Mortgage Stabilization and the End of a Housing Slowdown

 

Mortgage Stabilization and the End of a Housing Slowdown

Thanks to the lowest unemployment rate in 50 years, historically low-interest rates and responsible underwriting, the mortgage delinquency rate in the U.S. is the lowest in more than 20 years, according to a release from CoreLogic This Week in Real Estate. Below are a few highlights from the second week of July that influence our business:

Mortgage Rates Stabilize as U.S. Markets Respond to Improving Economic Conditions. This week, the 30-year, fixed-rate mortgage averaged 3.75%, holding steady from the previous week, according to the Freddie Mac Primary Mortgage Market Survey. Once again, the rate remains significantly lower than in the same time period in 2018 when it averaged 4.52%.  Freddie Mac Chief Economist Sam Khater said while rates have moderated, we’re still at near three-year lows, which is good news for buyers looking to purchase a home before school starts. “The recent stabilization in mortgage rates reflects modestly improving U.S. economic data and a more accommodative tone from the Federal Reserve to respond to the rising downside economic risk from trade tensions and soft global economic data,” Khater said. “On the housing front, the latest weekly purchase application data suggests homebuyer demand continues to rise, which is consistent with the slowly improving real estate data from the last two months.”


Americans Haven’t Been This Good at Paying Their Mortgages in More Than 20 Years. Americans are better now at paying their mortgages on time than they have been at any point in the last 20 years, a new report from CoreLogic shows. According to CoreLogic’s latest monthly Loan Performance Insights Report, the national delinquency rate (mortgages that are in some stage of delinquency, meaning those that 30 days or more past due and including loans in foreclosure) sat at 3.6% in April. That’s the lowest national delinquency rate in more than 20 years, CoreLogic said. It’s also a significant decline from the same time period last year, when the delinquency rate was 4.3%. According to CoreLogic’s report, the nation’s overall delinquency rate has fallen on a year-over-year basis for the last 16 consecutive months. “Thanks to a 50-year low in unemployment, rising home prices, and responsible underwriting, the U.S. overall delinquency rate is the lowest in more than 20 years,” said CoreLogic chief economist Frank Nothaft. According to the report, April’s serious delinquency rate of 1.3% was the lowest for any month since August 2005, when it was also 1.3%.

The Housing Slowdown May Be Ending. The much discussed – and, in some quarters, much feared – housing slowdown may be coming to an end. The real estate softening that began last summer, marked by a surge in homes hitting the market and fewer sales after years of crazy-high annual price growth, may show signs of reversing course by this fall, say housing experts. “I don’t think we’ll get back all the way to … the frenzy we saw at the beginning of 2018,” says Chief Economist Danielle Hale of realtor.com. But “it’s certainly a possibility that home sales and prices will pick up, especially if mortgage rates stay low.” One primary reason for the market revving up again: Mortgage interest rates falling below 4% again. Moreover, the number of homes available for sale is expected to decline again within the next few months, says Hale. That’s because the growth in inventory is starting to slow, slipping from 2.9% annual growth in May to 2.8% in June, according to realtor.com data. Experts predict it will fall even further this year. “It was only 18 months ago that the number of homes for sale hit its lowest level in recorded history and sparked the fiercest competition among buyers we’ve ever seen,” she explains. “There’s still plenty of pent-up demand from years of underbuilding and more millennials coming of age” and wanting a home of their own to raise their families in, says Hale. But “this year’s buyers seem a little more patient. They’re more willing to wait for a good property.”


