Monthly Archives: June 2021

Northeast new homes sales rise 48% | Waccabuc Real Estate

After notable and expected downward revisions for prior months, May recorded a decline of 5.9% for sales of newly-constructed single family homes, according to estimates from the Census Bureau and HUD. The May seasonally adjusted annual rate (769k) was the lowest in a year, due to builders slowing sales as a consequence of higher material costs and declining availability of labor, material and lots.

Residential demand continues to be supported by low interest rates, a renewed consumer focus on the importance of housing, and solid demand in lower-density markets like suburbs and exurbs. However, higher building costs, longer delivery times, and general unpredictability in the residential construction supply-chain are having measurable impacts on new home prices. In May, the median price of a newly-built home was 18% higher than a year ago, at $374,400. As NAHB has estimated, higher lumber costs alone are increasing new home prices by $36,000 on average.

Higher costs have priced out buyers, particularly at the lower end of the market. A year ago, 44% of new home sales were priced below $300,000. In May 2021, only 26% of new home sales were priced below $300,000.

Looking back to the spring of last year, the April 2020 data (570,000 annualized pace) marks the low point of sales for the 2020 recession. The April 2020 rate was 26% lower than the prior peak, pre-recession rate set in January. Sales then mounted a historic surge from April until July, outpacing gains in actual construction. Sales have been above the pace of the post-Great Recession trend since the second half of last year. However, since January the trend has been declining and has now dipped below the long-run trend (as indicated by the blue dashed line in the graph above).

Sales-adjusted inventory levels remained healthy in May, although they did increase to a 5.1 months’ supply.

Completed ready-to-occupy homes continue to fall as a share of new home inventory. Such homes were just under 24% of inventory a year ago. They are only a little more than 11% of the total in May 2021.

Moreover, to see how sales patterns have changed in a high demand, low supply market — the count of new homes sold that had not started construction is up 76 percent over the last year. The count of new homes sold that are completed and ready to occupy is down 33 percent.

Regionally on a year-to-date basis new home sales rose in all four regions, up 48.7% in the Northeast, 33.5% in the Midwest, 32.3% in the South, and 5.6% in the West. These significant increases are due in part to lower sales volume during the Covid crisis a year ago.

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Eyeonhousing.org

Existing home sales rise 44% | South Salem Real Estate

Median sales price of all existing homes was $350,300, up 23.6% from a year ago.

As low inventory continues to push home prices higher and squeeze out some buyers, existing home sales dropped to a eleven-month low in May, according to the National Association of Realtors (NAR). The median existing home price in May surged to an all-time high; the largest annual pace on record.

Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, fell 0.9% to a seasonally adjusted annual rate of 5.80 million in May, the lowest level since July 2020. However, on a year-over-year basis, sales were still 44.6% higher than a year ago.

The first-time buyer share remained at 31% in May, even with April but down from 34% a year ago. The May inventory level increased from 1.15 to 1.23 million units but is still down from 1.55 million units a year ago.

At the current sales rate, the May unsold inventory sit at a 2.5-month supply, slightly up from April’s 2.4-month but still down from 4.6-month a year ago. This low level supply of resale homes is good news for home construction.

Homes stayed on the market for an average of just 17 days in May, an all-time low, unchanged from April and down from 26 days a year ago. In May, 89% of homes sold were on the market for less than a month.

The May all-cash sales share was 23% of transactions, down from 25% last month and 17% a year ago.

Tight supply continues to push up home prices. The May median sales price of all existing homes was $350,300, up 23.6% from a year ago, representing the 111st consecutive month of year-over-year increases. The median existing condominium/co-op price of $306,000 in May was up 21.5% from a year ago.

Geographically, three of four regions saw a decline in existing home sales in May, ranging from 0.4% in the South to 4.1% in the West. Sales in the Midwest rose 1.6% in May. On a year-over-year basis, however, sales continued to grow by double-digits in all four regions, ranging from 27.2% in the Midwest to 61.6% in the West.

