Category Archives: Finance & Economics

MCLEAN, Verginia — Freddie Mac released the results of its Primary Mortgage Market Survey, showing the 30-year fixed-rate mortgage  averaged 7.09 percent. “After a five week climb, mortgage rates ticked down following a weaker than expected jobs report,” said Sam Khater, Freddie Mac’s Chief Economist. “An environment where rates continue to hover above seven percent impacts both sellers and buyers. Many potential sellers remain hesitant to list their home and part with lower mortgage rates from years prior, adversely impacting supply and keeping house prices elevated. These elevated house prices add to the overall affordability challenges that potential buyers face in this high-rate environment.”

Confidence in the market for new multifamily housing declined year-over-year in the first quarter of 2024, according to results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS produces two separate indices. The Multifamily Production Index had a reading of 47, down three points year-over-year, while the Multifamily Occupancy Index had a reading of 83, up one point year-over-year. Multifamily developers are concerned about higher interest rates for construction and development loans, tight lending conditions that are taking place in the market right now, and difficulty with getting projects approved. While owners of existing apartments continue to report strong occupancy, this has the potential to soften in the near future given the number of units currently under construction. NAHB is currently projecting that multifamily starts will fall 28% this year.

The Federal Reserve’s monetary policy committee held constant the federal funds rate constant at a top target of 5.5% at the conclusion of its April-May meeting. …Overall, the central bank continues to look for lower inflation readings, with the data having shown limited progress in recent months. Despite the ongoing policy pause, the current meeting did not tilt the Fed’s policy bias toward hawkishness. For example, Fed Chair Powell noted that an additional rate hike is all but ruled out. …With inflation data moderating at a slower than expected pace and economic growth remaining solid, forecasters are pushing back the timing and number of rate cuts expected for 2024. NAHB’s current forecast continues to call for two rate cuts during the second half of 2024. However, this may be reduced to just one dependent on incoming economic data.

Summary of the week-to-week lumber prices and plywood prices (for the week ending April 26, 2024): The Random Lengths framing lumber composite price fell 3.6% (the fifth consecutive week of declines); The price of lumber futures rose 1.2% (down 12.0% in the past month); The structural panel composite price was down 3.5% (OSB prices decreased 5.3%, Western Fir plywood prices declined 0.9% and Southern Yellow Pine plywood prices dropped 2.4%). …Softwood lumber prices have been especially volatile in recent years largely because of increased demand, rising tariffs, supply-chain bottlenecks and insufficient domestic production. ….Surveys conducted by Home Innovation Research Labs show that the average new single-family home uses more than 2,200 square feet of softwood plywood, and more than 6,800 of OSB, in addition to roughly 15,000 board feet of framing lumber.

Housing’s share of the economy rose to 16.1% in the first quarter of 2024. The share remained below 16% for all of 2023 at 15.9% in each of the four quarters. This increase to above 16% marks the first-time housing’s share of GDP is above 16% since 2022. In the first quarter, the more cyclical home building and remodeling component – residential fixed investment (RFI) – increased to 4.0% of GDP, up from 3.9% in the fourth quarter. RFI added 52 basis points to the headline GDP growth rate in the first quarter of 2024, marking three consecutive quarters of positive contributions. Housing services added 17 basis points to GDP growth in the first quarter. Among household expenditures for services, housing services contributions were behind health care (0.59), financial services and insurance (0.37) and other services (0.18).

Compared to the fourth quarter of 2023, the U.S. economy grew at a noticeably slower pace in the first quarter of 2024 due to an increase in the trade deficit and weaker inventory investment. But it was still on solid ground supported by consumers, the government, and the housing industry. Meanwhile, the data from the GDP report suggests that inflation accelerated. The GDP price index rose 3.1% for the first quarter, up from a 1.6% increase in the fourth quarter of 2023. … This quarter’s growth was lower than NAHB’s forecast of a 2.0% increase. …In the first quarter of 2024, residential fixed investment (RFI) made its largest contribution to GDP growth since the first quarter of 2021. It rose 13.9% in the first quarter, up from a 2.8% increase in the fourth quarter of 2023. 

Drax Group released a first quarter 2024 trading update, reporting that the company’s wood pellet production business has started the year well despite challenges. Drax Power Station also performed well during the quarter, according to the company. Drax said the wood pellet market remains challenging, but said “as a vertically integrated producer, user, buyer, and seller of biomass, Drax operates a differentiated model from its peers and sees the current global biomass market as representing a favorable balance of risks and opportunities.” The company also said it is positive on the outlook for biomass demand and it expects it to grow. Bioenergy with carbon capture and storage (BECCS) and the growing sustainable aviation fuel industry are both expected to create additional demand for wood pellets.

CAMBRIDGE, Massachusetts – Annual expenditures for improvements and repairs to owner-occupied homes are projected to decrease this year and into the first quarter of 2025, but at a moderating rate, according to the Leading Indicator of Remodeling Activity (LIRA) released by the Joint Center for Housing Studies of Harvard University. The LIRA projects that annual owner spending for home renovations and maintenance will decline by over 7 percent in the third quarter of this year before easing to just -2.6% through the first quarter of 2025. “Residential remodeling is expected to benefit from the rebounding housing market and stabilizing material costs as we move into next year,” says Carlos Martín, Director of the Remodeling Futures Program at the Center. “At $451 billion, spending on homeowner improvements and repairs over the coming year is anticipated to be slightly lower than the $463 billion spent over the last year,” says Abbe Will.

Despite higher interest rates last month, new home sales rose in March due to limited inventory of existing homes. However, the pace of new home sales will be under pressure in April as mortgage rates moved above 7% this month, which is expected to moderate sales and increase the use of builder sales incentives this Spring. Sales of newly built, single-family homes in March rose 8.8% to a 693,000 seasonally adjusted annual rate from a downwardly revised reading in February, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in March is up 8.3% from a year earlier. Although consumer demand has been somewhat dampened due to higher interest rates, builders continue to supply new homes to the market to lift inventory to make up for the low resale supply.

WASHINGTON, DC – Stronger-than-expected economic and inflation data have pushed interest rates higher and financial markets to price in fewer Federal Reserve rate cuts this year, according to the April 2024 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. While higher mortgage rates present renewed headwinds to the expected recovery in home sales this year, as well as homebuyer affordability more generally, the ESR Group notes that new listings of homes available for sale have continued to rise. While the ESR Group is forecasting existing home sales to rise modestly over the course of the year, it expects the flow of new listings to outpace home sales, which should help gradually thaw housing inventory and contribute to decelerating home price growth. …The ESR Group expects home prices to rise 4.8 percent in 2024, up 1.6 percentage points from last quarter’s projection, and then another 1.5 percent in 2025.