Economic Expansion’s Effect on the Housing Market

 

Economic Expansion’s Effect on the Housing Market

As the U.S. enjoys the longest economic expansion on record, Black Knight estimates This Week in Real Estate that 8.2 million borrowers could benefit from a refinance for a potential savings of about $2.2 trillion. Below are a few highlights from the first week of July that influence our business:

More Than 8 Million Homeowners Are Leaving Big Money on The Table by Not Refinancing. Mortgage rates have been on a roller coaster for the last year, but now they’re sitting at the bottom of the track, giving a major boost to the number of borrowers who can benefit from a refinance. The average rate on the 30-year fixed mortgage hit a three-year low of 3.73% last week, according to Freddie Mac. That means 8.2 million borrowers could refinance and lower their interest rates by at least 75 basis points, estimates Black Knight, a mortgage software and analytics company. It’s the largest group since the end of 2016. It is also a jump of 6.3 million eligible borrowers since last November, when rates peaked at just over 5%. The average borrower could save about $266 per month, bringing the total amount of potential savings to about $2.2 trillion. Mortgage applications to refinance a home loan were up a striking 92% annually last week, according to the Mortgage Bankers Association. Refinances for loans originated last year are leading the way, up 300% according to Black Knight. Given the steep rise in home values over the past three years, homeowners currently hold an aggregate $5.98 trillion in tappable equity.

U.S. Economy Smashes Record For Longest Expansion. America’s economic expansion is now the longest on record after celebrating its 10th birthday on July 1. There’s a caveat: it has also been slowest and the smallest. First, the good news: The expansion that started in 2009 has sent the unemployment rate to a half-century low and inflation is so subdued, Federal Reserve policymakers have said they are not concerned about it – at least, for now. “In the first 39 quarters of the record expansion of 1991-2001, gross domestic product increased 43%,” Bloomberg reported last month. “In the 39 quarters through this March, U.S. GDP grew just 22%. And the sluggish expansion has benefited capital more than labor: Workers’ share of national income has fallen from 68.9% to 66.4% over the period.” The lackluster nature of the expansion may also be its protection, said Mark Zandi, chief economist of Moody’s Analytics. “The key to the expansion’s longevity is two things,” he said in an interview. “First, the economy never boomed, it never really took off, and that has helped because in boom times, people tend to take on too much debt and build too many homes. That’s the fodder for recessions.”

U.S. Job Growth Surges, July Rate Cute Expectations Intact. U.S. job growth rebounded strongly in June, with government payrolls surging, but persistent moderate wage gains and mounting evidence the economy was losing momentum could still encourage the Federal Reserve to cut interest rates this month. The Labor Department’s closely watched employment report on Friday suggested May’s sharp slowdown in hiring was probably a fluke. Lack of concrete progress in resolving an acrimonious trade war between the United States and China, however, means the bar could be very high for the Fed not to lower borrowing costs at its July 30-31 policy meeting. But the strong pace of job gains reduced the chances of a half percentage point rate cut at the end of the month. The U.S. central bank in June signaled it could ease monetary policy as early as this month citing low inflation and growing risks to the economy from an escalation in trade tensions between Washington and Beijing. “We think the Fed is still on track for a 25 basis points cut given trade uncertainty and the steady downtrend in business sentiment,” said Andrew Schneider, a U.S. economist at BNP Paribas Securities in New York.

Take advantage of the low interest rates and talk to our team of mortgage brokers in Oregon or Washington about refinancing or purchasing a home.


Solid Summer Sales and a Solid Year for the Housing Market

 

Solid Summer Sales and a Solid Year for the Housing Market

The National Association of Realtors released its May Pending Home Sales Index (PHSI) This Week in Real Estate, which has increased three of the last four months due, in large part, to lower-than-usual mortgage rates. Below are a few highlights from the fourth week of June that influence our business:

Pending Home Sales Set Stage for Solid Summer Sales. Pending home sales got back on track in May, increasing by 1.1 percent after a 1.5 percent setback in April. The National Association of Realtors (NAR) said its Pending Home Sales Index (PHSI), a measure of newly signed contracts for home purchase, rose from 104.3 in April to 105.4 last month. The May increase, the third in four months, was still not enough to pull pending sales above the 2018 level of activity. The PHSI was down 0.7 percent compared to the previous May, marking the 17th straight month of annual decreases. Three of the four major regions saw growth in contract activity, with the West experiencing a slight sales decline. Lawrence Yun, NAR chief economist, said lower-than-usual mortgage rates have led to the increase in pending sales for May. “Rates of 4% and, in some cases even lower, create extremely attractive conditions for consumers. Buyers, for good reason, are anxious to purchase and lock in at these rates.” Yun said consumer confidence about home buying has risen, and he expects more activity in the coming months. “The Federal Reserve may cut interest rates one more time this year, but there is no guarantee mortgage rates will fall from these already historically low points,” he said. “Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.”

