building materials wholesaling decreased 1.3% over the month.  The wholesale and retail services indices measure changes in the nominal gross margins for goods sold by retailers and wholesalers. Gross profit margins of retailers, in dollar terms, have declined 25.7% since reaching an all-time high in June 2021 but remain 27.3% higher than the January 2020 level.

Building materials wholesale and retail indexes account for roughly two-thirds of the PPI for “inputs to residential construction, services.”

Professional Services

The category of professional services carries the third most weight among those that make up the service inputs to residential construction PPI.  The prices of legal, architectural, and engineering services changed 0.5%, 0.0%, and -0.1%, respectively, in December. Although the year-to-date increase in prices of professional services used in residential construction are quite modest compared to that of materials, prices have increased more in 2021 than they had by December 2020; the difference is especially striking for architectural services.

Though the difference in price changes for legal services is small, the percentage increases are large relative to engineering and architectural.  This follows with a trend in recent years.  Since December 2018, the price of legal services has risen 13.6%–much more than the three-year increase in architectural (+1.1%) and engineering services (+5.8%).

Metal Treatment Services

Prices of metal treatment services increased 1.2%, on average, in December.  The subset of these services used to calculate the services inputs to residential construction includes plating and polishing, coating and allied services, and heat treating.

Metal coating and allied services increased the most over the course of 2021 (+14.9%, NSA).  Metal heat treating and plating and polishing services climbed 6.2% and 3.8%, respectively, between January and December.  The average monthly price increase of the three services was just 0.1% over the course of 2020.

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eyeonhousing.org/2022/01/

As New Yorkers struggle with higher gas and grocery prices amid record-high inflation rates, the cost of rent is also increasing — and isn’t expected to level off anytime soon, according to data and experts. 

The net effective median rent in Manhattan increased by a whopping 10.1 percent between July and October and 20 percent since January as inflation jumped to the highest level seen since 1990, according to data compiled by Miller Samuel/Douglas Elliman.

In Queens, the third-quarter median asking rent was $2,200 this year, just $100 shy of the pre-pandemic peak set in quarter three of 2019, according to data from StreetEasy. 

While numbers from Miller Samuel/Douglas Elliman show housing costs across Manhattan, Brooklyn and Northwest Queens are still lower than 2019, early numbers from real estate analytics company UrbanDigs show prices jumped beyond pre-pandemic levels this month. 

So far, the median asking rent in Manhattan is up 27 percent this month compared to last year and up 4 percent compared to November 2019, the data show. 

In Brooklyn, the median asking rent is up 15 percent so far this month compared to last year and up 5 percent compared to Nov. 2019. 

“I wish I had better news on that one, I think a lot of tenants are likely to get sticker shock at their next lease renewal,” Greg McBride, the chief financial analyst at the personal finance website Bankrate.com, told The Post. 

“If inflation does eventually moderate and we get back to that 2 percent rate of inflation, then OK, that’s an environment where rents would likely increase at a much more modest, pedestrian pace, but if inflation stays at 4 or 5 percent, that’s going to translate into similar increase in rents year after year.” 

New York’s numbers reflect a nationwide trend that’s seen a 0.4 percent increase in housing cost for renters between September and October amid a dwindling supply of listings, high demand and a supply chain bottleneck that’s increased the cost of home building materials, Labor Department data show. 

Earlier this year, rents in tech hubs like New York City, Los Angeles and Chicago were declining by 15.8 percent but in September, they jumped by 7.6 percent year over year, according to data from Realtor. 

“In New York City, the vacancy rate here is already absurdly low and rents have been steadily rising post pandemic as there is more demand than supply. Additionally, if mortgage rates start to go up and affordability is affected it will force potential buyers to become renters as they are priced out of the market,” Pamela Liebman, the CEO of real estate giant Corcoran, told The Post. 

“If mortgage rates rise, that will put additional pressure on an already robust rental market and we could see a serious rise in rent. And as landlords’ costs go up due to inflation, they will continue to pass the increases on to the tenants.” 

The pandemic massively disrupted New York’s housing market and is partly to blame for the sky-high increases, said Jonathan Miller, the President and CEO of Miller Samuel Inc.

“The rate of growth in 2021 has been like a rocket ship, but it’s coming from a very low place because rents fell to 25% during the early days of the pandemic and now are rising,” Miller explained. 

“If we look at net-effective median rent for all of Manhattan compared to October of 2019, so pre-pandemic but the same seasonal period in the year, median rent is 0.8 percent below 2 years ago. It’s very close to parity.” 

Still, with billions in stimulus dollars flowing through the region, expected wage growth and the return of international buyers, demand is only expected to go up and unless the housing supply increases, rent costs are slated to jump even more, too, said Miller.  

In 2020, the number of new housing permits decreased by 26.3 percent citywide and in Manhattan, only 1,896 new housing permits were issued last year, down 65.6 percent from 2019 and the lowest level seen since the 2010 Great Recession, city statistics show.  

