(Read more: Banks hit the brakes on mortgage operations)

The summer has not proved much better for the builders. Mortgage applications to purchase a newly built home dropped 14 percent from July, according to a new report from the Mortgage Bankers Association. Still, demand is there, and after building next to nothing during the housing crash, U.S. builders are now faced with renewing the nation’s housing stock. That, Pulte executives say, is why innovation is so important.

“When I was at my first conference, I met someone and referenced that I was doing market research,” said Ian Wild, Pulte’s director of market research. “The fellow said, ‘Let me tell you how I do market research. I get in my car and I drive down the road to the competition and I say what’s selling and why?’ And as a result of that, the innovation in the home building industry is, well, there’s very little.”

So on a hot September morning, with the roar of O’Hare’s traffic overhead, small groups of homeowners wind their way through the rows of homes in frames of back doors and out frames of front doors, gripping their clipboards and checklists, and eyeing every detail and every measure of space.

“It’s much easier than looking at a blueprint, where you keep turning it around trying to understand which way the door swings. Will this be this way?” asked Chicago-area homeowner Sasha Zingerman, motioning. “It’s much more comprehendible, and you can physically picture yourself in that space. You could see how you would orient yourself there.”

The subjects are paid to offer their opinions, and after the tours they sit down with a moderator to tell what they like, and more importantly what they do not like.

(Read more: Jobs report tempers mortgage rates)

“I like how it all flows together. It’s open, it’s airy, there’s a lot of light coming in. It seems like a happy environment,” said one woman.

Pulte gets at least five new design ideas from each of these events, which are held across the country, according to Wahl. The latest trends are full home automation (running every system in the home through a smartphone), larger mud rooms, or as Pulte calls them, Everyday Entries. Dining rooms are out, larger kids’ bathrooms are in.

“I don’t think I would ever use the formal dining room, so it would be a wasted space for a room that I don’t use often enough,” added another.

After living through the worst housing crash since the Great Depression, today’s home buyers are more skeptical and less trusting of home builders. Some blame builders for throwing up far too many houses, selling them to speculators and turning a blind eye to an overheated market that was bound to bust. They are treading back in slowly and finding higher prices.

Article source: http://www.cnbc.com/id/101029507

Confidence, or lack thereof, is also still keeping some sellers sidelined.

“There always is a tendency to time the market, which we know is becoming a little bit harder to do,” said Budge Huskey, CEO of Coldwell Banker in an interview on CNBC. “It’s an assessment of their overall impressions of the economy. I think there’s still a little hesitation. People want to see stronger economic growth, people want to see more progress made toward unemployment rates and just feel better about moving on.”

Lack of inventory means it is a seller’s market, despite so much hesitance by potential sellers themselves. That will keep home prices strong, unless and until more people decide to list their homes and home builders ramp up production, which they have been so far slow to do.

(Read more: $1 million summer homes)

It begs the question, what is housing worth today, market-to-market? A million dollars may buy a McMansion in Oklahoma, but barely buy a bedroom in Manhattan.

In an effort to gauge differing values, CNBC is trawling the million-dollar market again, this time in a “back-to-school” edition.

Starting on “Squawk Box” this Friday, two reporters will show two homes without disclosing their locations; they will document the interiors, exteriors, marketed features and one unique bonus offered by each home.

Real estate maven Dolly Lenz will decide which house gives buyers a better bang for the buck.

We will then reveal where the two houses are located, and with that added to the mix, Lenz will choose a winner. That house will then go up against the next mystery location on the next show.

(Follow along on Twitter with the hashtag #MillionDollarHome and see the early winners here as well).

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/101009330

Mortgage rates are about a full percentage point higher today than they were at the beginning of March. The average rate on the 30-year fixed hit 4.80 percent by the middle of last week, according to the Mortgage Bankers Association. That is the highest since April 2011.

Rates have been trending higher on expectations that the Federal Reserve will begin to taper its investments in mortgage-backed securities.

Home prices are also trending higher in part due to the fact that there are fewer distressed properties for sale. Excluding distressed sales, prices were up 11.4 percent year over year. Distressed properties have seen big price jumps in the past year, as investors fight to get the remaining bargains.

