The first quarter of 2019 has ended, and now it is time to take stock and evaluate the events seen in the U.S. housing market over the first three months. Overall, mortgage demand has risen and home sales are on the rise across the board. Still, it is prudent to take a closer look at the U.S. housing market in general to get a better idea of the specific developments that are driving the current market atmosphere.
New Home Sales
The first area of the housing market to evaluate in the first quarter is new home sales. According to residential construction data released in March 2019, new homes sales in the United States for Q1 rose in all major areas of the nation except the west, which remained unchanged. Meanwhile, new housing rose 26.9 percent in the Northeast, 28.3 percent in Midwest and 1.8 percent in the South regions of the United States. Presently, the new construction housing market is experiencing a significant growth pattern on a month to month basis.
As a result of the increase in sales, there has been a decrease in the overall number of new homes that are available, down to 340,000 at last count. According to the available data, it seems highly likely that this trend will continue to increase in the months and quarter to come.
Existing Home Sales
The next area of the housing market that has to be looked at with regards to Q1 is the existing homes sales report. Based on information that was released by the National Association of Realtors, there has been an 11.8% increase in the overall sales of existing homes in Q1. This is notable because it follows the largest month over month gain (February 2019 to March 2019) since December 2015.
The regional rates are very different with regards to the overall growth that was experienced by the new construction housing sector. Specifically, the northeastern market was the one that stayed flat during this time period while all of the other three experienced growth that averaged into the somewhat substantial increase that was witnessed. Overall, there are many positive changes in the existing home sales market that should give market watchers something to keep an eye on.
U.S. Mortgage Rates
The behavior of mortgage rates is another factor to be considered when examining the first quarter. Several sub-factors to think about as it pertains specifically to the U.S. housing market as well. For starters, the overall mortgage rate dropped in late March 2019 and has been relatively down since. The averaged fixed rate on the 30-year mortgage dropped from 4.25% to 4.125%. Many believe that this is a direct result of the Federal Reserve declining to raise rates for 2019. Which seems to be in response to a growing market perception of slowing of global economic activity this year. Presently, 15-year fixed rate mortgages are now at an average rate of 4.03%, and the 5/1 ARM rate also settled at an average of 4.08%.
Nationally, there is an ongoing belief that the housing market is heading towards a slump which is an idea that is somewhat backed up by the Federal Reserve’s recent actions. However, mortgage banking continued to grow last quarter.
Q1 Economic Events
The economic event on the mind of nearly every person paying attention to financial markets and government policy – is a slowing global economy. The sluggish growth of economies in Europe and Asia in particular are making it seem likely that the markets are going to take be affected here in the U.S. as lenders are likely going to be more stringent with their expectations of repayment.
Additionally, there are some specific tertiary housing elements that are causing worry to investors and home owners alike. Mortgage rates are higher than buyers remember and continuing a climb that started in 2017. While the stock market problems that punctuated the end of 2018 likely made the mortgage rates drop for 2019’s first economic quarter, the bigger picture reveals rates that are much higher than they were 2 years ago. In fact, the overall increase in rates over 2 years is around 2 %, even accounting for the recent dip.
Federal Reserve Steadies Rates
The Federal Reserve appears n a path to keep interest rates steady for the remainder of 2019, with no plans to make adjustments for the time being. The result of this action yielded dropping mortgage rates. The announcement was made in mid-March when the 30-year mortgage rates were holding at 4.4%. Now, the mortgage rates have adjusted in light of this information and The Fed is taking additional measures such as buying bonds
It is suspected that an economic turndown at this point would push mortgage rates to the higher end of their range. However, that seems quite unlikely to happen the remainder of the year although it could be on the horizon for 2020 and beyond.
According to the Department of Housing and Urban Development, there has been one notable change in the first quarter of 2019. Based on their first quarterly review, reverse mortgage programs are doing very poorly. There has been a significant drop of 17.7% from last year, additionally the fourth quarter of 2018 was seen as lackluster.
The overall number of endorsements for these kinds of loans totaled 7,388, roughly worth $2.48 billion USD. These figures represent a decrease in revenue of 18.2% from the end of 2018. While this is not going to affect everyone, it is something that the entire U.S. housing market is watching.
The 2019 U.S. housing market appears to be beginning to right the ship following a tumultuous end to an otherwise moderate 2018. Mortgage rates are shrinking now, but overall they are still higher than we recent memory. New and existing home sales are up but there are some portions of the market that will have to be watched going into the second quarter.