According to data released by the Mortgage Banker’s Association This Week in Real Estate, purchase applications reached their highest level since April 2010, further suggesting a healthy and opportunistic spring market. Below are a few highlights from the third week of April that influence our business:
Builder Confidence Edges Higher in April. Builder confidence in the market for newly built single-family homes rose one point to 63 in April, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the low 60s for the past three months. The HMI index gauging current sales conditions increased one point to 69, and the component measuring the traffic of prospective buyers rose three points to 47. The measure charting sales expectations in the next six months fell one point to 71. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a three-point gain to 51, the Midwest increased two points to 53, and the South was up one point to 67. The West remained unchanged at 69.
Weekly Mortgage Applications For Homebuyers Hit Highest Level in 9 Years. Mortgage applications to purchase a home rose 1% last week from the previous week and were 7% higher than a year ago. Purchase applications reached their highest level since April 2010. Volume was 14% higher than a year ago. Applications to refinance a home loan brought the total down, falling 8% for the week but still rising 26% from a year ago, when interest rates were higher.
U.S. Weekly Jobless Claims Lowest Since 1969. The number of Americans filing applications for unemployment benefits fell to more than a 49-1/2-year low last week, pointing to sustained strength in the economy. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 192,000 for the week ended April 13, the lowest level since September 1969, the Labor Department said on Thursday. Claims have now declined for five straight weeks. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 6,000 to 201,250 last week, the lowest reading since November 1969. Though the trend in hiring has slowed, job gains remain above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate is at 3.8 percent, near the 3.7 percent Federal Reserve officials project it will be by the end of the year.
Signs of a continuing strong housing market were reported This Week in Real Estate as evidenced by the fact that bank repossessions reached an all-time low in the first quarter and applications for new home purchases were up 7% compared to the same time last year and up 19% over the prior month. Below are a few highlights from the second week of April that influence our business:
Builder Applications Hint at Strong Spring New Home Sales. Applications for financing new home purchases were up significantly in March. The Mortgage Bankers Association (MBA) reports that Builder Application Survey (BAS) data for the month shows a 7 percent increase in those applications compared to March 2018 and a 19 percent gain over February. The application data is not adjusted for seasonal variations. With a strong job market, rising wages and lower mortgage rates, housing demand remains strong, as shown by the solid 7 percent growth in new home purchase applications in March,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The confluence of declining mortgage rates with the spring buying season is supporting stronger housing demand and activity. Additionally, the drop in average loan size suggests that builders are tilting production to lower-priced homes, which continues to see the tightest inventories and strongest home-price growth.” Conventional loan applications accounted for 68.7 percent of the total. The FHA share was 18.8 percent, the VA share was 12 percent and RHS/USDA loans received 0.5 percent of the total. The average loan size of new homes decreased from $340,692 in February to $331,794 in March.
Here’s What You Need to Know About First-Time Homebuyers. Earlier this week, we established that first-time homebuyers are not, in fact, being shut out of the housing market as some had feared, thanks to a recent study by the Federal Reserve Bank of New York. Rather, their share of market participation has remained stable over time, rising and falling slightly over the last 17 years in response to market conditions, but averaging about 45% of the overall market. The NY Fed revealed that as of 2016, first-timers comprised a healthy 46% of homebuyers. First-time buyers generally take out smaller mortgages than repeat buyers.And, this gap is widening. In 2000, the average origination mortgage balance was $117,000 for first-timers was and $143,000 for repeat buyers. In 2016, the average origination mortgage balance was $213,000 for first-timers was and $273,000 for repeat buyers.First-time buyers traditionally have lower credit scores than repeat buyers. In 2000, first-time buyers had an average credit score of 670, while repeat averaged 705 – representing a 35-point difference. The subsequent housing boom and then bust drew credit scores down around 2003 and then up again in 2007. They continued to rise until 2013 and then remained stable for three years. In 2016, the spread between the two was 37 points – relatively unchanged from 2000. First-time buyers have smaller student loan balances than repeat buyers.While in 2000, average student loan balances for both first-time and repeat buyers were about the same, around $13,000, although first-timers generally had a slightly higher balance. But average student loan balances have trended upward over the last 17 years, and the disparity between the two demographics grew. As of 2016, the conditional average student loan debt for first-time buyers was $29,000, compared with $42,000 for repeat buyers. First-time buyers are getting older every year.The average first-timer was 35.4 years old in 2016 – quite a bit younger than 2017’s average of 37.9. The age of first-time buyers has increased incrementally every year for the past 17 years. Conversely, repeat buyers are also getting older, averaging 44.7 in 2000 and reaching 47.5 in 2016. First-time buyers are purchasing homes in cheaper neighborhoods than repeat buyers.Researchers looked at the average income in zip codes where buyers were purchasing homes. They determined that there is a relatively consistent difference of about $9,000 in average income in neighborhoods chosen by first-timers versus repeat buyers.
