April 2016

Affordability Index Finds Mixed Results

The National Association of Realtors Housing Affordability Index looks at the median price of an existing single-family home and compares it to the country’s median family income to determine whether or not the typical American family could qualify for a mortgage on the typical American home. According to the most recent results, affordability conditions across the country improved month-over-month in February but declined from one year earlier. Michael Hyman, a research data specialist with the NAR, says that housing affordability has fallen over the past year due to slightly higher mortgage rates and home prices that continue to outpace household income growth. For example, incomes increased approximately 2.1 percent year-over-year while home prices, during the same time period, have gone up 4.3 percent. However, home price gains have begun to moderate and grew at a slower pace in February than they did in January. Regionally speaking, the Midwest, South, and West saw affordability conditions decline from last year, while the Northeast actually improved. The Midwest remains the country’s most affordable area to buy a house. Also in the report, the median sales price for single-family homes sold during the month was $212,300. More here.

Mortgage Demand Spikes With Rate Drop

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for mortgage applications spiked last week, rising 10 percent over the previous week. The improvement, which included an 11 percent jump in refinance activity and an 8 percent increase in the purchase index, is a sign that low mortgage rates are beginning to inspire more Americans to enter the spring housing market. Mike Fratantoni, MBA’s chief economist, says demand for loans to buy homes – which are now 24 percent higher than last year – almost hit a six-year high last week. “Helped by a persistently strong job market and low rates, applications for both conventional and government home purchase loans increased last week,” Fratantoni said. “The purchase index was at its second highest level since May 2010. Applications to refinance also increased as the 30-year contract rate decreased to its lowest level since January 2015.” In fact, mortgage rates were down across most loan categories, including loans backed by the Federal Housing Administration, and 30-year fixed-rate mortgages with both conforming and jumbo balances. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Foreclosure Inventory Lowest Since 2007

In February, the foreclosure inventory rate was the lowest for any month since November 2007, according to new numbers released by CoreLogic. Their February 2016 National Foreclosure Report shows foreclosure inventory was down 24 percent from one year earlier and now represents just 1.1 percent of all homes with a mortgage. Anand Nallathambi, president and CEO of CoreLogic, says home price increases are among the leading causes behind the improvement. “Home price gains have clearly been a driving force in building positive equity for homeowners,” Nallathambi said. “Longer term, we anticipate a better balance of supply with demand in many markets which will help sustain healthy and affordable home values into the future.” Also in the report, the serious delinquency rate – which refers to mortgages that are 90 days or more past due – fell 19.9 percent over the past year and is also at its lowest point since 2007. Just as foreclosure inventory has been helped by rising home prices, delinquency rates have dropped as job creation and household income have improved. More here.

Energy Efficiency Draws Buyers To New Homes

In recent years, energy efficiency has repeatedly ranked among the top features potential home buyers say are important to them. And according to a recent survey from the National Association of Home Builders, that hasn’t changed. In fact, four of the top 10 features builders said they were most likely to include in new homes they build this year were focused on energy efficiency. “Today’s new homes include features that will help homeowners reduce energy consumption and enhance the conveniences of modern living,” Ed Brady, chairman of the National Association of Home Builders, said. “Our builders are telling us that energy efficiency continues to be a top demand from consumers.” Among the energy-efficient features most likely to be found in new homes built this year, low-E windows, Energy Star-rated appliances and windows, and programmable thermostats were all in the top 10. These features are so popular, buyers say they’d be willing to pay more in order to have them. In fact, buyers said they’d pay nearly $11,000 more for a house that could save them $1,000 a year on utilities. More here.

Home Purchase Sentiment Dips In March

Fannie Mae’s Home Purchase Sentiment Index is based on the results of a monthly survey that asks Americans about their attitudes toward buying and selling a home, the economy, their household finances, home prices, mortgage rates, etc. In March, the index dropped 2.5 points from the previous month. This indicates Americans are feeling more cautious about the housing market and less optimistic about their jobs and income. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says Americans’ feelings about the housing market are starting to become affected by pessimism about the overall economy. “Growing pessimism over the last three months about the direction of the economy seems to be spilling over into home purchase sentiment,” Duncan said. “The gap between the share of consumers who think the economy is on the wrong track and the share who think it is on the right track has widened, nearly matching its reading last August, when concerns regarding China and oil prices led to the biggest stock market plunge in years. In turn, we saw dips this month in income growth perceptions, attitudes about the home selling climate, and job confidence, all of which contributed to the lowest HPSI reading in the last year and a half. These declines seem to be at odds with recent news of solid overall job creation, but may reflect weakening economic performance in certain industries.” Still, despite the monthly dip, the index remains virtually unchanged from where it was at the same time last year. More here.

Is The Homeownership Rate Bouncing Back?