Nationwide’s Berson: 2019 Will Be “Solid Year” For Housing Market. Despite choppy data on the housing market over the last few months, Nationwide Chief Economist David Berson says 2019 will outperform 2018. “Economic figures from early in the year were probably negatively affected by the government shutdown as well as the impacts of higher interest rates over the second half of last year,” said Berson, who was Fannie Mae’s chief economist for two decades. “Despite that, we believe that the housing market is poised for another solid year as slower house price growth and lower mortgage rates help affordability, while job gains and faster income growth sustain demand.” Nationwide’s Leading Index of Healthy Housing Markets is at its highest point in three years, Berson said this week. Solid job growth, rising wages, and strong household formations are driving the positive outlook, he said.

30-Year Mortgage Rate Continues to Decline. For the fifth straight month, information compiled by Freddie Mac shows that mortgage rates continued to fall. As of May 2019, the 30-year FRM – Commitment rate, fell by seven basis points to 4.07 percent from 4.14 percent in April. The cycle peak was 4.87 percent in November. According to the June 2019 Federal Open Market Committee meeting statement, the Fed made no change to the interest rate, as expected. At the end of May, the 10-year Treasury rate is down to 2.14 percent from April. The rate has declined to 2.02 percent by the end of June which has contributed to a decline in the mortgage interest rates in the last few weeks. The average 30-Year Fixed market rate, according to Freddie Mac, was at 3.73 percent at the end of June compared to 3.99 percent at the end of May. At the end of 2018, the average 30-Year Fixed market rate was 4.64 percent.

 

 


This Summer Selling Season Creates Buyer Opportunities

This Summer Selling Season Creates Buyer Opportunities

As the summer selling season begins in earnest two market variables create opportunities for buyers. The Mortgage Bankers Association released its Mortgage Credit Availability Index (MCAI) This Week in Real Estate, reporting mortgage access increased for the fifth consecutive month in May. Increases in the MCAI means the loosening of credit. In addition, the decline of mortgage rates has resulted in the annual growth rate for the typical mortgage payment dropping below that of home prices. Below are a few highlights from the second week of June that influence our business:

Credit Availability Rises for Fifth Consecutive Month. Mortgage access increased in May for the fifth consecutive month. The Mortgage Bankers Association (MBA) said its Mortgage Credit Availability Index (MCAI) rose 1.9 percent to 189.5. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.) gathered from over 95 lenders and investors. They are combined with data from an AllRegs proprietary product to calculate a summary measure indicating the availability of mortgage credit at a point in time. The MCAI and its components are designed to show relative credit risk/availability for their respective indices and were benchmarked in March 2012. The total MCAI, Conforming, and Jumbo indices were indexed at 100 while the Conventional and Government indices were indexed at 73.5 and 183.5 respectively to better represent where each index might have been relative to 100. “Credit supply increased 2 percent in May, driven by the fifth straight gain in the jumbo index, which was up 7 percent and surpassed last month as the new all-time survey high,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The conventional index continues to grow, while the government index has generally been lower this year. Government credit supply continues to decline since peaking in 2017, as there are fewer streamlined refinance programs being offered.”