U.S. Foreclosure Activity Decreases 15 Percent in Q1 2019 to Lowest Levels Since Q1 2008.ATTOM Data Solutions released its Q1 2019 U.S. Foreclosure Market Report on Thursday, which shows a total of 161,875 U.S. properties with a foreclosure filing during the first quarter of 2019, down 23 percent from the previous quarter and down 15 percent from a year ago to the lowest level since Q1 2008. The report also shows a total of 58,550 U.S. properties with foreclosure filings in March 2019, up 7 percent from the previous month but down 21 percent from a year ago – the ninth consecutive month with a year-over-year decrease in U.S. foreclosure activity. “While some markets saw a slight uptick in foreclosure filings, that is above pre-recession levels, the majority of the major markets are well below pre-recession levels,” said Todd Teta, chief product officer at ATTOM Data Solutions. “While we did see a slight increase in U.S. foreclosure starts from last quarter, bank repossessions reached an all-time low in the first quarter of 2019, showing continuing signs of a strong housing market.”
Unemployment Hits Record Low as Home Prices Rise to Record High
As we transition from Q1 to Q2 This Week in Real Estate we do so on the heels of the median value of homes for sale reaching a record high, declining interest rates spurring a refinance surge and unemployment claims at the lowest level since December 1969. Below are a few highlights from the first week of April that influence our business:
Home Prices Hit a Record High.If you’re shopping for a cheap home this spring, good luck. The median value of homes listed for sale in March hit a record $300,000, according to realtor.com.”Despite a slowing growth rate, home prices will likely continue to set new records later this year,” said Danielle Hale, realtor.com’s chief economist. “Heading into spring, U.S. prices are expected to continue to rise and inventory is expected to continue to increase, but at a slower pace than we’ve seen the last few months as fewer sellers want to contend with this year’s more challenging conditions.” The number of homes for sale listed above $750,000 increased 11% year over year in March, while the number of entry-level homes priced $200,000 or below fell 9%.
Refinancing Activity Soars Due to Rate Declines.Amid growing concerns about housing affordability, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey show a surge in home refinancing, a week-to-week increase of 39% on a seasonally adjusted basis. The increase is contemporaneous with the fourth consecutive week of mortgage rates’ declining. Despite the widespread decrease in mortgage rates, changes in purchasing activity (i.e., purchases on new or existing homes) were not as sensitive to the drop as were applications to refinance. The data also show that purchase applications are almost 10% higher than they were a year ago, that refinance applications are 58% higher on a year-over-year basis, and that, combined, both purchase and refi applications are almost 30% higher than they were a year ago. Despite the tight lending environment of 2019, as anticipated by banks’ senior loan officers in the Federal Reserve’s Senior Loan Officer Opinion Survey, the data show a rise in applications on a year-to-date and year-over-year basis, which may partially offset tighter lending standards. The mortgage applications for purchase index is usually a leading indicator for forthcoming home sales, but the latter may be conflated by other factors, such as all-cash sales. The prior few months’ data lean less to such a conclusion, as the upward trend of the purchase index in January 2019 was subsequently followed up by increases in new and existing home sales in February.