Meanwhile, the Pending Home Sales Index (PHSI), also reported by the NAR, is a forward-looking indicator based on signed contracts. The PHSI declined 4.4% from 111.1 to 106.2 in April. On a year-over-year basis, sales were 51.7% higher than a year ago.

Though consumers are facing higher home prices and declining housing affordability, housing demand is expected to remain solid due to historically favorable mortgage rates and a promising economic outlook. Meanwhile, rising material prices and supply chain shortage are limiting builders’ abilities to meet the increased level of demand. The imbalance between housing supply and demand could hamper future sales by driving up house prices and eroding affordability.

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eyeonhousing.org

Mortgage rates average 3.02% | Mt Kisco Real Estate

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey (PMMS), showing that the 30-year fixed-rate mortgage (FRM) averaged 3.02 percent.

“Mortgage rates have risen above three percent for the first time in ten weeks,” said Sam Khater, Freddie Mac’s Chief Economist. “As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year. For those homeowners who have not yet refinanced – and there remain many borrowers who could benefit from doing so – now is the time.”

News Facts

  • 30-year fixed-rate mortgage averaged 3.02 percent with an average 0.7 point for the week ending June 24, 2021, up from last week when it averaged 2.93 percent. A year ago at this time, the 30-year FRM averaged 3.13 percent.
  • 15-year fixed-rate mortgage averaged 2.34 percent with an average 0.7 point, up from last week when it averaged 2.24 percent. A year ago at this time, the 15-year FRM averaged 2.59 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.53 percent with an average 0.3 point, up slightly from last week when it averaged 2.52 percent. A year ago at this time, the 5-year ARM averaged 3.08 percent.

The PMMS is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Lumber prices drop 41% from mid May 2021 peak | Katonah Real Estate

After peaking at around $1,700 per thousand board feet in mid-May, lumber prices sank below $1,000 per thousand board feet this week for the first time since late March, according to Random Lengths. Since falling by approximately 23% between September 2020 and November 2020, lumber prices surged into 2021, reaching record levels beginning in March.

Rising prices became a top concern across the construction industry, with numerous industry associations, including the National Association of Home Builders (NAHB) and the National Lumber and Building Material Dealers Association (NLBMDA), pushing government officials to prioritize the issue. The NAHB estimated the significant spike in softwood lumber prices between April 2020 and April 2021 added nearly $36,000 to the price of an average new single-family home and approximately $13,000 to the market value of an average new multifamily home. In addition to the risk the price increases, and related supply-side issues, posed to construction firms, the NAHB estimated the increase in average home prices priced out more than 5.5 million households.

Even as lumber prices soared in May, analysts at BMO Capital Markets projected lumber prices would drop by the second half of the year and return to more typical levels in 2022. The bank cited affordability concerns as the chief reason for expected lumber price reliefs.

“Household wallets are not unlimited and at some point, demand could shrink amid a reluctance to shell out extra dough for the same studs and sheathing,” BMO Capital Markets forecast in May.

Beyond affordability, expanding supply has also contributed to lumber’s recent price decline. U.S. lumber production has increased 5% in the past 12 months, with another 5% increase expected, according to Domain Timber Advisors via Bloomberg.

While prices have begun to decrease, and are trading roughly 40% below their mid-May peak, lumber prices are still up 175% on a year-over-year (YOY) basis, according Business Insider. Analysts project prices will remain “above trend” in the short-term future, despite the recent rapid decline. Speaking with CNBC, Sherwood Lumber COO Kyle Little said while relief is expected over the next six to 12 months, the prices seen will still be “much, much higher than prices we’ve experienced in the recent past.”

