According to a report released by the Federal Reserve This Week in Real Estate the market value of all owner-occupied residential real estate rose to $25.6 trillion in the third quarter. Below are a few highlights from the second week of December that influence our business:
Fannie Mae: Home Sales to Stabilize in 2019
Although economic growth is expected to slow in the new year, new data suggests the housing market will stabilize come 2019, according to Fannie Mae. “We expect full-year 2018 economic growth to come in at 3.1% – an expansion high – before slowing markedly to 2.3% in 2019 and 1.6% in 2020,” Fannie Mae Chief Economist Doug Duncan said. The report indicates that consumer spending will continue being the largest positive contributor for growth. Nevertheless, the GSE believes higher tariffs, trade uncertainty and rising interest rates and input costs will further constrain business fixed investment growth. With the exception of accelerating inflation, both mortgage rates and home sales could stabilize in 2019, according to the ESR Group. In fact, Fannie predicts purchase mortgage originations will climb, but origination volumes will slow as refinances decline.
U.S. Household Balance Sheet Continues to Recover in Q3 2018
The third quarter Federal Reserve Flow of Funds report showed continued improvement in the financial position of U.S. households with real estate, as the market value of all owner-occupied residential real estate (household owned) rose to $25.6 trillion. According to NAHB tabulations of the quarterly series, the asset or market value of owner-occupied real estate held by U.S. households increased $298 billion dollars while the liabilities (home mortgages) increased by about $90 billion from the second quarter reading. The housing market’s value of owners’ equity in real estate as a percentage of household real estate reached 59.9% in the third quarter of 2018, a level had not been seen since 2002. On the other hand, the greatest quarter-to-quarter percent increase in households’ equity position, that is, the difference between assets and liabilities, occurred not in 2018 but in 2017. The 2018 third quarter’s increase in equity position was 1.4%, which was substantially lower than the quarter-to-quarter increases of over 2.0% in the previous year’s quarters.
HUD Announces New FHA Loan Limits for 2019
The Federal Housing Administration (FHA) announced its loan limits for 2019 on Friday. The nationwide rise in median home prices indicates most buyers across the country – including those in more than 3,000 counties – will see increases. The FHA floor will increase from $294,515 to $314,827. This base limit applies to areas where 115% of the area median home price is less than $314,827. The FHA high-cost ceiling will increase from $679,650 to $726,525. High-cost areas are those where 115% of the median home price is greater than the floor ($314,827). In these areas, the limit equals 115% of the median home price up to the FHA ceiling ($726,525). FHA also increased the loan limits for its Home Equity Conversion Mortgage (HECM), or reverse mortgage program, from $679,650 to $726,525.