Monthly Archives: September 2020

Lending standards change. That’s why the Mortgage Bankers Association’s monthly Mortgage Credit Availability Index tracks how easy or difficult it currently is for borrowers to secure financing. Any increase in the index indicates that credit has become more available, while decreases mean standards have tightened. In August, the index fell 4.7 percent. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says economic uncertainty continues to affect lending standards. “Credit continues to tighten because of uncertainty still looming around the health of the job market, even as other data on loan applications and home sales show a sharp rebound,” Kan said. “A further reduction in loan programs with low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability.” The index was benchmarked to 100 in March 2012. Currently, it is at 120.9, which is its lowest level since March 2014. (source)

There’s currently an imbalance in the housing market. The number of interested home buyers far exceeds the inventory of homes for sale. That means, listings sell quickly, home prices rise, and prospective home buyers have to compete with other buyers for available homes. The lack of homes for sale also holds back home sales and makes things more difficult for first-time buyers looking for an affordable house to purchase. In short, low inventory is the housing market’s primary issue, and it’s only gotten worse since the coronavirus pandemic began in March. However, there is some good news, and it could mean a better balanced market is on the horizon. That’s because, according to one recent analysis, new for-sale inventory is up 16.2 percent month-over-month and is now at its highest level since March 22. The improvement is an indication that more homeowners now feel that it’s a good time to sell. And, if the trend continues, it could mean some relief for buyers, as it would lead to better affordability conditions, a slower market, and more chances to find a home that suits their needs. (source)

Spring and summer are the busiest seasons for the housing market. Home buyer demand ramps up in March and doesn’t typically start falling until after Labor Day. But this year is far from typical. And with buyer demand running well above last year’s pace, it’s natural to wonder what the fall housing market will look like. Will it be as competitive as the summer market or will it cool off like it usually does? Well, according to a new report from the National Association of Realtors’ consumer website, it may be more normal than you’d think. That’s because their most recent Housing Market Recovery Index – which tracks the market’s rebound since the coronavirus’ onset – found a slight dip in home buyer demand at the beginning of September. At the same time, the index found the inventory of homes for sale improved. The data is a hopeful sign for buyers that things may be trending in a more normal direction. If buyer demand continues to cool, it could mean a slower fall market with less competition and more homes to choose from. However, though encouraging, it’s too soon to say whether or not the numbers are anything more than a small bump in the long-term trend. (source)

When the coronavirus took hold in March it required a lot of adjustments. Everything from how we shop for groceries to how we socialize underwent an instant change. The way we work was among the biggest changes. Many Americans, who once commuted to-and-from the office every day, transitioned to working from home full-time. Now, six months later, it seems likely that remote work is here to stay, at least for some. But what might that mean for the housing market? Well, according to one new analysis, it could mean an opportunity for millions of renters to become homeowners. That’s because, in many markets, renters can’t afford to buy. In fact, priced-out renters make up 4.5 percent of all renting households. But, if those renters could live further from their workplace, they’d have an opportunity to buy a home in a more affordable area outside the city. The analysis found that this could apply to as many as 2 million current renters. However, since work isn’t the only factor deciding where we live, only time will tell how many Americans will actually make the move. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes is now 40 percent higher than it was at the same time last year. Typically, year-over-year gains are in the single digits. The improvement is also noteworthy, as it comes at a time of year when the housing market is usually starting to slow down. This year, however, is atypical. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says, the year-over-year comparison is a bit skewed because of Labor Day. “Purchase applications were 40 percent higher than the same week last year, but the increase is skewed higher by being compared to Labor Day 2019,” Kan said. “Nevertheless, there continues to be resiliency in the purchase market. Applications were up almost 3 percent on a weekly basis and the average loan size continued to increase, hitting a survey high at $368,600.” Also in the report, average mortgage rates fell across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the FHA, and 15-year fixed-rate loans. The rate for 15-year mortgages hit a new record low. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Fannie Mae’s Home Purchase Sentiment Index is a monthly measure of how Americans view the housing market and their personal financial situation. The survey asks respondents for their feelings about whether it’s a good time to buy or sell a home, home prices, mortgage rates, job security, income, etc. In August, the index found Americans’ optimism rebounded after a drop in July. Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the recovery was driven, in part, by record low mortgage rates. “The HPSI rose modestly in August, recovering the ground it lost in July,” Duncan said. “The HPSI’s recovery was driven by near-record low mortgage rates that helped restore much of consumers’ positivity on whether it is a good time to buy a home, while also improving the good-time-to-sell sentiment.” According to the survey, the number of participant who said they felt now was a good time to buy a home rose from 53 percent to 59 percent in August, while the net share of those who said it’s a good time to sell increased 7 percent. The number of respondents who said their income was significantly higher than one year ago also rose, climbing 3 percent month-over-month. (source)