Weekly Jobless Claims Drop to the Lowest Level Since 1969. The number of Americans filing applications for unemployment benefits dropped to a more than 49-year low last week, pointing to sustained labor market strength despite slowing economic growth. Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 202,000 for the week ended March 30, the lowest level since early December 1969, the Labor Department said on Thursday. Job growth has slowed from last year’s roughly 225,000 monthly average pace. The pace of increase, however, remains more than sufficient to keep up with growth in the working age population, holding down the unemployment rate. The unemployment rate forecast is unchanged at 3.8 percent.
According to research released by realtor.com This Week in Real Estate, the best time to list a home for sale in the top 50 largest U.S. Metro areas is the first week of April. The research suggests the best week to go live for the Seattle-Tacoma-Bellevue area is April 7, 2019 and for the Portland-Vancouver area is April 14, 2019, respectively. Below are a few highlights from the fourth week of March that influence our business:
New Home Sales Rise to 11-Month High in February. Sales of new U.S. single-family homes increased to an 11-month high in February and sales for January were revised higher. The Commerce Department said on Friday new home sales rose 4.9 percent to a seasonally adjusted annual rate of 667,000 units last month, the highest level since March 2018. January’s sales pace was revised up to 636,000 units from the previously reported 607,000 units. The 30-year fixed mortgage rate tumbled to a more than one-year low of 4.06 percent last week from an average of 4.28 percent in the previous week, according to data from mortgage finance agency Freddie Mac. Mortgage rates have been declining since the Federal Reserve signaled a long pause in interest rates increases this year. Lower borrowing costs, slowing house price inflation and rising wages have improved housing affordability.
The First Week of April is The Best Time to List a Home For Sale. The first week of April is the best time to list a home on the market in 2019. By listing during the week of March 31 – April 6, sellers are able to take advantage of a sweet spot in the season that offers high buyer demand, less competition, quick home sales, and strong prices. June is often considered the peak of home buying season, but our analysis found the first week of April is best for sellers looking to maximize list price, and also reduce the risk of price cuts and competition from other sellers. Given the time it takes from listing to close, putting a home on the market in early April positions sellers to attract buyers seeking to close and move before the beginning of school year. The analysis is based on trends in median listing prices, views per property on realtor.com, home price drops, median days on market, and number of listings on the market over the last three years. The market is bustling with buyers, but the number of homes hasn’t peaked yet, which means more demand for every listing. In fact, homes listed the first week of April see 14 percent more views, on average, and 5 percent less competition compared to the rest of the year’s weekly average. As a result, homes are likely to sell 6 days, or nearly 9 percent, faster on average. Another factor that’s likely to boost April buyer demand this year, is the surprising decline in mortgage rates that started in November 2018. Rates are now below 4.5 percent vs. nearly 5.0 percent in November 2018. These lower rates could entice demand earlier than usual and April sellers could see even more buyers trying to take advantage of this temporary window of affordability.
HPI for Largest Metro Areas: Growth Continues, But at a Slower Pace.CoreLogic Home Price Index appreciation slowed in recent months, with an annual appreciation of 4.4 percent in January 2019 compared with 6.1 percent in January 2018. This slowdown in home price growth comes after stellar appreciation when prices started increasing again after the housing market crash. National home prices through January were 6 percent above the pre-crisis peak hit in April 2006 and two-thirds of the 50 largest metros now have prices at or above their pre-housing-crisis peaks. While the 17 metros that have yet to regain home price losses are dispersed across the U.S., six of them are located in Florida. What does the future hold for home price growth? The CoreLogic HPI forecast predicts home price appreciation will continue to slow, with National appreciation over the next 12 months averaging 3.2 percent.
