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Mortgage rates edged up slightly in April, with the average 30-year fixed-rate mortgage settling at 6.73%, according to Freddie Mac. This marks an 8-basis-point (bps) increase from March. The 15-year fixed-rate mortgage increased by 7 bps to 5.90%.

The uptick in mortgage rates followed a sell-off in U.S. Treasury securities, driven by concerns surrounding the ongoing trade war. As demand for Treasuries declined, prices fell and yields rose. The 10-year Treasury yield averaged 4.28% in April, with the most recent weekly yield rising to 4.34%. The sell-off signals a potential loss of investor confidence in what is typically considered a safe-haven asset.

In response to rising yields, the president has pressured Federal Reserve Chair Jerome Powell to cut interest rates. However, at the recent Economic Club of Chicago, Chairman Powell stated that “tariffs are highly likely to generate at least a temporary rise in inflation” and emphasized the Fed’s obligation to price stability, adding that it must ensure “a one-time increase in the price level does not become an ongoing inflation problem”.

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The Market Composite Index, which measures mortgage loan application volume based on the Mortgage Bankers Association (MBA) weekly survey, rose 14.0% month-over-month on a seasonally adjusted (SA) basis, driven primarily by a surge in refinancing activity. Year-over-year, the index is up 29.2% compared to March 2024.

The Purchase Index rebounded 8.3% (SA) from the previous month as mortgage rates declined. Meanwhile, the Refinance Index surged 22.2% (SA), continuing its strong upward trend. Compared to a year ago, purchase applications are up 7.6%, while refinance activity has jumped 72.9%.

Economic uncertainty continues to drive treasury yield volatility, impacting mortgage rates. In March, the average 30-year fixed-rate mortgage reported in the MBA survey fell 17 basis points (bps) to 6.7%, marking a 23 bps decline from a year ago.

Loan sizes have continued to rise since the start of the year. In March, the average loan size across the total market (including purchases and refinances) increased 3.5% month-over-month (NSA) to $403,300. For purchase loans, the average size edged up 0.9% to $450,000, while refinance loans saw a sharper increase of 10.4%, reaching $337,500. Meanwhile, the average loan size for adjustable-rate mortgages (ARMs) rose slightly by 1.1%, from $1.13 million to $1.14 million.

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Mortgage rates dropped significantly at the start of March before stabilizing, with the average 30-year fixed-rate mortgage settling at 6.65%, according to Freddie Mac. This marks a 19-basis-point (bps) decline from February. Meanwhile, the 15-year fixed-rate mortgage fell by 20 bps to 5.83%.

The drop in long-term borrowing costs was driven by a 24-bps decline in the 10-year Treasury yield, which averaged 4.28% in March. This decline provided a boost to the housing market—new home sales increased 5.1% year-over-year in February, while the participation of first-time homebuyer of existing homes rose 26% over the same period. However, existing home sales saw a slight dip from last February.

The decrease in Treasury yields reflects growing concerns about an economic slowdown, particularly as shifts in tariff policy weaken consumer confidence. Despite this, the labor market remained resilient in February, posting steady job gains even as the unemployment rate ticked up slightly. The strength of upcoming jobs reports will be critical in assessing whether recession risks are intensifying.

At the latest FOMC meeting, the Federal Reserve held interest rates steady but revised its 2025 economic projections: expected GDP growth was lowered to 1.7% (down from 2.1% in December 2024) and the projected unemployment rate was raised to 4.4%, up 0.1 percentage point from previous estimates.

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Property tax revenue collected by state and local governments reached a new high in 2024 and continued to make up a bulk of tax revenue. Total tax revenue for state and local governments also reached a high after falling in 2023, driven by higher revenue across all sources. In 2024, tax revenue totaled $2.095 trillion, up 4.6% from $2.004 trillion in 2023.

