State and Local Property Tax Revenue Grows in the First Quarter

2025-06-27T09:22:07-05:00

In the first quarter of 2025, state and local governments experienced an increase in property tax revenue growth. On a seasonally adjusted basis, state and local government property tax revenue grew 1.1% over the quarter, according to the Census Bureau’s quarterly summary of state and local tax revenue. Meanwhile, total tax revenue for state and local governments grew 1.3% over the quarter, with corporate income tax revenue up 6.6%, sales tax revenue up 0.9% and individual income tax revenue up 0.2%. Property tax revenue stood at $203.4 billion in the first quarter, a slight increase from $201.1 billion in the fourth quarter. While this does show growth over the quarter, growth has notably slowed over the past year. The quarterly growth in the first quarter of 2024 was almost double (2.1%) the current rate. On a year-over-year basis, property tax revenue was 5.2% higher, up from $193.3 billion. Property taxes typically make up the largest share of the total tax revenue for state and local governments, accounting for over one-third at 37.8% in the first quarter. The second highest revenue source was sales tax at 27.7%, totaling $148.9 billion, followed closely by individual income tax at 26.1% ($140.5 billion). Corporate income tax rounded out the remaining 8.4% at $45.4 billion. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

State and Local Property Tax Revenue Grows in the First Quarter2025-06-27T09:22:07-05:00

Mortgage Rates Hold Steady Despite Modest Uptick in Treasury Yield

2025-06-26T15:15:46-05:00

Average mortgage rates were flat in June, according to Freddie Mac. The average 30-year fixed-rate mortgage held at 6.82%, while the 15-year stayed at 5.95%. Compared to a year ago, the 30-year rate is down 10 basis points (bps), and the 15-year rate is 24 bps lower. The 10-year Treasury yield, a benchmark for long-term borrowing, averaged 4.43% in June – a marginal increase of 5 bps from the previous month. However, the most recent weekly yield saw a small decrease following Federal Reserve Chair Jerome Powell’s congressional testimony, where he noted the possibility of a rate cut being “sooner rather than later” if inflation remains contained. Nonetheless, he reiterated the Fed’s “wait and see” stance, citing ongoing uncertainty around how changes in trade, immigration, fiscal, and regulatory policies will affect the economy. Last week, the Federal Open Market Committee (FOMC) continued its pause on rate cuts, keeping the federal funds rate unchanged at 4.25% to 4.5%. The updated dot plot continues to signal a cumulative rate cut of 50 bps by the end of 2025. However, the latest Summary of Economic Projections revised the median 2025 GDP forecast down from 1.7% to 1.4%. Forecasts for unemployment (4.4% to 4.5%), PCE inflation (2.7% to 3.0%), and core PCE inflation (2.8% to 3.1%) were all revised upward. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Mortgage Rates Hold Steady Despite Modest Uptick in Treasury Yield2025-06-26T15:15:46-05:00

Single-family Construction Loan Volume Grows

2025-06-20T10:15:46-05:00

Credit conditions for builders and developers eased in the first quarter of 2025 as the level of outstanding 1-4 family residential construction loans rose for the first time in two years, according to data released by FDIC. While the volume of 1-4 family residential construction loans rose, a drop in other real estate development loans offset the increase, resulting in the fifth straight quarterly decline in the total volume of outstanding acquisition, development, and construction loans. In the first quarter of 2025, the total level of outstanding acquisition, development, and construction loans fell to $478.3 billion, down 4.1% from a year ago. This was driven by the drop in other real estate development loans, which fell to $388.2 billion, down 3.8% compared to the a year ago. The volume of 1-4 family residential construction and land development loans totaled $90.0 billion in the first quarter, down 5.2% from a year ago. On a quarterly basis, this volume is up 0.6% from $89.5 billion one quarter ago. 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. Quality Metrics of Construction Loans Along with the volume increase of 1-4 family residential construction loans, the share of the volume that is 30+ days past due or nonaccrual status grew in the first quarter. The total level of past due and nonaccrual loans was $1.2 billion, up 24.4% from $978.4 million a year ago. As a share of the total 1-4 family residential construction loan volume, this accounts for only 1.4% but is notably the highest share since 2015. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Single-family Construction Loan Volume Grows2025-06-20T10:15:46-05:00