The real estate market is poised for a super ‘spring selling season’ fueled by increased inventory, more sustainable price appreciation and according to data released by Freddie Mac This Week in Real Estate, interest rates that have dramatically dipped since the start of the year. Below are a few highlights from the third week of March that influence our business:
Mortgage Rates Are In A Free Fall With No End In Sight. According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average slipped to 4.28 percent. It was 4.31 percent a week ago and 4.45 percent a year ago. “Mortgage rates fell this week and have yet to account for yesterday’s Fed’s announcement,” said Danielle Hale, chief economist for realtor.com. “Looking ahead to next week, we could see rates fall even further based on the decision to hold rates steady combined with guidance that emphasized patience.” The Federal Reserve did not increase its benchmark rate Wednesday and signaled it would not hike rates this year. “These developments almost certainly mean mortgage rates will be moving even lower in the coming days after remaining in a narrow range and hovering around 14-month lows for most of the past couple of months.”
Existing Home Sales Surge 11.8% in February. Existing-home sales rebounded strongly in February, experiencing the largest month-over-month gain since December 2015, according to the National Association of Realtors. Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops, shot up 11.8 percent from January to a seasonally adjusted annual rate of 5.51 million in February. However, sales are down 1.8 percent from a year ago (5.61 million in February 2018). Lawrence Yun, NAR’s chief economist, credited a number of aspects to the jump in February sales. “A powerful combination of lower mortgage rates, more inventory, rising income, and higher consumer confidence is driving the sales rebound.” Existing-home sales in the West rocketed 16.0 percent to an annual rate of 1.16 million in February, 7.9 percent below a year ago. The median price in the West was $379,300, up 3.0 percent from February 2018.
Builder Confidence Holds Steady in March. Builder confidence in the market for newly-built single-family homes held steady at 62 in March, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builders report the market is stabilizing following the slowdown at the end of 2018, and they anticipate a solid spring home buying season. The HMI component charting sales expectations in the next six months rose three points to 71, the index gauging current sales conditions increased two points to 68, and the component measuring traffic of prospective buyers fell four points to 44. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a five-point gain to 48, the South was up three points to 66 and West increased two points to 69. The Midwest posted a one-point decline to 51.
According to the Federal Reserve’s Flow of Funds report that was released This Week in Real Estate the home equity percentage has reached its highest level since the second quarter of 2002. Below are a few highlights from the second week of March that influence our business:
Equity Rises for U.S. Homeowners. The home equity percentage reached a level that had not been seen since the second quarter of 2002. As of the fourth quarter of 2018, the equity percentage, on a non-seasonally-adjusted basis, stood at 60.1%. At the end of 2018, the market value of all owner-occupied real estate totaled $25.9 trillion, growing by 5.3% from the start of the year, and outstanding home mortgage debt totaled $10.3 trillion, growing by a lesser percentage of 2.6%. The trend in the market value of all owner-occupied real estate mirrors that of the Case-Shiller U.S. National Home Price Index. Rising residential real estate prices are a good proxy for the increasing market value of homes in the U.S. As of the fourth quarter of 2018, homeowners collectively held 15.4 million home equity lines of credit, totaling a balance of about $0.4 trillion.
Home Price and Mortgage Rate Forecasts Suggest Smaller Gains in the Mortgage Payments Homebuyers Will Face This Year. While the nation’s median home sale price rose about 4 percent year over year in December 2018, the principal-and-interest mortgage payment on that median-priced home increased nearly three times as much because mortgage rates rose by more than half a percentage point over that period. However, some forecasts for home prices and mortgage rates indicate mortgage payments will rise at a much slower pace this year, which could help stoke home sales this spring. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home.