Markets hit hardest by the housing crash have seen some of the biggest price gains: Nevada home prices were up 27 percent annually in July, California up 23 percent and Arizona up 17 percent. Completed foreclosures nationally were down 25 percent in July from a year ago, according to CoreLogic.

(Read more: Map: Tracking the recovery)

Prices are also getting a boost from the sheer lack of properties for sale. Inventories are way down in local markets across the nation, and home builders are not ramping up production fast enough to meet new demand.

While the inventory situation is not expected to ease very much over the next year, home prices are expected to weaken slightly, as higher rates and weak income growth put a cap on just how high prices can go.

Article source: http://www.cnbc.com/id/101004096

Even though home building is on the rise, home builder stocks have gotten creamed over the last 3 months, including PulteGroup, KB Home and DR Horton.

(Read more: He’s not buying a house—why is Obama on Zillow?)

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/100964905

“The recent increase in mortgage rates hasn’t slowed demand, as long as home affordability remains high,” noted Bob Walters, chief economist at Quicken Loans. “We are, however, seeing an increased urgency from potential new home buyers as they move to secure today’s historically low rates.”

New home sales jumped more than 8 percent month-to-month in June, but May’s sales numbers were revised sharply lower, and prices, while up from a year ago, are down 11.5 percent from April. That has some housing skeptics less optimistic about the builders’ prospects.

(Read more: Map: Tracking the US real estate recovery)

“Remember, last month on the ‘strong’ but FAKE new home sales print of 476k, home builders rallied, and every bull took a huge victory lap. Today we learned that was all garbage,” noted California-based analyst Mark Hanson. “Bottom line: May was a huge miss. Prices have tumbled as rates surged. And June is suspect because of the huge lower May revision.”

Article source: http://www.cnbc.com/id/100910336

Hanson is particularly concerned about cancellations among the home builders.

(Read More: Home Builder Sales at Risk Due to Rising Mortgage Rates)

Buyers of new construction often sign contracts for homes that will not be delivered for three to nine months, and therefore the buyers do not lock in mortgage rates at the time of purchase. A buyer who signed a deal the first week in May without a mortgage is now facing a far higher potential monthly payment, perhaps an unaffordable one.

The hangover effect could be much like the drop in home sales after the expiration of the home buyer tax credit. Prices dropped as well. This, as millions more borrowers were finally coming out from underwater on their loans, thanks to increased home equity. The number of borrowers owing more on their mortgages than their homes are currently worth fell by 47 percent in the first three months of this year from a year ago, according to Lender Processing Services. Some 7.2 million mortgages are still underwater, but that’s down from a high of 17 million in 2011.

Increased home equity has helped to push mortgage delinquencies down. They dropped 15 percent in May from Jan. 1, the biggest drop in 11 years, according to LPS. If home price gains stall or if prices turn lower, that trend will reverse. Rising home equity has allowed more borrowers to sell homes they don’t want or can’t afford.

(Read More: Map: Tracking the US Real Estate Recovery)

While home sales may surge in the short term on fears of rising rates and falling affordability, the longer term may be a different story. One telling sign from the Fannie Mae survey, 56 percent of respondents expect rents to rise. That’s up 8 percentage points in one month to a survey high.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC.

Questions? Comments? RealtyCheck@cnbc.com.

Article source: http://www.cnbc.com/id/100870112

The predictions may sound dire, but the forward-looking indicators are falling in line. Mortgage applications have been falling for the past month. Applications to purchase a home are down 28 percent in the past month and up only 4.5 percent from a year ago. They should be up far higher, given that prices and demand are rising so fast. Signed contracts to buy existing homes jumped unexpectedly to a six-year high in May as rates started to rise; there’s your rush.

At a brokers open house in Northern Virginia this week, real estate agents said they are already seeing the effects of higher rates on the ground and in the homes they’re trying to sell.

(Read More: Apartments Reap Rewards of Rising Rates)

“It has gotten a lot quieter, which is a shame because historically the rates are still very low,” said Ruth Griel with Prosperity Mortgage.

“It’s having a kind of chilling effect on the market,” said Mark Beardsley, a Realtor with Long and Foster. “What’s happening is we are pricing down. If they were qualified for 600, now we’re looking at 550 and below.”