While the past week has seen a reprieve on lumber prices, supply-side shortages continue to significantly affect the construction industry. A recent report from the NAHB found the shortage of materials was more widespread than any other period since the association began tracking the issue in the 1990s. The NAHB’s May Housing Market Index (HMI) survey in May 2021 found approximately 90% of builders who buy framing lumber, plywood, and OSB reported shortages. However, shortage issues for builders extend beyond lumber, as sourcing appliances and windows and doors are issues plaguing around 90% of builders, according to the NAHB. A recent survey of the JLC readership also found windows and doors had long wait times, ranging from from about 2-3 weeks to as many as 17 weeks for some readers. Lighting, electrical and plumbing fixtures, cabinets, and appliances were among the other items the JLC readers reported had long lead times.

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jlconline.com/business/

Prices of Residential Construction Inputs Up 23% Year-Over-Year | Bedford Real Estate

Prices paid for goods used in residential construction ex-energy rose 3.6% in May (not seasonally adjusted) and have increased 16.5% over the past 12 months, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. Building materials (i.e., inputs to residential construction less food and energy) prices have declined just twice since December 2019.

The index for inputs to residential construction, including food and energy, increased more (+4.1%) and is up 22.5%, year-over year.  This increase closely mirrors the 26% increase found in a recent NAHB survey.

Building materials prices have increased 9.4% year-to-date (YTD), in stark contrast to the 0.4% YTD seen in 2020.  However, the 2021 increase YTD is an outlier when compared to pre-pandemic years as well, more than tripling the largest January-to-May increase since 2015 (the most recent data available).

Steel Products

Steel mill products prices climbed 2.4% in May, a substantial slowdown after three months during which increases averaged 15.9%.  Even so, prices are up 75.4% over the past 12 months and have risen 59.4% in 2021 alone.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) rose 19.2%–the largest monthly increase since September 2020—and set a record high for the fourth consecutive month. Lumber prices have remained extremely volatile since the 88.5% increase between April and September 2020.

Since falling 22.9% between September and November, the softwood lumber PPI has risen 81.2%. However, recent data from Random Lengths suggests that the index will decline next month as weakening prices in late-May and the first half of June are captured by the BLS survey.

Lumber Futures

Good news has been found in the futures market of late, as July lumber futures have fallen precipitously in recent weeks.  Since May 10, the price of July futures has declined 44.2%.  It is worth noting the features of lumber futures as they explain why changes in the futures market may not be a practical leading indicator of how much builders will pay for framing packages in the months ahead.

First, the specifications of lumber futures contracts state that a futures contract:

  • Is for delivery of roughly 110,000 board feet (all of which is made up 2x4s), assuming the future is held to delivery.
  • Only delivers lumber that is manufactured in California, Idaho, Montana, Nevada, Oregon, Washington, Wyoming, or Alberta or British Columbia, Canada.
  • Is limited to Hem-Fir, Englemann Spruce, Lodgepole Pine, and/or Spruce-Pine-Fir.  Southern Yellow Pine is notably absent.

Second, if hoarding takes place in the middle of the supply chain as wholesalers and/or distributors attempt to protect against upside risk, these supply chain members may sell inventories if futures and/or mill prices fall.  But the current cash or futures price has little effect on prices paid by builders until prices have fallen to a sufficiently low level for long enough to counteract middlemen being “trigger shy” in an environment of falling mill prices.

Exchange Rate Effects

In addition to nominal price movements and tariffs on Canadian lumber, cross-border purchasers are affected by the strength of the U.S. dollar relative to the Canadian dollar.

The USD has depreciated 4.8% YTD and 10.3% over the past 12 months which has raised the price of Canadian imports in real terms above nominal increases due to other market forces.

Gypsum Products

Prices paid for gypsum products increased 3.4% in May, reaching a record high for the second consecutive month. The index has climbed 14.6% over the past year, but the whole of that increase has occurred since October 2020. The index for gypsum building materials (e.g., drywall) has increased 17.9% since last October.

