A couple of key leading indicators in the housing market continue to show marginal signs of improvement with builder confidence rising, and delinquency declining. Also we’ll cover weekly updates in mortgage rates and lender activity. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free Builder Confidence Edges Up The National Association of Home Builders (NAHB) reported that builder confidence improved in November. The survey registered a score of 16 up from 15 (downwardly revised) the previous month. The Midwest saw the largest increase up 5 points to 18, while the Northeast dropped 3 points to 13. Typically anything over a 50 shows market conditions favorable to builders while anything under 50 is considered poor. The survey NAHB has been conducting for 20 years of builders specifically single-family home sales. The Home Builders did note that one of the survey factors that registers “future expectations” rose 2 points to 25. That category was up 5 points in October. The Home Builders are starting to feel cautiously optimistic for 2 reasons; financing conditions are improving (even if slightly), and home sales are happening (albeit slow). I anticipate this number will stay close to even or rise slightly over the winter months. If strong retail sales improve due to consumers feeling better, I’d anticipate the confidence index to rise as well. Mortgage Rates: Highest Since August Interest rates jumped on higher consumer confidence and a bit retail sales report that doubled expectations. Freddie Mac reported the 30-year fixed rose .21 bps from 4.17% to 4.39%, marking the highest rates since August and the biggest single week jump this year. The 15-year fixed rate rose from 3.57% to 3.76%. Last week I stated that rates were unlikely to move much over the upcoming weeks and instead we saw the biggest 1-week change in 2010. The retail sales report beating market expectations was huge (by nearly double). Although when auto sales are excluded, the rise was more in line with expectations. Markets will no doubt be watching if and how consumers will react to Black Friday shopping and online sales this year. The resulting sentiment will drive rates the remainder of the year. Mortgage Activity Slows Rising rates naturally means less mortgage activity. The Mortgage Bankers Association reported a plunge in refinance activity of nearly 16.5% over last week, while purchases declined 5%, resulting in a 14.4% decline in its Composite Index(week ending November 12). Refinances account for 80.3% of the market, down from 81.7% last month. The main focus regarding applications is the Purchase Index. Although it declined 5%, the four-week moving average is up 1.3%. Refinances while healthy because they free up extra capital for consumers, is not a true measure of the health of the housing market. Delinquencies Decline Also from the Mortgage Bankers Association(MBA) this week is their quarterly report on delinquencies. The MBA reported that delinquency on 1-4 unit properties decreased to a seasonally-adjusted annual rate of 9.13%, a decrease of 71 bps from Q2, and a year-over-year decrease of 51 bps. It will take considerable time to get the delinquency numbers to a market healthy number. And until this number gets healthy (under 5%), we’ll see a high sustained rate of foreclosure. This is essentially the big number in mortgages as unemployment is to the overall economy. Further it is tied to the unemployment number as job loss/income reduction is the biggest factor in delinquency. The prediction here is continued improvement over the winter, even if marginally. Prices off, but Housing Fundamentals Continue to Improve Most analysts tracking home prices are showing them down at this point and I anticipate that will continue. Home prices are a lagging indicator. Some of the earliest indicators, delinquencies and builder confidence are improving, even if, only slightly at this point. Further I first wrote about the potential for a housing shortage on BiggerPockets back in March. While we’re still roughly 4 years out, when the market swings back, the recovery will go from non-noticeable (stagnant home prices) to heated with asset values rising again 2014-2015.