Since peaking at nearly 70 percent in 2004, the homeownership rate has been falling. In fact, it fell to a 48-year low during the second quarter of last year. Of course, there are many factors that contributed to the drop off. But, according to a recent study, the changes that have taken place over the past 12 years can be seen most dramatically when looking at the numbers generationally. For example, the study found that the homeownership rate has seen its biggest decline among Americans between the ages of 35 and 44. Among that group, the number of homeowners is 11 percent below its peak. Comparatively, the rate among consumers under the age of 35 is 9 percent off its peak and the rate among Americans 65 and older has actually risen 2 percent. In other words, most of the drop in homeownership has been among Americans 44 and younger. The encouraging news is that many would-be buyers on the younger end of that spectrum have expressed an interest in homeownership and are planning to buy once they’ve put together some savings. The situation among 35-to-44 year olds, however, may be a bit more complicated. This is due to the fact that many of them are boomerang buyers who bought their first home just before home prices plummeted. Over the past few years, as home values have bounced back, more of these potential buyers have seen their financial situation improve, which may help lead them back down the path of homeownership. More here.

Mortgage Rate Drop Stirs Demand

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates dropped sharply last week from the week before. Rates were down across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, mortgages backed by the Federal Housing Administration, and 15-year fixed-rate loans. MBA economist Joel Kan told CNBC the decline was brought on by recent comments from Fed Chair Janet Yellen. “Rates fell last week as a more cautious message from Chair Yellen about the economic outlook and continuing concerns about weaker growth abroad kept demand for U.S. Treasurys high,” Kan said. “The 30-year fixed mortgage rate dropped 8 basis points, the largest single week decline in eight weeks.” Falling rates spurred demand for mortgage applications. In fact, overall demand was up 2.7 percent over the week before – driven by a 7 percent surge in refinance activity. And though purchase demand was down 2 percent from one week earlier, it remains 11 percent higher than at the same time last year. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Most Renters Want A Single Family Home

A new survey of consumer preferences found that an overwhelming majority of current renters say, if they were to move, that they’d prefer to buy a single-family home. In fact, a full 75 percent of renters who responded to the National Association of Realtors quarterly Housing Opportunities and Market Experience survey said they’d like to own a home and just 21 percent of them said they’d prefer to buy in an urban area. Lawrence Yun, NAR’s chief economist, said the fact that most Americans prefer a larger home outside of the city isn’t exactly news. “The American Dream for most consumers is not a cramped, 500-square-foot condo in the middle of the city, but instead a larger home within close proximity to the jobs and entertainment an urban area provides,” Yun said. “While this is not a new discovery, supply and demand imbalances and unhealthy levels of price growth in several metro areas have made buying an affordable home an onerous task for far too many first-time buyers and middle-class families.” But while a majority of renters and younger buyers said they’d prefer a larger home in the suburbs, respondents over the age of 65 were the most likely to consider buying a condo and almost as likely as respondents under the age of 35 to say they’d consider buying in an urban area. More here.

Latest Jobs Report Hints At Building Boom

The March jobs report from the U.S. Bureau of Labor Statistics contained good news for the economy, as the number of jobs created rose by 215,000. In addition, labor force participation improved for the fourth consecutive month. But the report also offered a glimpse of a potentially positive trend for the housing market. When it comes to the market for single-family homes, affordability conditions have garnered a lot of attention this year. That’s because, in a lot of markets, the number of homes available for sale hasn’t kept up with the number of Americans who are interested in buying a house. Naturally, when there are more buyers than homes for sale, home prices go up. And, while that has been good news for current homeowners – and especially those that fell into negative equity following the housing crash – home price increases and lack of inventory are now a concern for the growing number of potential buyers hoping to purchase a home this year. However, the jobs report shows construction employment rose by 37,000 in March, including a 12,000-worker increase in residential specialty trade contractors. This improvement could be an indication that home builders are beginning to build more new homes, which will help alleviate upward pressure on prices, balancing the market and leading to more favorable conditions for buyers this year. More here.

Optimistic Outlook Sees Brighter Days Ahead

According to Freddie Mac’s March Outlook, the housing market is poised to have its best year since 2006. The optimistic forecast is based on the belief that an improved job market – combined with low mortgage rates and a growing number of housing starts – will help boost sales this year and build momentum for 2017. “Housing markets are poised for their best year in a decade,” Sean Becketti, Freddie Mac’s chief economist, said. “In our latest forecast, total home sales, housing starts, and house prices will reach their highest levels since 2006. Low mortgage rates, robust job growth and a gradual increase in housing supply will help drive housing markets forward. Low levels of inventory for-sale and for-rent and declining housing affordability will be major challenges, but on balance the nation’s housing markets should sustain their momentum from 2015 into 2016 and 2017.” According to the outlook, Freddie Mac expects housing starts to increase this year, which will help slow down the rate at which home prices have been increasing. In fact, the outlook says annual house price appreciation will be 4.8 percent in 2016. In 2015, it was about 6 percent. More here.