Mortgage rates going from 3.5 to 5 percent is roughly a 15 to 20 percent decrease in what the average buyer can afford. They can move to different loan products, like an adjustable rate loan, but ARMs are harder to qualify for and require far more documentation.

Article source: http://www.cnbc.com/id/100876300

The predictions may sound dire, but the forward-looking indicators are falling in line. Mortgage applications have been falling for the past month. Applications to purchase a home are down 28 percent in the past month and up only 4.5 percent from a year ago. They should be up far higher, given that prices and demand are rising so fast. Signed contracts to buy existing homes jumped unexpectedly to a six-year high in May as rates started to rise; there’s your rush.

At a brokers open house in Northern Virginia this week, real estate agents said they are already seeing the effects of higher rates on the ground and in the homes they’re trying to sell.

(Read More: Apartments Reap Rewards of Rising Rates)

“It has gotten a lot quieter, which is a shame because historically the rates are still very low,” said Ruth Griel with Prosperity Mortgage.

“It’s having a kind of chilling effect on the market,” said Mark Beardsley, a Realtor with Long and Foster. “What’s happening is we are pricing down. If they were qualified for 600, now we’re looking at 550 and below.”

Mortgage rates going from 3.5 to 5 percent is roughly a 15 to 20 percent decrease in what the average buyer can afford. They can move to different loan products, like an adjustable rate loan, but ARMs are harder to qualify for and require far more documentation.

Article source: http://www.cnbc.com/id/100876300

The predictions may sound dire, but the forward-looking indicators are falling in line. Mortgage applications have been falling for the past month. Applications to purchase a home are down 28 percent in the past month and up only 4.5 percent from a year ago. They should be up far higher, given that prices and demand are rising so fast. Signed contracts to buy existing homes jumped unexpectedly to a six-year high in May as rates started to rise; there’s your rush.

At a brokers open house in Northern Virginia this week, real estate agents said they are already seeing the effects of higher rates on the ground and in the homes they’re trying to sell.

(Read More: Apartments Reap Rewards of Rising Rates)

“It has gotten a lot quieter, which is a shame because historically the rates are still very low,” said Ruth Griel with Prosperity Mortgage.

“It’s having a kind of chilling effect on the market,” said Mark Beardsley, a Realtor with Long and Foster. “What’s happening is we are pricing down. If they were qualified for 600, now we’re looking at 550 and below.”

Mortgage rates going from 3.5 to 5 percent is roughly a 15 to 20 percent decrease in what the average buyer can afford. They can move to different loan products, like an adjustable rate loan, but ARMs are harder to qualify for and require far more documentation.

Article source: http://www.cnbc.com/id/100876300

Hanson is particularly concerned about cancellations among the home builders.

(Read More: Home Builder Sales at Risk Due to Rising Mortgage Rates)

Buyers of new construction often sign contracts for homes that will not be delivered for three to nine months, and therefore the buyers do not lock in mortgage rates at the time of purchase. A buyer who signed a deal the first week in May without a mortgage is now facing a far higher potential monthly payment, perhaps an unaffordable one.

The hangover effect could be much like the drop in home sales after the expiration of the home buyer tax credit. Prices dropped as well. This, as millions more borrowers were finally coming out from underwater on their loans, thanks to increased home equity. The number of borrowers owing more on their mortgages than their homes are currently worth fell by 47 percent in the first three months of this year from a year ago, according to Lender Processing Services. Some 7.2 million mortgages are still underwater, but that’s down from a high of 17 million in 2011.

Increased home equity has helped to push mortgage delinquencies down. They dropped 15 percent in May from Jan. 1, the biggest drop in 11 years, according to LPS. If home price gains stall or if prices turn lower, that trend will reverse. Rising home equity has allowed more borrowers to sell homes they don’t want or can’t afford.

(Read More: Map: Tracking the US Real Estate Recovery)

While home sales may surge in the short term on fears of rising rates and falling affordability, the longer term may be a different story. One telling sign from the Fannie Mae survey, 56 percent of respondents expect rents to rise. That’s up 8 percentage points in one month to a survey high.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC.

Questions? Comments? RealtyCheck@cnbc.com.

Article source: http://www.cnbc.com/id/100870112