The Fed Pause Continues

2025-06-18T15:17:06-05:00

Reflecting most forecasters’ expectations for the June FOMC meeting, the Federal Reserve continued its post-2024 pause for federal funds rate cuts, retaining a target rate of 4.5% to 4.25%. The pause comes after a 100 basis point series of reductions in late 2024. Despite these cuts, mortgage rates have remained in the high 6% range. The Fed also held unchanged its ongoing quantitative tightening program, which is more strongly focused on balance sheet reduction for mortgage-backed securities (MBS). The Fed reaffirmed its policy commitment to achieve maximum employment and reduce inflation to a two percent target rate. During the 2025 policy pause, the Fed remains data dependent in a “wait and see” mode for developments in areas like tariff policy. Chair Powell noted that we learn more about tariffs later this summer. NAHB’s forecast incorporates two rate cuts from the Fed for 2025, one in the third quarter and one in the fourth quarter. The Fed noted that economic activity continues at a “solid pace,” however swings in imports affected the first quarter GDP data. The central bank also stated that the unemployment rate remains low and inflation remains “somewhat elevated.” I would note that the primary driver of this elevated inflation is ongoing high rates of shelter inflation, which reflect significant, underlying increases for residential construction costs for the post-covid period. During his press conference, Chair Powell cited that the housing market suffers from both long-run and short-run issues, involving affordability and a [structural] housing shortage. In prior comments to Congress, Powell has noted that home builders face a perfect storm of challenges from both the demand- and supply-sides of the market. The Federal Reserve also published an update for its Summary of Economic Projections (SEP). Compared to its prior March projections, the Fed reduced its 2025 GDP forecast from 1.7% to 1.4% (year-over-year rate from the fourth quarter). During his press conference, Chair Powell linked policy uncertainty as a complicating factor for economic growth. Additionally in the SEP, the Fed slightly increased its 2025 forecast for the unemployment rate in the fourth quarter from 4.4% to 4.5%. The central bank also increased its core PCE inflation projection for the final quarter of the year from 2.8% to 3.1%. During his press conference, Chair Powell noted that economic forecasters cited tariff policy as a contributing factor for a higher than expected level of inflation for 2025. He specifically projected that a measurable amount of inflation will arrive to the economy this summer. There is some debate among economists whether tariffs would have just a one-time impact on the aggregate price level, which would not be inflation pressure felt over a sustained period of time, or would in fact be a factor increasing inflation as a series of price increases. Looking forward to future monetary policy, the “dot plot” projections of the SEP leave the Fed forecasting two rate cuts in 2025, followed by just one reduction in 2026 and one more cut in 2027. This projection removes one rate cute from both 2026 and 2027 compared to the March dot plot, although the Fed continues to point to 3% as the long-run, terminal rate for the federal funds rate. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

The Fed Pause Continues2025-06-18T15:17:06-05:00

Mortgage Applications Dip in May amid Refinance Slowdown

2025-06-04T12:20:31-05:00

Mortgage loan applications declined in May, driven by a drop for refinancing activity. According to the Mortgage Bankers Association (MBA) weekly survey, the Market Composite Index, which measures mortgage application volume, fell 5.5% month-over-month on a seasonally adjusted (SA) basis. Despite the monthly dip, application volume remains 23.7% higher than in May 2024. The average 30-year fixed mortgage rate rose for the second consecutive month, climbing 10 basis points to 6.9%. Purchase activity remained resilient, posting a modest 1.3% monthly gain from the previous month, while the Refinance Index declined 13.7% (SA). Compared to a year ago, mortgage rates are still 18 basis points lower, with purchase and refinance applications up 15.8% and 39.8%, respectively. Average loan sizes also declined. In May, the average loan amount for the overall market, which includes purchases and refinances, declined 3.1% to $390,800. Purchase loan sizes stayed flat at $443,600, while refinance loan sizes dropped 12.8% to $296,000. The average size for adjustable-rate mortgages (ARMs) ticked up 0.5%, from $1.05 million to $1.06 million. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Mortgage Applications Dip in May amid Refinance Slowdown2025-06-04T12:20:31-05:00