Homebuyers Face Much Slower Growth in the “Typical Mortgage Payment” This Year. Last year’s rising mortgage rates meant the monthly payments that many homebuyers struggled to qualify for were rising much faster than home prices. In November 2018, for example, the U.S. median sale price rose about 4% year over year, but the principal-and-interest payment on that median-priced home – what we call the “typical mortgage payment” – surged 17% because mortgage rates had risen a percentage point. By March this year, however, declining mortgage rates had resulted in the annual growth rate for the typical mortgage payment dropping below that of home prices. Moreover, some rate and price forecasts suggest the mortgage payments homebuyers face the rest of this year will, on a year-over-year basis, be only slightly higher or a tad lower, which could help spur home sales. Looking ahead, the CoreLogic Home Price Index (HPI) and HPI Forecast suggest annual gains in home prices each month from this April through next March will average 4.3%. That forecast, combined with the average among six mortgage rate forecasts, suggests that over that same period the annual change in the typical mortgage payment each month will average out to a gain of 0.9%, including five months in which there is a slight annual decline.

Consumer Credit Posts Highest Yearly Increase Since July 2017. As of April 30, 2019, consumer credit totaled $4.1 trillion on a seasonally adjusted basis, with $1.1 trillion in revolving debt and $3.0 trillion in nonrevolving debt. The latest monthly year-over-year percentage increase of 5.3% in the outstanding debt is the greatest change that has occurred since July 2017, driven primarily by increases in nonrevolving debt. The increase in nonrevolving debt is a good sign for the sentiment of American consumers, as it signifies that they are confident in willing to make larger purchases, including houses.

 


60% of Americans are Homeowners

 

60% of Americans Are Homeowners

According to the Federal Reserve’s Flow of Funds report released This Week in Real Estate, the collective value of all owner-occupied homes reached a record high of $26.1 trillion in the first quarter; 15% higher than the peak prior to the ‘great recession’ in 2006. Below are a few highlights from the first week of June that influence our business:

U.S. Home Values Reach a Record High of $26.1 Trillion in Q1. The value of all U.S. owner-occupied homes increased to a record $26.1 trillion in the first quarter, according to a Federal Reserve report released Thursday known as the Flow of Funds. That was a gain of 4.3% from a year earlier, the slowest annualized increase since 2012. The collective value of U.S. homes is now 15% higher than the bubble peak reached in 2006. Once that bubble popped, it was a decade before values recovered to the same level. As home values rose in the first quarter, so did homeowner equity, meaning the worth of a home compared to its mortgage. Americans owned 60.4% of their homes in the first quarter, the highest level of equity since 2002. An increase in home equity traditionally has been a support to the U.S. economy as Americans either refinance their first-lien mortgages at higher balances, known as cash-out refis or get home equity loans in a junior lien position. That supports consumer spending, which accounts for 70% of the U.S. economy. Cashed-out equity typically is used either for renovations, college tuition, or to pay off credit card debt, according to Fed economists. Americans converted $19 billion of their home equity into cash in the first quarter, the largest amount since the year-earlier quarter when it was $22.7 billion, according to a Freddie Mac estimate. Most were through cash-out refis, at $16.7 billion, while home equity loans accounted for $2.3 billion.

Borrowers Are Sitting on Record Amounts of Home Equity. The amount of equity in mortgaged real estate increased by about $486 billion in Q1 2019 from Q1 2018, an annual increase of 5.6%, according to the latest CoreLogic Equity Report. The first quarter’s annual increase in home equity marked the lowest such gain in equity since Q4 2012, which reflects slowing price growth. Despite the lower growth rate, borrower equity hit a new high in Q1 2019, and borrowers have gained $5.6 trillion in equity since the end of 2011 when equity stopped declining. The nationwide negative equity share for Q1 2019 was 4.1% of all homes with a mortgage, more than 20 percentage points lower than the peak negative equity share – 26% – recorded in Q4 2009. The number of underwater properties decreased by 268,000 from Q1 2018 to Q1 2019.