Looking ahead, the CoreLogic Home Price Index Forecast suggests a 4.5 percent annual gain in home prices by this December, while the average among six rate forecasts indicates a small increase – 0.1 percentage points – in mortgage rates this December compared with December 2018. The CoreLogic HPI Forecast suggests the median sale price will rise 2.1 percent in real, or inflation-adjusted, terms over the year ending December 2019 (or 4.5 percent in nominal, or not-inflation-adjusted, terms). Based on that projection, coupled with the aforementioned consensus mortgage rate forecast, the real typical monthly mortgage payment would rise from $904 in December 2018 to $935 by December 2019, a 3.5 percent year-over-year gain , down from a 9.9 percent gain a year earlier. In nominal terms the typical mortgage payment’s year-over-year increase in December 2019 would be 6.0 percent, or about half the 12.1 percent gain a year earlier.
MBA Has a More Upbeat View on New Home Sales.Even though the January Census Bureau report on new home sales published on Thursday wasn’t all that encouraging for the spring market, the Mortgage Bankers Association (MBA) is predicting more upbeat news for February. The Association’s Builder Application Survey (BAS) shows a 6 percent increase in new home purchase applications from the previous month and a 3-point gain from February 2018. Those numbers are not seasonally adjusted. “The housing market remains poised for a strong spring, with last month’s increase in builder applications likely leading to a healthy 7 percent year-over-year rise in new home sales,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “We are starting to see signs of more new residential construction and inventory, which increases buying opportunities for the many home shoppers who have been hampered by the ongoing lack of supply.” Added Kan, “Slowing home-price growth, combined with stronger wage gains and lower mortgage rates, is translating to improving affordability conditions for spring buyers.”
Housing Heats up with a $1.3 Trillion Dollar Increase in Equity
According to the most recent Financial Accounts of the United States, released This Week in Real Estate by the Board of Governors of the Federal Reserve System, the value of homeowner’s equity in real estate reached $15.4 trillion in the third quarter of 2018; that is up $1.3 trillion over the prior four quarters. Below are a few highlights from the first week of March that influence our business:
Housing Starts Heat Up In January, Climb Whopping 18.6%. Housing starts significantly heated up in January, according to the latest report from the U.S. Dept. of Housing and Urban Development and the U.S. Dept. of Commerce. Housing starts rose a whopping 18.6% to a seasonally adjusted annual rate of 1.23 million units, according to the report. “In January, the 18.6% monthly increase in housing starts reflects rising consumer sentiment and builder confidence,” First American Chief Economist Mark Fleming said. “Despite the headwinds, home builders are pushing through new construction projects.” Single-family production rose 25.1% from last month to 926,000 units while multifamily starts came in at a seasonally adjusted annual rate of 289,000 units. Overall permits increased 1.4% in January to a seasonally adjusted annual rate of 1.345 million. Lastly, housing completions in January were at a seasonally adjusted annual rate of 1.24 million, climbing 27.6% from December’s rate. Of these, single‐family housing completions were at a rate of 914,000 units and multifamily units came in at 327,000.
Increase in Housing Wealth. Homeowners’ equity in real estate improved as home prices continue to increase and mortgage debt expands slowly. The latest quarterly Financial Accounts of the United States, published by the Board of Governors of the Federal Reserve System, finds that the value of owners’ equity in real estate, the difference between the market value of owner-occupied real estate and home mortgage debt, rose by $1.3 trillion over the past four quarters and reached $15.4 trillion in the third quarter of 2018. On a nominal and not seasonally adjusted basis, the market value of owner-occupied real estate increased to $25.6 trillion totally in the third quarter of 2018, $298 billion more than the second quarter of 2018 and $1,526 billion more than the third quarter of 2017. Additionally, the improvement in home equity partially reflected slow growth in home mortgage debt. A decade ago, when the loan-to-value (LTV) ratio climbed to the highest level of 63%, the value of owners’ equity in real estate dropped to as low as $6.1 trillion in the first quarter of 2009. Between 2011 and 2018, the market value of households’ real estate rose by 59%, however, home mortgage debt increased by 3% over the same period. As a consequence, the LTV ratio decreased and the value of owners’ equity in real estate rose.