According to the Census Bureau’s Quarterly Summary of State and Local Taxes, state and local property tax revenue totaled $797.0 billion (38.0%), up 8.2% from the prior year. Individual income tax totaled $537.4 billion (25.6%), up 4.7% over the year. Corporate income tax totaled $174.5 billion (8.3%), up 0.2% and general sales tax revenue was up 1.2% to $587.0 billion (28.0%) in 2024.

State Level Detail

Separating out this summary to just the state level, property taxes accounted for only 1.6% of state tax revenue in 2024, totaling $24.3 billion. State tax revenue is mostly comprised of individual income tax and general sales tax, with individual income tax reaching $490.7 billion (32.9%) and general sales tax at $470.0 billion (31.5%) in 2024.

Additionally, the state where government tax revenue was most reliant on property tax was Vermont, where approximately 27.7% of the state’s tax revenue was from property tax. Seventeen states did not collect any tax revenue in the form of property tax. This means that for property tax within a state, all collections essentially remain at the local government level.

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Higher interest rates and tight financial lending conditions have led to a decline in loans for new home construction. The total volume of acquisition, development, and construction (AD&C) loans outstanding from FDIC-insured institutions fell 1.02% to $490.7 billion, the third straight quarterly decline. The level of 1-4 residential construction loans, which include loans for the construction of single-family homes and townhomes, has fallen for seven consecutive quarters. Coincidingly, the volume of 1-4 family residential construction has moved to its lowest level since 2021.

The volume of 1-4 family residential construction and land development loans totaled $89.5 billion in the fourth quarter, down 7.6% from one year ago. This is also down after reaching a recent high of $105.0 billion in the first quarter of 2023.

To end the year, a plurality of outstanding loans was held by smaller banking institutions, those with $1 billion-$10 billion in total assets, totaling $30.2 billion (33.7%). Banks with $10 billion- $250 billion in assets held the second largest share at $29.8 billion (33.3%), followed by the smallest banks with under $1 billion in assets, holding $20.7 billion (23.1%). The largest banks with over $250 billion in assets held the smallest amount at $8.8 billion (9.8%).

Notably, 56.9% of 1-4 family residential construction and development loans were held by banks with under $10 billion in assets to end 2024. Small community banks play a vital role ensuring financial and lending opportunities for builders across the United States. The data below shows the year-ending level of outstanding 1-4 family residential construction loans broken out by bank asset sizes.

All Other Real Estate Development Loans

Excluding 1-4 family residential construction loans, the level of all other outstanding real estate construction loans totaled $394.6 billion and was down 2.2% from the previous year This is also down from a peak in the second quarter of 2024 of $404.2 billion.

The banks that held the most loans were those with total assets between $10-$250 billion totaling $163.2 billion (41.4%) to end 2024. Banks with $1-$10 billion in assets held $107.1 billion (27.3%), banks with more than $250 billion in assets held $86.6 billion (21.9%) and the smallest banks, those with less than $1 billion in assets, held $37.7 billion (9.6%).

For the end of 2024, larger banks ($10 billion or more in assets) had more activity in the other construction and land development loan arena compared to 1-4 family residential construction holding 63.3% of the outstanding volume.

It is worth noting, the FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Nonetheless, lending remains much reduced from years past. The current amount of existing 1-4 family residential AD&C loans now stands 56% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years.

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Profitability for single-family home builders reached the highest levels in more than a decade in 2023.  Industrywide profit benchmarks are important because they allow companies to compare their financial performance against the entire industry.  Doing so can guide resource allocation, budgeting, and target setting for costs and expense lines.  More broadly, understanding industry benchmarks can lead to an improved business strategy and to higher financial results. 

On average, builders reported $11.3 million in total revenue for fiscal year 2023.  Of that, about $9.0 million (79.3%) was spent on cost of sales (i.e., land, direct and indirect construction costs), which translates into an average gross profit margin of 20.7%.  Operating expenses (i.e., finance, S&M, G&A, and owner’s compensation) cost builders an average of $1.4 million (12.0% of revenue), leaving them with an average net profit margin of 8.7%.  This post summarizes the results from NAHB’s most recent edition of the Builders’ Cost of Doing Business Study.