“Rents are going to continue to grow throughout the end of the year and throughout next spring,” said Nancy Wu, an economist with StreetEasy. 

“We’re going to see a very busy rentals market [next year] and high demand is going to lead to higher rents, given the supply is pretty constant.” 

At the start of the pandemic, New York implemented a moratorium on evictions barring landlords from booting tenants who can show they’re behind on their rents because of COVID-era financial difficulties but the program will end come January 15. 

Beyond that, cash-strapped renters can apply for state aid through a federally financed program designed to help lower-income New Yorkers pay their housing costs but that program has a bottom, too. 

So far, tenants have filed 252,000 applications, 73,000 of which have been paid out, totaling $913 million in aid. 

An additional 73,000 applications, totaling $917 million in aid, have been tentatively approved.

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nypost.com/2021/11/11/

January marked the fifth straight month that the National Association of Realtors® (NAR) has reported a decline in its Pending Home Sales Index (PHSI). The index, based on newly signed contracts for the purchase of existing homes, was down 2.8 percent from its December level.

The index in January was at 122.8 compared to 125.5 in December and has lost 10 points since August. Still, pending sales were up 13 percent compared to a year earlier. This January’s PHSI was, in fact, the highest for any January on record.  

Analysts had expected the index to be flat but individual estimates by those polled by Econoday all overshot the actual results. They covered a range from a 1.5 percent downturn to 0.5 percent growth. The consensus was for zero change.

“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” said Lawrence Yun, NAR’s chief economist. “That said, there has been an increase in permits and requests to build new homes.” Yun said that increase in single-family permits has been consistent for eight months and is a good sign that the supply and demand imbalance in the residential real estate market could be easing as soon as mid-2021.

“There will also be a natural seasonal upswing in inventory in spring and summer after few new listings during the winter months,” he said. “These trends, along with an anticipated ramp-up in home construction will provide for much-needed supply.”

Following a week where January’s existing-home sales increased, Yun noted that pending contracts are a great early indicator for upcoming closed sales but stressed that the timing of the relationship between existing-home sales and pending home sales may not be in lockstep.

“The two measurements aren’t always perfectly correlated due to varying amounts of time required to close a contract,” Yun said. “This is because a number of fallouts can occur due to a variety of factors, including a buyer not obtaining mortgage financing, a problem with a home inspection, or an appraisal issue.”

He noted that the economy is showing promising signs of improvement, and many millions of Americans are now receiving a COVID-19 vaccination. Still, he cautioned that the better economic outlook, rising inflation prospects and higher budget deficits will soon drive increases in interest rates. “I don’t foresee mortgage rates jumping to an alarming level,” he said, “but we should prepare for a rise of at least a decimal point or two.”

The Northeast PHSI fell 7.4 percent to 101.6 in January, putting it 9.6 percent higher than a year earlier. In the Midwest, the index declined 0.9 percent to 113.2, up 8.6 percent from January 2020.

Pending home sales transactions in the South inched up 0.1 percent to an index of 151.3 in January and were 17.1 percent higher year-over-year. The index in the West was at 104.6, a 7.8 percent drop from December but up 11.5 percent from a year prior.

The PHSI is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. Existing home sales numbers for February will be released on March 22.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

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Low mortgage rates and record-low housing inventory has driven home price increases throughout the year. The National Association of Realtors is saying that the median single-family home price grew year over year in all 181 metro areas it tracks.

In the U.S., median existing single-family home prices rose 12% year over year to $313,500, NAR said. In 117 metros, there were double-digit price gains from one year ago. For added perspective, in Q2, only 15 metro areas had double-digit price gains.

What can help remedy high home prices? Finding a solution to the housing inventory crisis, NARs Chief Economist Lawrence Yun said.

By the end of Q3, 1.47 million existing homes were available for sale, which is 19.2% lower than the total inventory at the end of Q3 last year. As of September 2020, there were enough homes in inventory to last 2.7 months at the current sales pace.

“As home prices increase both too quickly and too significantly, first-time buyers will increasingly face difficulty in coming up with a down payment,” Yun said. “Transforming raw land into developable lots and new supply are clearly needed to help tame the home price growth.”

Some of the metros with the biggest gains in Q3 were Bridgeport, Conn., 27.3%; Crestview, Fla., 27.1%; Pittsfield, Mass., 26.9%; Kingston, N.Y., 21.5%; and Atlantic City, N.J., 21.5%.

According to NAR, the monthly mortgage payment on a typical single-family home rose to $1,059 in Q3. As of Thursday, the average U.S. mortgage rate for a 30-year fixed loan rose to 2.84%, Freddie Mac said.

“Favorable mortgage rates will continue to bring fresh buyers to the market,” said Yun. “However, the affordability situation will not improve even with low-interest rates because housing prices are increasing much too fast.”

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