Treasury Yield Increase Drives Mortgage Rates Higher in May

2025-05-29T15:15:52-05:00

Mortgage rates continued their upward trend in May due to market volatility triggered by fiscal concerns and weaker U.S. Treasury demand. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.82% — a 9-basis-point (bps) increase from April. The 15-year fixed-rate mortgage increased by 5 bps to 5.95%. The 10-year Treasury yield, a benchmark for mortgage rates, averaged 4.38% in May, with the most recent weekly yield surpassing 4.50%. Long-term treasury yields spiked following two events: first, a credit rating downgrade by Moody’s Ratings, and then, a tepid auction of the 20-year treasury. The weak demand for long-term government bonds necessitated a higher yield to attract investors. At the core of the market unease is concern over the growing fiscal deficit that intensified as the new “One Big Beautiful Bill” threatens to further widen the federal deficit, which stood at $1.9 trillion as of January 2025. The combination of weakening fiscal credibility and poor auction performance suggests a possible upward repricing of long-term borrowing costs. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Treasury Yield Increase Drives Mortgage Rates Higher in May2025-05-29T15:15:52-05:00

Cost of Credit Eases for Builders and Developers

2025-05-15T11:19:46-05:00

The cost of credit for residential Land Acquisition, Development & Construction (AD&C) eased in the first quarter of 2025, according to NAHB’s survey on AD&C Financing. During the quarter, the average contract interest rate declined on three of the four categories of loans tracked in the NAHB survey: from 8.48% in 2024 Q4 to 8.23% on loans for land acquisition, from 8.28% to 7.86% on loans for land development, and from 8.34% to 8.08% on loans for speculative single-family construction. The average rate on loans for pre-sold single-family construction meanwhile bucked the trend, increasing from 7.75% to 7.96%. In addition to interest, lenders also typically charge initial points on the loans. The points can affect credit costs as much as the interest rate—especially for loans paid off as quickly as most of those for single-family construction. In the first quarter of 2025, average points declined from 0.75% to 0.74% on loans for land development, and from 0.67% to 0.45% on loans for pre-sold single-family construction; but increased from 0.55% to 0.71% on loans for land acquisition, and from 0.64% to 0.68% on loans for speculative single-family construction. The change in points was sufficient to offset the increase in interest rates on loans for pre-sold single-family construction, but not the reduction in rates on the other three categories of AD&C loans. As a result, the average effective interest rate (calculated taking both the contract rate and initial points into account) declined in all four cases: from 10.79% to 10.68% on loans for land acquisition, from 12.12% to 11.50% on loans for land development, from 12.86% to 12.59% on loans for speculative single-family construction, and from 12.98% to 12.49% on loans for pre-sold single-family construction. Except for what now looks like a temporary reversal for construction loans in 2024 Q4, the average effective rate on AD&C loans has been trending downward for about a year. This stands in contrast to the average rate on 30-year fixed-rate mortgages, which has levelled off and even started to edge up again after coming off its 2023 peak. While the cost of AD&C credit was declining, the NAHB survey shows that lending standards on AD&C loans were still tightening in the first quarter, although the reports of tightening were less widespread than they had been at any other time over the past three years. The net easing index derived from the survey posted a 2025 Q1 reading of -10.0 (the negative numbers indicating that net credit had become tighter since the previous quarter). This is the closest the NAHB index has come to hitting the break-even point of zero since the first quarter of 2022. At the same time, the similar net easing index derived from the Federal Reserve’s survey of senior loan officers posted a 2025 Q1 reading of -11.1. This is down slightly from the previous quarter, but still ranks as the second highest reading for the Fed index since the first quarter of 2022. The Fed survey of lenders and the NAHB survey of builders and developers have been telling very similar stories recently, especially over the past five quarters. More details from the Fed’s survey of lenders—including measures of demand and net easing for residential mortgages—are discussed in a previous post. Perhaps surprisingly, given the above results on declining credit costs, raising interest rates (cited by 57% of builders and developers who reported that availability of credit had worsened in the first quarter) has displaced lowering the loan-to-value or loan-to-cost ratio (50%) as the number-one way NAHB members say lenders are tightening conditions on AD&C loans. It is important to remember that relatively few NAHB members reported worse credit availability in the first place in 2025 Q1, so these percentages are based on a relatively small sample. Tied for third place, each cited by 43% of builders and developers, are increasing documentation requirements and requiring personal guarantees or collateral not related to the project. Meanwhile, the share of builders and developers who say lenders are reducing the amount they are willing to lend fell to 36%—the lowest percentage for this mode of tightening since 2018. More detail on credit conditions for residential builders and developers is available on NAHB’s AD&C Financing Survey web page. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Cost of Credit Eases for Builders and Developers2025-05-15T11:19:46-05:00