If you know nothing else about how financing works, you know a lower mortgage rate is better than a higher one. You don’t need to be an expert to have figured that out. But calculating exactly how a good rate affects how much house you can afford is a little more complicated. After all, there a lot of moving parts. One recent analysis might help. The report looked at how much purchasing power home buyers have gained over the past year – since mortgage rates have dropped by almost a full point during that time. The results help explain why buyer demand is so high right now. They also help illustrate just how much more house you can afford with rates near record lows. So how much is it? Well, according to the numbers, a home buyer with a monthly budget of $2,500 can afford a home $33,250 more expensive than what they could buy last year at the same time. That’s a nearly 7 percent increase year-over-year. Put another way, that buyer, in August 2019, could afford a $483,250 house. Now, they could comfortably buy a $516,500 house. That’s a significant upgrade and good news for hopeful home buyers looking to make a move as the summer winds down. (source)

Ideally, the number of homes for sale would be equal to the number of interested home buyers. After all, an equally balanced housing market would mean no competition, no bidding wars, and no threat of spiking home prices. Unfortunately, though, that’s not how it works. And so, there are times when there are few buyers and more than enough homes and other times when there aren’t enough homes to satisfy buyer demand. In today’s market, inventory is low. The number of available homes for sale was already lower than normal to start the year and the pandemic only made things worse. How much worse? Well, according to new data from the National Association of Realtors’ consumer website, inventory was down 36 percent in August year-over-year. And while there are some areas – like Las Vegas, San Francisco, and Orlando – where active listings are down as little as 11 percent, there are others that have seen inventory drop as much as 55.9 percent. In short, it’s a seller’s market and will likely continue to be for the foreseeable future. That means, hopeful home buyers need to be prepared to act fast when they find a home that fits their needs. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes is now 28 percent higher than it was last year at the same time. The improvement is notable, especially since it comes during a week when purchase demand was virtually flat from the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said it was the 15^th straight week of year-over-year gains. “Purchase applications were essentially unchanged over the week and were 28 percent higher than a year ago – the 15^th straight week of year-over-year increases,” Kan said. “Lenders are reporting that the strong demand for home buying is coming from delayed activity from the spring, as well as households seeking more space in less densely populated areas.” Also in the report, average mortgage rates were relatively unchanged from one week earlier, with rates still hovering just above historic lows. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

During the second quarter, the economy suffered the worst contraction since World War II. But the strength of the subsequent rebound has Fannie Mae’s Economic and Strategic Research Group expecting further improvement. In fact, according to their latest forecast, the group believes that – barring a worsening of the coronavirus outbreak – the recovery will continue into the third quarter. And Doug Duncan, Fannie Mae’s chief economist, says the housing market will lead the way. “We believe housing will continue to be a sector with relative strength amid the larger downturn, as long-running supply constraints exacerbate demographic and interest rate demand-side factors that are supporting home price growth,” Duncan said. “The recently observed increase in purchase demand is largely due to pent-up demand as buyers are acting now after delaying purchases in the spring.” Additionally the ESR Group says that any regional coronavirus flare-ups are unlikely to lead to a further economic contraction and, instead, will result only in a temporary pause in the growth rate. Because of this, they’ve revised upward their forecast for home sales and mortgage originations this year. (source)