U.S. Housing Data Remains Weak

A tapped out American middle class is shying away from an increasingly expensive real estate market.  Several indicators of weak housing activity are pointing to a pause in the 6-year bull run in real estate. Most Americans, facing stagnant wages, job insecurity, and declining economic prospects, sour on the idea of being locked into one house for a long period of time.

A tapped out American middle class is shying away from an increasingly expensive real estate market.  Several indicators of weak housing activity are pointing to a pause in the 6-year bull run in real estate. Most Americans, facing stagnant wages, job insecurity, and declining economic prospects, sour on the idea of being locked into one house for a long period of time.

Although mortgage rates remain almost as low as they’ve ever been in American history, mortgage applications fell 3.3% on a seasonally adjusted basis last week, while purchases fell 1% from a year ago. According to the Mortgage Bankers Association Market Composite Index, both refinance activity and purchase activity fell amid weak demand for housing.

In total, the MBA Composite index fell 3.3%, the Purchasing Index rose 1%, and the Refinance Index fell 4.9%. Mortgage rates fell slightly, with 30-year rates averaging 3.93%, almost the lowest level in history.

That still is not encouraging Americans to get into the real estate market, as refinancing and purchasing activity falls. “The refinance share of mortgage activity decreased to 53.9 percent of total applications from 55.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.9 percent of total applications,” said the MBA in a statement.

Real estate experts are becoming increasingly negative about the future of the American property market. According to a study by First American Real Estate, a title insurance and settlement services company, real estate sentiment fell 4.4% on a quarter-over-quarter basis in the first three months of 2016.

“The modest decline in title agent expectations for market production was caused by concerns over transaction volume as opposed to slowing price appreciation,” said Mark Fleming, First American chief economist. “Rather, concerns about rising prices hampering affordability and access to credit are tempering title agent expectations for market growth.”

The weakness is because of Americans being unable to afford houses, according to First American Real Estate. “Currently, title agents ranked the inability of buyers to obtain a mortgage as the most frequent cause of a title policy cancellation, which is unchanged from the fourth quarter,” said the firm in a statement.

After a recent report showing a steep drop in existing home sales, a new study by the Census Bureau shows new home sales meeting expectations. In total, new home sales rose 2% in February to 512,000, about expectations and above 502,000 in January. However, that was largely due to a significant spike in the Northeast, where sales rose 38.5% year-to-date.

In most regions, sales were down. This includes the stressed south, where new home sales fell 7.2% despite a higher population growth relative to the north and the lack of incremental weather discouraging home sales activity.