AD&C Loan Volume Expands at Start of 2019. After a slight dip at the end of 2018, a consequence of rising interest rates, the volume of residential construction loans increased by 1.5% during the first quarter of 2019. The expansion of construction loans mirrors an NAHB survey showing a slight easing of credit conditions at the start of 2019, with an average 6% rate for speculative single-family construction financing. Tight availability of acquisition, development, and construction (AD&C) loans has been a limiting or cost factor for home building growth, but easing credit conditions and a growing loan base helped expand residential construction activity, albeit modestly. According to data from the FDIC and NAHB analysis, the outstanding stock of 1-4 unit residential construction loans made by FDIC-insured institutions increased by $1.1 billion during the first quarter of 2019, placing the total amount of outstanding loans at $80 billion. On a year-over-year basis, the stock of residential construction loans is up just under 6%, the lowest rate since 2013. Since the first quarter of 2013, the stock of outstanding home building construction loans has nonetheless grown by 97%, an increase of $39 billion.

 


Mortgage Rates Plummet to the High 3’s

 

Mortgage Rates Plummet to the High 3’s

According to a report from CoreLogic This Week in Real Estate, as the pace of home price appreciation has decelerated so too has the percentage of homes selling at or above asking price. At the end of Q1 this year the percentage of homes selling at or above list price was 31.1% compared to 40% in Q2 2018. Below are a few highlights from the last week of May that influence our business:

Share of Homes Selling at or Above List Price Returning to Normal Levels. Ten years after the financial crisis, the national CoreLogic Home Price Index (HPI®) has exceeded its pre-crisis peak and continues to grow but at a slower pace. With home prices reaching many homebuyers’ budget limits, the share of homes selling at or above list price has returned to normal levels. The share of homes selling at or above list price has returned to early 2000 levels. In Q2 2018 that share peaked at more than 40% of total sales – almost triple the level during the trough in January 2008. As annual home price growth started to slow in Q3 2018, the share of home buyers able to negotiate a better price began to rise. As of March 2019, the share of homes that were sold at or above list price has fallen to 31.1% – about the same level as in 2000 and 2001.

Mortgage Rates Drop Well Into the High 3’s. Mortgage rates were decisively lower today, following a massive market movement on news of new tariffs to be imposed on Mexico. In general, trade wars are economically negative. They hurt stocks and help bonds. When bonds are improving, it means bond prices are rising and yields (another word for “rates”) are falling. Long story short, investors are pricing in a new reality where trade tensions do measurable damage to the global economy. This not only forces money out of stocks and into bonds, but it also implies lower inflation and increased odds of Fed rate cuts. The specific implication for mortgage rates was quite good today. Mortgages have been lagging the moves seen in Treasury yields, for the most part. That was NOT the case today – at least for the lower portion of the rate spectrum. The average lender improved by the biggest amount of the past several weeks with top tier scenarios now easily seeing quotes of 3.875%. That said, different lenders have responded to the market movement at drastically different paces. Volatility tends to have that effect.  If the bond market stabilizes at the beginning of next week, we’ll see some more cohesive pricing between lenders.

Nearly Half of Prospective Buyers are Actively House Hunting. Many people start thinking about a home purchase well in advance of actually engaging in the process of finding a home. In a national poll in the first quarter of 2019, 13% of adults reported planning a home purchase within the next year. Of those prospective buyers, 46% are already actively involved in trying to find a home to buy. The latter finding is not different from a year earlier, when 17% of poll participants were planning a home purchase and 46% of them were actively engaged in the search process. Are actively engaged buyers spending a lot of time house hunting? In the first quarter of 2019, 53% of those searching have been at it for three months or longer, while 46% have looked for less than three months. A year earlier, 50% of active buyers reported looking for a home for less than three months. Future polls will determine if there is a trend for more people spending upwards of three months searching for a home.

Looking to purchase a new home or see how much of a mortgage you qualify for? Speak with a HomeServices Lending Mortgage Loan Officer in Oregon or Washington today!

