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WOULD-BE HOMEBUYERS WHISTLE PAST MORTGAGE RATE UPTICK

The cost of financing home loans bucked the recent mini-trend by inching higher last week, provoking a mixed reaction from potential borrowers, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI added a nominal 2 basis points to 6.86%, its first uptick in three weeks.

While that failed to impress those looking to refinance current mortgages - refi demand USMGR=ECI, which accounted for 36.4% of total mortgage demand, fell by 0.4% - applications for loans to purchase homes USMGPI=ECI increased by 2.3%.

On aggregate, total demand for home loans rose by 1.1%.

"Last week saw steadier mortgage rates, as the FOMC meeting played as predicted, and market movements led to a small two-basis point increase in the 30-year conforming rate to 6.86 percent," writes Mike Fratantoni, chief economist at MBA. "Despite the economic uncertainty, the increase in home inventory means there are additional properties to buy ... and this supply is supporting more transactions."

The 30-year fixed rate, having whipsawed over the last 12 months, is now 22 basis points cooler than it was the same week a year ago.

Over that same time frame, refi and purchase demand have risen 43.6% and 17.5%, respectively.

Demand for loans to buy homes is among the housing market's leading indicators, and while it's no big shocker to see purchase applications grow in the wake of winter's thaw, it does provide a signal that the sector's on a firm foundation, for now.

On the other hand, all economic indicators are backward-looking.

For a look at where investors expect the sector to be six months to a year down the road, we turn to the stock market.

For much of the post-pandemic era, housing-related stocks - the S&P 1500 Homebuilding index .SPCOMHOME and the Philadelphia SE Housing index .HGX - handily outperformed the broader market.

But that relationship reversed in early November.

The SPCOMHOME and HGX indexes are currently down 14.2% and 7.7%, respectively, over the last year, and are currently eating the S&P 500's dust; the benchmark index has advanced 12.2% during that time.

(Stephen Culp)

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