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.