Residential Mortgages Experience Weaker Demand in First Quarter

2025-05-13T09:18:21-05:00

Overall demand for residential mortgages was weaker while lending standards for most types of residential mortgages were essentially unchanged1 according to the Federal Reserve Board’s April 2025 Senior Loan Officer Opinion Survey (SLOOS).  For commercial real estate (CRE) loans, lending standards for construction & development were moderately tighter, while demand was modestly weaker.  However, for multifamily loans within the CRE category, lending conditions and demand were essentially unchanged for the second consecutive quarter.  The Federal Reserve left its monetary policy stance (i.e., Federal Funds rate) unchanged during its most recent meeting stating that the Fed “is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”  Nevertheless, NAHB is maintaining its forecast for interest rate cuts in the second half of 2025. Residential Mortgages In the first quarter of 2025, only one of seven residential mortgage loan categories saw a slight easing in lending conditions, as evidenced by a positive2 value for GSE-eligible loans, which was +3.2 in the first quarter of 2025.  Subprime and government loans both recorded a neutral net easing index (i.e., 0) while the other four categories (Non-QM jumbo; Non-QM non-jumbo; QM non-jumbo, non-GSE-eligible; QM jumbo) were negative, representing tightening conditions.  The Federal Reserve classifies any net easing index between -5 and +5 as “essentially unchanged,” however.  By this definition, lending standards changed significantly for only one category of residential mortgages: non-QM jumbo (-7.5). All residential mortgage loan categories reported significantly weaker demand in the first quarter of 2025, except for QM-jumbo which was essentially unchanged.  The net percentage of banks reporting stronger demand for most of the residential mortgage loan categories has been negative since mid-2022. Commercial Real Estate (CRE) Loans Across CRE loan categories, construction & development loans recorded a net easing index of -11.1 for the first quarter of 2025, indicating tightening of credit conditions.  For multifamily loans, the net easing index was -1.6, or essentially unchanged. Both categories of  CRE loans show at least three consecutive years of tightening lending conditions (i.e., net easing indexes below zero).  However, the tightening has become less pronounced recently—especially for multifamily, with its net easing index rising (i.e., becoming less negative) for six straight quarters. The net percentage of banks reporting stronger demand was -6.3% for construction & development loans and -1.6% for multifamily loans, the negative numbers indicating weakening demand.  Like the trend for lending conditions, demand for CRE loans has become less negative recently, especially for multifamily loans  where the net percentage of banks reporting stronger demand has risen (i.e., become less negative) for six consecutive quarters. The Federal Reserve uses the following descriptors when analyzing results from the survey which will be used, in principle, within this blog post as well: – “Remained basically unchanged” means that the change or actual reading is greater than or equal to 0 and less than or equal to 5 percent. – “Modest” means that the change or actual reading is greater than 5 and less than or equal to 10 percent. – “Moderate” means that the change or actual reading is greater than 10 and less than or equal to 20 percent. – “Significant” means that the change or actual reading is greater than 20 and less than or equal to 50 percent. – “Major” means that the change or actual reading is greater than or equal to 50 percent.A value above zero (i.e., positive) indicates that lending conditions are easing while a value below zero (i.e., negative) indicates that lending conditions are tightening. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Residential Mortgages Experience Weaker Demand in First Quarter2025-05-13T09:18:21-05:00

