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Mortgage News

Sep 6 2016                 

Home price increases continued to exceed CoreLogic's own projections in July.  The company's Home Price Index (HPI) indicates that home prices nationwide, including distressed sales, rose 1.1 percent from June and were 6 percent higher than in July 2015.  The month-over-month gain was identical to the rate of appreciation from May to June, but the year-over-year increase marked an acceleration from the 5.7 percent reported in June.  In the last HPI, CoreLogic noted a deceleration in price gains.

 

 

Oregon and Washington continue to top the charts with double digit annual increases of 11.2 and 10.2 percent respectively.  They were followed by Colorado at 9.3 percent, West Virginia (8.6 percent) and Utah (7.9 percent.)  Only one state failed to post an annual gain; Connecticut, where prices fell by 1.2 percent.  Other states had negligible changes; New Jersey saw appreciation of only 0.2 percent and in Vermont the gain was 0.8 percent.

"The strongest home price gains continue to be in the western region," said Anand Nallathambi, president and CEO of CoreLogic. "As evidence, the Denver, Portland and Seattle metropolitan areas all recorded double-digit appreciation over the past year."

CoreLogic is forecasting an increase in its HPI of 5.4 percent over the next 12 months (to July 2017) and a 0.4 percent uptick from July to August.  The company's forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. In the first six months of 2016 CoreLogic has projected monthly gains averaging 0.68 percent while reporting actual increases with a mean of 1.46 percent. CoreLogic had projected a June to July gain of 0.6 percent.

"If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year," said Dr. Frank Nothaft, chief economist for CoreLogic. "The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5 percent over the next year."

Posted by Chris Styner on September 6th, 2016 11:49 AM
Aug 31 2016                

Despite some predictions that pending home sales would fall in July, they actually rose modestly to reach their third highest level in nearly a decade. The National Association of Realtors® reported that its Pending Home Sales Index (PHSI) was up 1.3 percent to 111.3 from a downwardly revised (from 111.0) 109.9 in June and was up 1.4 percent compared to July 2015. 

The index had reached its highest level since February 2006 this past April when it hit 115.0.  The July index was second only to that number. NAR pronounced the increase in purchase contracts as broad-based; only the Midwest failed to improve on its June numbers.

Analysts surveyed by Econoday had projected the index could be in the range of a 1.8 percent decline to a 1.4 percent gain.  The consensus was a positive move of 0.6 percent.  

NAR's index is a forward-looking indicator based on contract signings for the purchase of homes. Those transactions are generally expected to close within two months.

Lawrence Yun, NAR chief economist, says a sizable jump in the West lifted pending home sales higher in July. "Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas," he said. "More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There's little doubt there'd be more sales activity right now if there were more affordable listings on the market."

Adds Yun, "The index in the West last month was the highest in over three years, largely because of stronger labor market conditions. If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales."

As Yun noted, the PHSI in the West surged 7.3 percent in July to 108.7, and is now 6.2 percent above a year ago. The index in the Northeast rose 0.8 percent to 96.8, putting it 1.1 percent higher than a year ago. It also rose 0.8 percent in the South to 123.9, up 0.4 percent year-over-year.  The Midwest was an outlier, falling 2.9 percent to 105.8, leaving it down 1.1 percent from a year earlier.  

Yun noted there has been a downward trend in the size and cost of new homes over the last year and says this could be an early indication that builders are starting to focus more on properties for buyers in the middle and lower price tiers rather than on the larger and more expensive homes they have been building.

"Realtors® in several high-cost areas have been saying for quite a while that there is robust demand for single-family starter homes and townhomes at an affordable price point for young buyers," adds Yun. "The homeownership rate won't move up from its over 50-year low without a meaningful boost from first-time buyers, whose participation has yet to noticeably increase so far this year despite mortgage rates near all-time lows."

NAR forecasts that existing-home sales will finish the year at around 5.38 million units, a 2.8 percent increase from 2015 and the highest annual pace since 6.48 million homes sold in 2006. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to around 4 percent.

Posted by Chris Styner on September 6th, 2016 11:28 AM
May 26 2016, 10:26AM, by: Jann Swanson                 

This morning's strong pending home sales report was the third upbeat April housing indicator. The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI) a forward looking indicator based on home purchase contract signings, was up 5.1 percent in April to 116.3 while the March PHSI was revised up from 110.5 to 110.7.  It was the third consecutive month that the Index had gained ground and it brought pending sales to their highest level in a decade.  The index gained 4.6 percent from April 2015 and was the 20th consecutive year-over-year increase.

The month over month change blew analysts' expectations out of the water.  Econoday's poll put the high end of expectations at 1.2 percent with a consensus of 0.8%.

The strong report follows a solid existing home sales report of a 1.7 percent monthly increase and a stunning report in which new home sales posted a 16.6 percent gain.

Lawrence Yun, NAR chief economist, says vast gains in the South and West propelled pending sales in April to their highest level since February 2006 (117.4). "The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets," he said. "The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market."

Yun says it remains to be seen how long mortgage rates will stay as low as they have fallen in recent months.  They, along with rent growth, rising gas prices - and the fading effects of last year's cheap oil on consumer prices - could edge up inflation and push rates higher. For now, he foresees mortgage rates continuing to hover around 4 percent in coming months, but surprises, he said, are always possible.

Adds Yun, "Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search."