January Marks Seven Years of Annual Home Price Appreciation. National home prices increased 4.4 percent year over year in January 2019 and are forecast to increase 4.6 percent from January 2019 to January 2020, according to the latest CoreLogic Home Price Index (HPI) Report. The overall HPI has increased on a year-over-year basis every month for seven years (since February 2012) and has gained 57.3 percent since hitting bottom in March 2011. As of January 2019, the overall HPI was 5.6 percent higher than its pre-crisis peak in April 2006. Adjusted for inflation, U.S. home prices increased 3.7 percent year over year in January 2019 and were 13.1 percent below their peak.
The Census Bureau reported This Week in Real Estate that the U.S. homeownership rate increased in the fourth quarter of 2018 to 64.8 percent – the highest rate since 2014 – driven mainly by a rise in the 35-44-year-old homeownership rate. Below are a few highlights from the fourth week of February that influence our business:
Homeownership is Highest Since 2014. The Census Bureau reported on Thursday that the national homeownership rate rose slightly in the fourth quarter of 2018 to 64.8 percent, up from 64.4 percent in the third quarter and 64.2 percent in the fourth quarter of 2017. The Census Bureau said that change was not statistically different in either case, but at least it did continue the gradual upward trend in the rate since it hit an all-time low of 62.9 percent in the second quarter of 2016. The headline news, however, was a 1.2-point year-over-year change in the rate for those 34 to 44 years of age to 61.1 percent, by far the largest gain for any age group. The final three months of last year also yielded an additional 1.7 million units (compared to the end of 2017). This made 2018 the strongest year for owner household formation since 2004. We have now seen three years of growth in homeownership – with the last two well in excess of the one million mark – and believe that housing demand continues to be strong.
Pending Home Sales Jump 4.6% in January.Pending home sales rebounded strongly in January, according to the National Association of Realtors. All four major regions saw growth last month. The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 4.6 percent to 103.2 in January, up from 98.7 in December. Lawrence Yun, NAR chief economist, said “a change in Federal Reserve policy and the reopening of the government were very beneficial to the market. Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”
US Consumer Confidence Rebounds in February. American consumers were feeling more confident this month after a rally in the stock market and an end to the partial shutdown of the federal government. The Conference Board, a business research group, says its consumer confidence index rose to 131.4 from 121.7 in January. The index measures consumers’ assessment of current economic conditions and their expectations for the next six months. Consumers’ views of today’s economy were the sunniest since December 2000.
Housing Affordability Brings a Wave of New Buyers to the Market
The interest rate on a 30-year fixed loan fell to its lowest point in a year, fueling a four-point increase of the Housing Market Index and leaving NAR chief economist, Lawrence Yun, to conclude This Week in Real Estate that “existing home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low.” Below are a few highlights from the third week of February that influence our business:
Lower Interest Rates, Rising Consumer Confidence Boost Builder Sentiment. Builder confidence in the market for newly built single-family homes rose four points to 62 in February, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The ongoing reduction in mortgage rates in recent weeks coupled with continued strength in the job market are helping to fuel builder sentiment. In the aftermath of the fall slowdown, many builders are reporting positive expectations for the spring selling season. February marked the second consecutive month in which all the HMI indices posted gains. The index measuring current sales conditions rose three points to 67, the component gauging expectations in the next six months increased five points to 68 and the metric charting buyer traffic moved up four points to 48.
NAR: Home Sales “Likely to Have Reached a Cyclical Low.”Existing home sales fell again in January although the decline was a minor one compared to the 6.4 percent drop in December. The National Association of Realtors (NAR) said sales of single-family homes, townhomes, condominiums, and co-ops ticked down 1.2 percent from December’s annual rate of 4.99 million to a seasonally adjusted annual rate of 4.94 million. Lawrence Yun, NAR’s chief economist, acknowledged the sluggish sales, but said he does not expect the numbers to decline further going forward. “Existing home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low. Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months.” Yun notes that this median home price growth is the slowest since February 2012 and cautions that the figures do not yet tell the full story for the month of January. “Lower mortgage rates from December 2018 had little impact on January sales, however, the lower rates will inevitably lead to more home sales.”