 


Mortgage Rates Decline As The Market Moves

 

 

Mortgage Rates Decline As The Market Moves

This Week in Real Estate mortgage rates fell to the lowest levels in more than a year while new home sales are up 6.7% through the first four months of 2019 compared to the same time the prior year. Conclusion: the market is positioned for a strong summer selling season thanks in part to a healthy job market, continued low-interest rates and steady sales pace of new homes. Below are a few highlights from the third week of May that influence our business:

New Home Sales Post Solid Numbers in April. After an upward revision, March and April newly-built single-family homes sales data indicate that lower mortgage rates and price incentives increased the volume of transactions as the spring home-buying season stabilized after weakness in late 2018. Contracts for new, single-family home sales declined to a 673,000 seasonally adjusted annual rate according to estimates from the joint release of HUD and the Census Bureau. However, this decline was off a strong 723,000 sales pace in March, making that month’s sales rate the best since the Great Recession. Furthermore, the April rate was the third strongest of this cycle. The March data places the industry back on a trend line that has been in place since 2011. For the first four months of the year, new home sales are 6.7% ahead of the sales pace of the initial four months of 2018. However, those gains have distinct regional clustering. Year-to-date sales are up 10.3% in the South, 6.7% in the West (concentrated in the Mountain states), and 1.3% in the Midwest while recording a 17.6% decline in the Northeast.

Rates Are Back to Lowest Levels in More Than a Year. Mortgage rates fell again today as mortgage lenders got caught up with yesterday’s market movements. Mortgage rates are based on bond market trading levels, but mortgage lenders only adjust rates once per day unless there’s quite a bit of movement. Yesterday saw such movement, and in those cases, lenders typically adjust rates to reflect only part of the overall shift in markets until the shift is confirmed for a certain amount of time. As such, when bond markets began the day in similar territory to yesterday, lenders were able to bring mortgage rates even lower than yesterday. With that, the average lender is back to the lowest rates in more than a year. It should be noted that several lenders are still a bit higher than they were on March 27th and 28th of this year. Other lenders are in noticeably better shape, however. In outright terms, that means rate quotes of 4.125% are common, 4.0% is not uncommon, and 3.875% is possible for the most flawless scenarios–especially in cases where borrowers are willing to pay a bit more in upfront closing costs to buy down the rate.

Grocery Store is Most-Desirable Neighborhood Amenity, Federal Reserve Report Shows. When the Federal Reserve released on Thursday its Survey of Household Economics and Decision-making, known to economists as the SHED report, the biggest number covered by the financial media was: Four in 10 American adults wouldn’t be able to cover an unexpected $400 expense. But buried in the 64-page annual report there were nuggets about the housing market. For example, people said the most important neighborhood amenity is a grocery store. About 87% of respondents said it is “moderately or very important” to have nearby. Next on the list of desired neighborhood amenities was a combined category of “shops or restaurants,” which 75% of people cited as being important to have nearby. The next slot went to banks, with 65% of people citing them as important, then places of worship, at 48%, a library, at 48%, a park or playground, at 43% and public transportation, at 37%. Another housing-related data nugget was insight on “boomerang kids,” the pop term for adult children who return to live at home. About 61% of Americans ages 18 to 21 years are living with parents, according to the Fed report. The share drops to 51% for 22- to 24-year-olds and 26% for 25- to 29-year-olds. About 13% of 30- to 39-year-olds continue to live with their parents.


The Rise of Housing Inventory and Market Prices

The Rise of Housing Inventory and Market Prices

According to the latest National Association of Home Builders Housing Market Index (HMI), builder confidence has reached its highest level since October 2018 and NAR chief economist, Lawrence Yun, predicted at NARs mid-year meeting This Week in Real Estate, that he expects new home sales to reach a 12-year high this year. Below are a few highlights from the second week of May that influence our business:

Builder Confidence Posts Solid Gain in May. Builder confidence in the market for newly-built single-family homes rose three points to 66 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builder sentiment is at its highest level since October 2018 after declines in late 2018 due to higher interest rates and concerns over slower growth. Builders are catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply. All the HMI indices posted gains in May. The index measuring current sales conditions rose three points to 72, the component gauging expectations in the next six months edged one point higher to 72 and the metric charting buyer traffic moved up two points to 49. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a six-point gain to 57, the West increased two points to 71, the Midwest gained one point to 54, and the South rose a single point to 68.