Ready-Mix Concrete

Prices paid for ready-mix concrete (RMC) climbed 0.2% (seasonally adjusted), following a 1.1% increase in April. Price volatility has eased in 2021 as four of the five monthly price changes YTD have been between -0.2% and 0.3%.

Prices increased in the Northeast (+2.3%) and South (+0.2%) regions in May, while prices paid in the Midwest (-1.1) and South (-0.4%) declined.

Other Building Materials

The chart below shows the 12-month and year-to-date price changes of other price indices relevant to the residential construction industry.  As Congress continues to work on an infrastructure package, the Construction Materials index is particularly salient.  This index is much more heavily weighted with products necessary and used in large amounts in the production of “traditional” infrastructure (e.g., roads, bridges, rail).

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eyeonhousing.org/2021/06/

US housing market is short 5.5 million homes, NAR says | Pound Ridge Real Estate

The National Association of Realtors says the current state of the housing market is absolutely “dire,” the consequence of a housing shortage 30 years in the making.

According to the lobbying group, construction of long-term housing fell 5.5 million units short of historical levels over the past 30 years.

The NAR is calling for a “major national commitment” to build more housing of all types by expanding resources, addressing barriers to new development and making new housing construction an integral part of a national infrastructure strategy.

The report, authored for the NAR by the Rosen Consulting Group, highlighted a “chronic shortage of affordable and available homes [needed to support] the nation’s population,” noting the recent lack of new construction and a prolonged underinvestment in those affordable units as the main culprits.

From 1968 to 2000, the total stock of U.S. housing grew at an average annual rate of 1.7%. In the past 20 years, the U.S. housing stock grew by an annual average rate of 1% — and only 0.7% in the last decade.

In fact, coming off the Great Recession, new home construction in the U.S. between 2010 and 2020 fell 6.8 million units short of what was needed, the report said.

Residential fixed investment (RFI) — the sector of economic activity that accounts for housing construction and renovation — accounted for approximately 5% of the country’s total gross domestic product between 1968 and 2000. In the past 12 years, though, RFI accounted for only 3% of the country’s gross domestic product. This shortfall in RFI, the NAR reported, translated to a $4.4 trillion gap in housing market investment from 2000 to 2020.

Existing-home inventory at the end of April totaled just 1.16 million units, down 20.5% from the prior year.

In looking at underbuilt, major U.S. metros, the New York-Newark-Jersey City metro had an underbuilding gap of 148,650 units in the past nine years — the largest gap in the country, the study claimed. That’s followed only by the San Francisco-Oakland-Hayward metro, which reported a gap of 113,200 units; and the Riverside-San Bernardino-Ontario, California metro, which reported a gap of 107,700 units.

“There is a strong desire for homeownership across this country, but the lack of supply is preventing too many Americans from achieving that dream,” said Lawrence Yun, NAR chief economist. “It’s clear from the findings of this report and from the conditions we’ve observed in the market over the past few years that we’ll need to do something dramatic to close this gap.”

Specifically, NAR President Charlie Oppler said adequate increases in housing construction this decade would add an estimated 2.8 million American jobs and $50 billion in nationwide tax revenue.

“A number of factors from the past 20 years are responsible for the massive housing investment gap we see in America today, but what’s important now is that we find solutions that will get us out of this crisis and provide more stability in future markets,” Oppler said. “Additional public funding and policy incentives for construction will very clearly provide huge benefits to our nation’s economy, and our work to close this gap will be particularly impactful for lower-income households, households of color and millennials.”

In order to fill the underbuilding gap in the next 10 years, the NAR estimated that more than 2 million housing units would need to be built per year – an increase of more than 700,000 units per year relative to the pace of housing production in 2020.

Several potential policy changes were offered up by NAR in the report, including addressing the large shortages of capital for the development of affordable housing by expanding resources and maximizing the potential of existing programs, incentivizing shifts in local zoning and regulatory environments to increase the quantity of developable residential space, and increasing housing supply by promoting conversions of underutilized commercial space.