Mortgage Rates Fall to One Year Low, Setting the Stage for a Sunny Spring Selling Season.Rates for home loans fell to the lowest in over a year as investors remained concerned about economic headwinds, setting up the housing market for a strong spring season. The 30-year fixed-rate mortgage averaged 4.35% in the February 21 week, mortgage guarantor Freddie Mac said Thursday. That was down from 4.37% in the prior week and the lowest since early February 2018. The popular product has eked out a weekly increase only once in 2019.
Mortgage Performance Remains Strong As Housing Prices Jump
Home prices ended 2018 rising at a ‘healthier’ pace according to NAR chief economist Lawrence Yun This Week in Real Estate while unemployment is at a near 50-year low, mortgage performance is strong and household debt levels relative to disposable incomes are at a 35-year low. Below are a few highlights from the second week of February that influence our business:
The 4th Quarter Housing Jump
Metro Home Prices Jump 4% in 2018’s Fourth Quarter. Inventory increased and metro market prices rose at a slower pace in the fourth quarter of 2018, according to the latest quarterly report by the National Association of Realtors®. The national median existing single-family home price in the quarter was $257,600, up 4.0 percent from the fourth quarter of 2017 ($247,800). Lawrence Yun, NAR chief economist, says in light of the various hurdles for 2018, the close of the fourth quarter was promising. “Home prices continued to rise in the vast majority of markets but with inventory steadily increasing, home prices are, on average, rising at a slower and healthier pace,” he said. “Housing affordability will be the key to sustained healthy growth in the housing market in the upcoming years. That requires more homebuilding of moderately priced homes,” Yun said. “Housing starts fell far short of historically normal levels, with only 9.6 million new housing units added in the past decade; compared to 15 to 16 million that would have been needed to meet our growing population and 20 million new job additions. “Local zoning law changes, expanding construction worker training programs at trade schools and promoting the use of tax breaks for developers in the designated Opportunity Zones will all play an important role in assuring an adequate future supply of housing,” Yun said.
Consumer Expectations Shift
Consumer sentiment surges higher than expected after the government shutdown ends. Consumer sentiment gained more than expected in early February as U.S. spending confidence recovered after the end of the longest government shutdown in history. “The early February gains reflect the end of the partial government shutdown as well as a more fundamental shift in consumer expectations due to the Fed’s pause in raising interest rates,” said Richard Curtin, chief economist for the Surveys of Consumers. Consistent with the bounce in sentiment, more respondents suggested that it was a good time to buy a major household item/vehicle/house,” said Jon Jill, fixed income strategist at BMO Capital Markets.
Homeowners Are In Great Shape
Mortgage loan delinquencies were down from the third quarter of 2018 in the fourth quarter. The Mortgage Bankers Association (MBA) said the improvements held across all loan types and all stages of delinquency although there was a slight uptick in foreclosure starts. The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.06 percent of all loans outstanding, down 41 basis points (bps) from the third quarter and 111 bps from the fourth quarter of 2017 according to MBA’s National Delinquency Survey. Marina Walsh, MBA’s Vice President of Industry Analysis said, “The overall national mortgage delinquency rate in the fourth quarter was at its lowest level since the first quarter of 2000. What’s even more noteworthy, the delinquency rate dropped from the previous quarter and on a year-over-year basis across all loan types and stages of delinquency.” Added Walsh, “With the unemployment rate near a 50-year low, wage growth trending higher and household debt levels relative to disposable incomes at a 35-year low, homeowners are in great shape, and mortgage performance is quite strong.” Take advantage of steady mortgage rates and contact a HomeServices Oregon or Washington mortgage lending officer for a complimentary consultation.