Home Prices Continue on Healthy Course in Q1. Inventory increased and metro market prices rose in the first quarter of 2019, but at a slower pace than the previous quarter, according to new research. From the first quarter of 2018 to the first quarter of 2019, home prices rose 3.9 percent, according to a National Association of REALTORS® (NAR) report. On an annual basis, there were higher home prices in 86 percent or 153 of the 178 metropolitan areas in the report. Comparing the largest markets, the median price was $254,800, up from $245,300 in Q1 2018. Lawrence Yun, NAR chief economist, says the first quarter has been beneficial to U.S. homeowners. “Homeowners in the majority of markets are continuing to enjoy price gains, albeit at a slower rate of growth. A typical homeowner accumulated $9,500 in wealth over the past year,” he said.

NAR’s Yun Forecast for 2019 Housing Sales: New Homes Will Drive Market Gains. Sales of new homes probably will reach a 12-year high this year as builders scramble to meet demand from entry-level buyers, according to Lawrence Yun, chief economist of the National Association of Realtors. Existing home sales probably will be flat, he said. The number of new houses sold in 2019 probably will total 667,000, the highest level since the beginning of the financial crisis in 2007, Yun said at NAR’s Legislative Meetings & Trade Expo in Washington D.C. on Thursday. Sales of existing homes, which tumbled 3.1% in 2018 as mortgage rates rose to an eight-year high, probably will be flat this year, Yun said. Next year, existing home sales probably will gain 3.7%, he said. Nationally, the inventory of homes on the market has grown for eight straight months on a year-over-year basis, and Yun said he expects that to continue.


May’s Hot Housing Market Increases Mortgage Applications

 

 

May’s Hot Housing Market Increases Mortgage Applications

The Mortgage Bankers Association announced This Week in Real Estate that the mortgage credit availability index for April was the highest reading for that month ever in the eight-year index. A high reading means it’s easier to get a home loan and a low reading indicates a credit crunch. Below are a few highlights from the first full week of May that influence our business:

Leading Indicators Point To A May Pick-Up in Home Sales. Mortgage credit availability is the highest ever recorded for the spring market. Fixed rate for home loans are near 4% and wages are up. What can that mean for the spring selling season? Unless Americans don’t want to own houses anymore – and that hasn’t happened yet – it means this month’s data should look pretty good. The purchase index from the Mortgage Bankers Association, which measures applications for mortgages to buy homes, increased 5% during the first week of May compared with the previous week and was 5% higher than the same week one year ago. MBA’s mortgage credit availability index for April was the highest reading for that month in the eight-year index. And, it was near the record high seen in mid-2018. A high reading means it’s easier to get home loans and a low reading indicates a credit crunch. At the end of March, the U.S. average rate for a 30-year fixed mortgage had the largest one-week decline in more than 10 years, dropping to 4.06%, according to Freddie Mac. Since then, it has bounced around in a narrow band, and this week averaged 4.1%. That’s almost half a percentage point lower than it was a year ago, according to Freddie Mac data. Sales of new homes, which are recorded when a contract is signed, rose 4.5% in March, according to the Commerce Department. Pending home sales, reflecting existing homes with newly signed contracts, rose 3.8% in March, according to the National Association of Realtors. “There is a pent-up demand in the market, and we should see a better performing market in the coming quarters and years,” Lawrence Yun, chief economist of NAR, said in the report.

Lending Conditions Tighten (But Less Than Expected). The recently released results of the Federal Reserve Board’s quarterly Senior Loan Officer Opinion Survey (SLOOS) show some tightening of lending conditions in the first quarter of 2019. While many banks reported that their standards in approving applications for credit cards from individuals or households tightened somewhat, overall, the tightening was not as much as they had anticipated, when they were asked about their outlook for 2019 in the fourth quarter of 2018’s survey. The tightening of credit standards is consistent with the Federal Reserve’s data on Consumer Credit, which, in part, show a decrease in revolving debt from the previous month.