Oppler added that addressing the national underbuilding gap in the housing market will require a “coordinated approach” to the planning, funding and development of infrastructure.

As part of a $1 trillion national infrastructure plan, President Biden has earmarked $318 billion toward the construction and preservation of affordable housing.

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housingwire.com/articles/

Mortgage rates average 2.93% | Bedford Hills Real Estate

Freddie Mac  today released the results of its Primary Mortgage Market Survey (PMMS), showing that the 30-year fixed-rate mortgage (FRM) averaged 2.93 percent.

“Mortgage rates continue to drift down as markets concur with the view that inflation increases are temporary,” said Sam Khater, Freddie Mac’s Chief Economist. “While mortgage rates are low, purchase demand has weakened over the last couple of months, primarily due to affordability constraints stemming from high home prices. With inventory tight, the slowdown in demand has yet to impact prices, meaning the summer will likely remain a strong seller’s market.”

News Facts

  • 30-year fixed-rate mortgage averaged 2.93 percent with an average 0.7 point for the week ending June 17, 2021, down from last week when it averaged 2.96 percent. A year ago at this time, the 30-year FRM averaged 3.13 percent.
  • 15-year fixed-rate mortgage averaged 2.24 percent with an average 0.6 point, up slightly from last week when it averaged 2.23 percent. A year ago at this time, the 15-year FRM averaged 2.58 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.52 percent with an average 0.3 point, down from last week when it averaged 2.55 percent. A year ago at this time, the 5-year ARM averaged 3.09 percent.

The PMMS is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers.

Housing starts surge 50% | Bedford Corners Real Estate

U.S. homebuilding bounced back in May as lumber prices pulled back from record highs. 

Housing starts rose 3.6% to a seasonally adjusted annual rate of 1.572 million last month, the Commerce Department said on Wednesday. April’s reading was revised lower to 1.517 million from 1.569 million. Economists surveyed by Refinitiv had expected housing starts to rise to 1.63 million.

Starts surged 50% on a year-over-year basis in May. Homebuilding rose in the Midwest, South and West but fell in the Northeast. 

The slight increase in homebuilding came as lumber prices topped out on May 7 and fell 22% through the end of the month, finishing below where they ended April. A lumber shortage that developed in the aftermath of COVID-19 lockdowns caused the cost of the critical material to soar, resulting in builders putting off projects and losing confidence.        

Permits for future construction slipped 3% to a rate of 1.681 million units in May, missing the 1.73 million units that economists were expecting. 

The drop in builder confidence was reflected in the latest National Association of Homebuilder’s/Wells Fargo Housing Market Index that was released on Tuesday. The index fell two points in June to 81, a 10-month low. 

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foxbusiness.com/economy/

Homebuyers are growing weary of the housing market | Chappaqua Real Estate

Fannie Mae’s HPSI sees “good time to buy” sentiment drop to survey low

Homebuyers are feeling pretty discouraged by the housing market these days. The latest Fannie Mae Home Purchase Sentiment Index shows that just 35% of consumers believe now is a good time to buy a home, down from 47% in April. And those who believe it is a bad time to be a homebuyer increased to 56% from 48%.

“Consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

“However, despite the challenging buying conditions, consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment,” Duncan said.

Though low inventory, bidding wars and high prices have knocked down homebuyer sentiment, other factors, such as a rebounding economy and stable income levels, pushed the overall HSPI index up one point to 80 in May.

In fact, four of the HPSI’s six components measuring market expectations increased month over month. The HPSI is still 12.5 points higher than it was in May 2020, when forbearance and unemployment heavily weighed down consumer sentiment.

Because the housing market feels very much like a zero sum game at this point, sellers again felt good about their position. Just over two-thirds of those surveyed in June said it was a prime time to list a home and tempt the swarms of homebuyers, unchanged from the prior month.

