Mortgage rates are tricky, mortgage performance is a treat. The U.S. housing market continues to present mixed messages, with home sales lagging last year’s, and mortgage originations doing the same. On the other hand, affordability challenges are reflected in slower rent growth and the need for down payment assistance programs. Let’s take a look at where the current landscape stands:
- Trick No 1: Monthly sales of existing homes continued to decline nationally and were 13% below 2023 levels in September 2024. Although we are in a period of typical seasonal decline, the cooling appears stronger than historical in some metro areas. Despite moments of surpassing 2023 volumes earlier in the year, existing home sales appear poised to close the year below 2023.
- Trick or Treat No 1: There were several metros where home sales exceeded last September’s numbers; however, most of those are small and with low sales volumes. Two exceptions were Boise City, Idaho, which posted a 11% increase, and the Washington-Arlington-Alexandria, DC-VA metro area, with a 6% increase. However, many cities showed a decline in sales compared with September 2023. Florida posted fewer sales compared with last September in multiple cities, with Miami and West Palm Beach falling as much as -40%, Ft. Lauderdale down by -35% and Daytona Beach at -30%.
- Treat or Treat No 2: While Dallas continued to top the list of markets with the largest number of newly built homes sold in Q3 2024, averaging 2,600 per month, this was a 16% decline from last year and a much larger drop than the entire country, where new home sales are only down by 10%.
- Trick or Treat No. 3: The share of single-family purchases made by investors rose to 25% in September, up from 23% in June. The rise in share indicates that the temporary decline in investor share was likely a seasonal blip and not due to any decreases in rental demand.
- Treat No 2: Rent growth among single-family homes remains subdued despite the spike in demand reported by multifamily operators. High-end rental prices were up by 2.9% year over year in August, while low-end prices declined by -0.2%. Seattle, New York, Washington, D.C. and Detroit are among the top four metros where rent growth exceeds 5% year-over-year.
- Trick No. 2: Jumbo mortgage origination volume dropped to a 10-year low in 2024. Jumbo mortgage originations experienced a noticeable decline in both dollar amounts and market share in 2023 and 2024 compared with previous years. From their peak in 2021 to 2023, conforming loan volumes fell by 67%, while jumbo loan volumes declined by 61%. The drop in jumbo originations could be offset by an increase in cash purchases, which have been elevated in the last few years.
- Treat No 3: About 10% of outstanding jumbo loans have an interest rate at or above 6%.As of July 2024, most jumbo loans are secured at ultralow or low rates, with three-quarters having interest rates below 4%. Just about 10% of current jumbo loans carry an interest rate of 6% or higher. These loans were mostly originated in 2023 and 2024 and could benefit from refinancing if rates fall below 6%.
- Treat No. 4: One-fifth of FHA loans originated in August 2024 had a piggyback second mortgage. The use of second mortgages has been on the rise in recent years, from an average of 14% pre-pandemic. Unlike the piggyback lending of the 2000s, many of today’s second mortgages are sourced directly or indirectly from local housing authorities and community organizations, also known as “community seconds.”
- Trick or Treat No. 4: The weighted average outstanding mortgage rate of all mortgage debt in the U.S. was 3.98% in August, the highest since June 2020. Metros in the South have the highest outstanding mortgage rates, led by Lakeland, Florida (4.5%); El Paso, Texas (4.4%) and Port St. Lucie, Florida (4.4%). Metros in California have the lowest outstanding mortgage rates, with San Jose (3.4%), San Francisco (3.5%) and Los Angeles (3.6%) at the bottom. Areas with higher average outstanding mortgage rates had more sales over the past two years, lifting their average outstanding rate.
- Treat No. 5: The share of mortgages in delinquency was 2.8% in August, unchanged from July but up from 2.6% a year earlier. The share of 30- to 119-day delinquencies increased slightly from one year ago, while the share of mortgages in later stages of delinquency (including foreclosure) fell. The increase in 30- to 119-day delinquencies was recorded in 93% of metros, with Houston, New Orleans and Baton Rouge, Louisiana having the largest increases.