Cooling of Home Price Gains Continued For Eleventh Consecutive Month. National home prices increased 3.7 percent year over year in March 2019 and are forecast to increase 4.8 percent from March 2019 to March 2020, according to the latest CoreLogic Home Price Index (HPI) Report. The March 2019 HPI gain was down from the March 2018 gain of 6.6 percent and it continued a slowdown in home price growth that began in May 2018. The overall HPI has increased on a year-over-year basis every month for seven years (since March 2012) and has gained 59 percent since hitting bottom in March 2011. As of March 2019, the overall HPI was 6.9 percent higher than its pre-crisis peak in April 2006. Adjusted for inflation, U.S. home prices increased 2.6 percent year over year in March 2019 and were 12.5 percent below their peak.

Looking to purchase a new home or see how much of a mortgage you can qualify for? Speak with a HomeServices Lending Mortgage Loan Officer in Oregon or Washington today!

 


Federal Funds Rate Holds while Homeowner Tenure Slips

 

 

 

Federal Funds Rate Holds while Homeowner Tenure Slips

The Federal Reserve decided to keep the federal funds rate steady This Week in Real Estate, with no expectation of a rate increase until the end of the year, at the earliest. Below are a few highlights from the last few days of April that influence our business:

Federal Reserve: Patience Continues. At the conclusion of its May meeting, the Federal Reserve held the key, short-term federal funds rate steady, with a top rate of 2.5%. The decision was unanimous and widely expected, with members of the Federal Open Market Committee agreeing that while economic growth conditions remain “solid,” inflation pressures remain anchored. We do not expect another federal funds rate increase until, at the earliest, the end of 2019. For housing, the more dovish perspective of the Federal Reserve is an important reason why mortgage interest rates have declined from late-2018 cycle highs. Given that the housing market faced a 10-year low for housing affordability last Fall, the Fed’s approach is a net positive for future housing market activity and offers an offset (but only a partial one) for rising construction costs. These costs are limiting housing inventory, particularly at the entry-level market. Moreover, higher production costs have caused housing affordability to decline in recent years and are the primary driver for NAHB’s call for generally flat conditions for new home sales and starts in 2019.

Homeowners Are Staying Put, Just Not For As Long As Before. At the end of last year, the length of time that a homeowner stayed put hit a record high at an average of 8.17 years. But the latest data from the first quarter of 2019 reveals that the average tenure has begun to backslide as more Americans opt to relocate. Homeowners who sold their home in Q1 2019 had owned their property for an average of 8.05 years, according to the latest from ATTOM Data Solutions. While this is down slightly from the previous quarter, ATTOM points out that it is up from the 7.75-year average seen in Q1 2017. It’s also significantly longer than the average tenure seen in the years leading up to the housing bubble. Between 2000 and 2007, homeowners moved an average of just 4.21 years, ATTOM revealed.

Top Home Technology Features. According to the latest edition of NAHB’s study, What Home Buyers Really Want, 46 percent of recent and prospective home buyers want a security camera in their home, more than any other home technology feature listed in the survey. Three of the four most wanted features are security-related: along with a security camera, a video doorbell and a wireless home security system are wanted by at least 40 percent of home buyers. However, at most 21 percent of homebuyer currently have any one of these technology features installed, indicating that there is market growth potential for these items. In contrast, about the same share of home buyers who want a programmable thermostat (44 percent) have one already installed (41 percent). Four other home technology features are desired by at least a third of buyers: a multi-zone HVAC system (39 percent), a lighting control system (36 percent), and a wireless home audio system and central vacuum system (both wanted by 33 percent of home buyers). An energy management system/display and a smart washer/dryer (controlled remotely) are wanted by 31 percent of home buyers each.  Few home buyers currently have any of these items (14 percent of home buyers at most), which also indicates that there is room for growth in these product areas.


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