Respondents also remained virtually unaltered on how much homes will actually cost. The percentage of respondents who say home prices will go up in the next 12 months decreased from 49% to 47%, while the percentage who say home prices will go down remained unchanged at 17%. The share who think home prices will stay the same increased from 27% to 29%.

Mortgage rate expectations changed a bit in May for prospective homebuyers and sellers: The percentage who expect mortgage rates to go up decreased from 54% to 49% while the share of those who think mortgage rates will stay the same increased from 33% to 38%. The remaining 6% are hopeful they may slide back down.

Since rates have fallen back below 3% once again, Fannie Mae’s economic and strategic group revised its expectations for purchase and refinance volume. The economic group cut $43 billion from its 2021 purchase volume forecast; it now estimates that purchase mortgages will hit $1.8 trillion by year’s end.

Because record low mortgage rates fueled the refinance wave of 2020’s housing market, Fannie Mae also revised its refi origination volume to $2.2 trillion in 2021, an increase of $125 billion from the previous month’s forecast.

Borrowers who aren’t stuffing their pockets full of refi savings may be making it up on the job market. The percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 21% to 29%, while the percentage who say their household income is significantly lower decreased from 17% to 13%. To top it off, the percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 80% to 87%.

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housingwire.com/articles/

Mortgage lenders loosened credit standards | Chappaqua Real Estate

Numbers are consistent with an uptick in mortgage rates and a downturn in applications.

Mortgage credit availability increased by 1.4% in May – a sign that volume-hungry lenders continued to loosen credit standards in a highly competitive market, according to Thursday data from the Mortgage Bankers Association.

MBA’s Mortgage Credit Availability Index (MCAI) which uses 100 as a benchmark — increased to 129.9 in May. A decline in the MCAI suggests that lending standards are tightening while a higher number suggests loosening credit standards.

Lenders concerned over borrowers’ ability to pay their bills at the beginning of the economic shutdown resulted in an exponential tightening of credit. However, May’s credit availability inched to its highest level since the early days of the pandemic, but remained at 2014 levels.

The MCAI on conventional loans increased 3.5%, while MCAI on government loans increased by 0.3%. Of the two component indices of the conventional MCAI, the jumbo MCAI increased by 5.1%, and the conforming MCAI rose by 1.6%, the MBA said.

MCAI-May

“The overall increases were driven by a 3% gain in the conventional segment of the market, with a rise in the supply of ARMs and cash-out refinances,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Borrowers are “stuck in the middle” between the agencies’ minimum FICO requirements and the “FICO gates” imposed by lenders’ credit overlays. We have the tools to help them, we just need to use them. 

According to Kan, this is consistent with the uptick in mortgage rates and a slowing refinance market, as well as MBA’s Weekly Applications Survey data showing increased interest in ARMs. Monday data from the MBA revealed mortgage applications dropped for the third consecutive week.

Compared to last year, fewer people are applying for purchase mortgages – a likely result of home prices continuing to rise and prospective buyers avoiding astronomical bidding wars.

However, housing demand is still far outpacing supply, Kan said. The average loan size on a purchase application edged down to $407,000, below the record $418,000 set in February — but still far above 2020’s average of $353,900, the MBA reported.

“The jumbo index also jumped 5% last month, but even with increases over the past two months, the index is still around half of where it was in February 2020,” Kan said. “A rapidly improving economy and job market has freed up jumbo credit, as banks have deposits to utilize. However, there is still plenty of restraint, as many sectors have not fully returned to pre-pandemic capacity, and there are around 2 million borrowers still in forbearance.”

At this time last year, the Jumbo loan index was 54% lower than it had been in February 2020. Securing a jumbo loan was the most difficult it had been in four years, according to MBA data. But a flourishing housing market gave way to jumbos from a host of lenders, including Rocket Mortgage and United Wholesale Mortgage.

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housingwire.com/articles/