Consumer Credit Slows in the First Quarter of 2025

2025-05-09T09:18:23-05:00

Consumer credit continued to rise in early 2025, but the pace of growth has slowed. Student loan balances rose year-over-year as borrowers resumed payments following the end of pandemic-era relief. However, growth remains modest. Credit card and auto loan debt also increased, though both experienced their slowest annual growth rates in years. Despite historically high interest rates, credit card and auto loan rates have begun to ease slightly, providing some relief for consumers facing elevated borrowing costs. Total outstanding U.S. consumer credit reached $5.01 trillion for the first quarter of 2025, according to the Federal Reserve’s G.19 Consumer Credit Report. This is an increase of 1.53% at a seasonally adjusted annual rate (SAAR) compared to the previous quarter, and a 1.93% increase compared to last year. Both rates have slowed from the previous quarter. Nonrevolving Credit Nonrevolving credit, largely driven by student and auto loans (the G.19 report excludes mortgage loans), reached $3.68 trillion (SA) in the first quarter of 2025. This marks a 1.23% increase (SAAR) from the previous quarter, and a 1.56% increase from last year. Student loan debt balances stood at $1.80 trillion (NSA) for the first quarter of 2025, marking a 2.48% increase from a year ago. The end of the COVID-19 Emergency Relief—which allowed 0% interest and halted payments until September 1, 2023—led year-over-year growth to decline for four consecutive quarters, from Q3 2023 through Q2 2024, as borrowers resumed payments and took on less new debt. While the past three quarters have shown a return to growth, the current pace of growth remains below pre-pandemic levels. Auto loans reached a level of $1.56 trillion (NSA), showing a year-over-year increase of only 0.26%, marking the slowest growth rate since 2010. The deceleration in growth can be attributed to several factors, including stricter lending standards, elevated interest rates, and overall inflation. Auto loan rates for a 60-month new car stood at 8.04% (NSA) for the first quarter of 2025, a historically elevated level. However, auto rates have slowed modestly, decreasing by 0.18 percentage points compared to a year ago. Revolving Credit Revolving credit, primarily made up of credit card debt, rose to $1.32 trillion (SA) in the first quarter of 2025. This represents a 2.36% increase (SAAR) from the previous quarter and a 2.98% increase year-over-year. Both measures reflect a notable slowdown, marking the weakest growth in revolving credit in several years. This deceleration comes as credit card interest rates remain elevated, with the average rate held by commercial banks (NSA) at 21.37%. Although rates have hovered near historic highs since Q4 2022, the past two quarters have shown modest year-over-year declines, reflecting the impact of rate cuts that began in 2024. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Consumer Credit Slows in the First Quarter of 20252025-05-09T09:18:23-05:00

Mortgage Activity Levels Off in April as Rates Increase

2025-05-06T12:14:55-05:00

Mortgage loan applications saw little change in April, as refinancing activity decreased. The Market Composite Index, which measures mortgage loan application volume based on the Mortgage Bankers Association (MBA) weekly survey, experienced a 0.4% month-over month increase on a seasonally adjusted (SA) basis. However, year-over-year, the index is up 29.3% compared to April 2024. The average rate for a 30-year fixed mortgage climbed 10 basis points in April, reaching 6.8%, according to the MBA survey. As rates edged higher, purchase activity posted a modest 1.9% month-over-month gain (SA), while the Refinance Index declined by 1.4% (SA). Compared to a year ago, mortgage rates are down 37 bps, and thus, purchase applications are higher by 11.2%, while refinance activity has jumped 62.0%. Loan sizes remained relatively stable. In April, the average loan size across the total market (including purchases and refinances) held steady at $403,500, month-over-month, on a non-seasonally adjusted basis (NSA). Purchase loans sizes edged down 1.3% to $444,000, while refinance loan sizes increased 0.5% to $339,300. Notably, the average loan size for adjustable-rate mortgages (ARMs) fell 7.8%, from $1.14 million to $1.05 million. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Mortgage Activity Levels Off in April as Rates Increase2025-05-06T12:14:55-05:00
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