Based on historical survey data (performed every three years), the 20.7% average gross profit margin in 2023 was the highest registered since 2006 (20.8%).  As a point of reference, builders’ gross margin sank to a record low of 14.4% in 2008 (i.e., during the housing recession), but bounced back steadily through 2017 (19.0%).  The onset of COVID-19 in 2020 increased costs, causing builders’ average gross margin to drop (18.2%) for the first time since 2008.

The 8.7% average net profit margin for fiscal year 2023 is the highest in this survey’s recent history, exceeding the 7.7% reported in 2006.  However, increased use of financial incentives, such as mortgage rate buydowns, and cuts in home prices are likely to have caused this margin to shrink in 2024.

The Cost of Doing Business Study also tracks builders’ balance sheets.  On average, builders reported $7.2 million in total assets on their 2023 balance sheets.  Of that, $4.5 million (62%) was financed by liabilities (either short- or long-term) and the other $2.7 million (38%) by equity builders held in their companies.

Historical data show the average $7.2 million in total assets in 2023 was 23% lower than in 2020 ($9.4 million), and builders’ lowest asset level since 2010 ($6.2 million).  But perhaps more important than fluctuations in the size of their balance sheets, the data reveal a long-term decline in builders’ reliance on debt to finance their operations: in 2006, 74% of their assets were backed up by debt; by 2020, the share was down 10 points to 64%; and by 2023, it dropped to a record low of 62%. Logically, the latter means builders are using more of their own capital to run their companies, as illustrated by their equity share rising from 26% of assets in 2006 to 38% in 2023.

The NAHB Economics team will conduct a Cost of Doing Business Study for residential remodelers in the spring of 2025. If that is your firm’s primary activity, please consider participating in this confidential survey. We simply can’t produce benchmarks without your input.  To participate, please complete this form. A summary of the most recent profitability benchmarks for residential remodelers is available in this blog post.

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The Market Composite Index, a measure of mortgage loan application volume from the Mortgage Bankers Association’s (MBA) weekly survey, rose 4.7% month-over-month on a seasonally adjusted (SA) basis, primarily driven by refinancing activity. Compared to February last year, the index is 15.6% higher.

The Purchase Index declined 6.5% (SA) from the previous month, though it may rebound as mortgage rates continue to fall amid weakening consumer sentiment and growing economic concerns. Meanwhile, the Refinance Index surged 22.7% (SA). Compared to February last year, purchase applications are marginally higher by 2.1%, while refinance activity has jumped 43.7%.

The average 30-year fixed rate mortgage reported in the MBA survey for February fell 15 basis points (bps) to 6.9% (index level 687), 7 bps lower than a year ago.

Loan sizes also increased with the average total market loan size (purchases and refinances combined) rising by 4.4% on a non-seasonally adjusted (NSA) basis from January to $389,500. For purchase loans, the average size increased by 3.93% to $446,000, while refinance loans experienced a 6.1% increase, reaching an average of $305,800. Adjustable-rate mortgages (ARMs) saw a jump in average loan size of 5.9% from $1.07 million to $1.13 million.

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Mortgage rates declined marginally in February, with the average 30-year fixed-rate mortgage falling to 6.84%. After climbing steadily since December and peaking at 7.04% in mid-January, rates have been trending downward.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage decreased 12 basis points (bps) from January, while the 15-year fixed-rate mortgage fell 13 bps to 6.03%. Although the recent decline in mortgage rates and an increase in the total single-family homes supply are positive signs for buyers, homebuying activity may remain sluggish due to persistent high prices and mortgage rates still exceeding 6%.

The 10-year Treasury yield declined 11 bps to an average of 4.52% in February, reversing its recent upward trend. This shift reflects concerns over a weakening U.S. economy due to inflationary pressures and increasing geopolitical risks. In response, the markets anticipate that the Federal Reserve will resume rate cuts later in the year.

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