Yun now expects sales this year to climb above earlier estimates and be around 5.41 million, a 3.0 percent boost from 2015. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to between 4 and 5 percent.

Pending sales increased in all four regions on an annual basis.  In the Northeast the index climbed 1.2 percent to 98.2 and is now 10.1 percent above a year ago. In the Midwest the index declined slightly (0.6 percent) to 112.9 in April, but is still 2.0 percent above April 2015.

April pending sales jumped 6.8 percent in the South to an index of 133.9 and are 5.1 percent higher than last April. The index in the West soared 11.4 percent to 106.2, and is now 2.8 percent above a year ago.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

Posted by Chris Styner on May 27th, 2016 4:06 PM
by: Jann Swanson: Apr 25 2016                

Housing remains the bright spot in a darkening economic outlook according to Freddie Mac's economists.  Though they have revised their forecast for economic growth downward in the latest edition of the company's Outlook they are still forecasting housing will retain its momentum in 2016.   

First quarter data painted "a bleak picture" of economic growth the report says.  Information on consumer spending, manufacturing, auto and retail sales have led to successive downward revisions in real GDP growth estimates for the first quarter from others and Freddie Mac is revising its forecast from 1.8 percent to 1.1 percent.  The company is looking for consumer spending, wage growth, and residential and business investment to pick up in the following quarters and for the GDP growth to be 2 percent for the entire year and 2.3 percent in 2017.

Even though job growth has been solid, Freddie Mac says wage growth has yet to materialize because of remaining slack in the labor market.  However, labor participation did rise slightly in March as discouraged workers, seeing hope, again sought employment.  The 0.6 percentage point increase since September 2015 means 1.5 million more workers.  This more than offset the job gains over the same period so the unemployment rate ticked up 0.1 point to 5.0 percent in March.

 

 

This increase in participation suggests there is remaining slack in the labor force but perhaps not much; both the median weeks of unemployment and the share of those unemployed for 27 weeks or more have been declining, and unemployment should drop back below 5 percent for the rest of 2016 and 2017.  "Stronger economic growth for the remainder of 2016 and reduced slack in the labor market will drive wage gains above inflation, though the gains are likely to be modest."

Freddie's economists maintain their positive view on housing and expect that the declines in long-term interest rates that accompanies much of the recent gloomier news should increase mortgage market activity, particularly refinancing, and housing will be an engine of growth.  Construction activity will pick up as we enter the spring and summer and rising home values will help support renewed confidence in the remaining months of the year.

As of April 14, 2016, the national average for Freddie's 30-year fixed mortgage rate was 3.58 percent, the lowest since May of 2013. Mortgage rates have followed U.S. Treasuries closely, with the mortgage rate decline almost entirely a function of declining Treasury yields spurred by a flight to quality. As goes the 10-year Treasury, so too shall go the 30-year fixed mortgage rate which has fallen more than 40 basis points since the beginning of the year. 

Freddie Mac has lowered its forecast for the 30-year rate for the second through fourth quarters by a tenth of a percent and expects that rate to average 4 percent for the year while still anticipating that the Federal Open Market Committee (FOMC) will raise short-term rates twice in 2016.

Both low rates and strong job growth should push home sales to the best year since 2006 even though they started the year slow.  Chronically low inventories remain a challenge both for new and existing home sales and the report says, "At the current rate of construction, people should get used to seeing headlines about low inventory of for-sale homes in many markets for years to come. Demographics and demand are only going to increase the pressure on housing stocks."

 

 

Housing and Urban Development (HUD) estimates that between 2009 and 2011 there were over 800,000 1-unit housing units lost to conversion, demolition, disaster, condemnation, or other reasons.  With approximately 90 million 1-units housing units in the country, about 414,000 must be replaced each year just to keep the stock constant.  While single-family housing starts have been accelerating recently and are running above replacement rates, the difference is only about 400,000 units per year which is constraining growth in the single family market.  Freddie Mac expects this to increase by another 200,000 over the next two years gradually alleviating tight inventories.

Tight supply along with demand driven by low rates and solid job gains will keep prices rising above historic average rates - an estimated 4.8 percent this year and 3.5 percent next year.  This will also drive up homeowner equity from an estimated $12.4 trillion at the end of 2015, slightly below the not-inflation-adjusted peak of $13.3 trillion in 2006.  The current surge in equity has not, like the earlier figure, been accompanied by a surge in mortgage debt but has gone almost exclusively to bolstering household balance sheets.

 

 

Mortgage debt will increase 3.5 percent this year and 4.0 percent in 2017, higher than in recent years but still well below the historic average of an annual 10 percentage point increase. There is also opportunity, given the low rates, for increased refinancing and since the recent drop Freddie Mac has refigured its February estimate that rates dipping below 4 percent would increase refinance potential by $122 billion. 

They say the contract rate on most loans clusters around every eighth of a percentage point. For example, there are clusters of loans around 3 percent, 3.125 percent, 3.25 percent, and 3.5 percent, but not many loans with contract rates in between. If borrowers react to specific rate incentives, e.g., refinance if market rates drop 1 full percentage point below the borrower's contract rate, then refinance activity will tend to ratchet higher with each eighth point rate reduction.  In the week of April 7, 2016, mortgage rates had their biggest one-week decline in over a year of 0.12 percentage points (nearly one eighth). Replicating its February analysis, the company says that one-week decline increased in-the-money refinance potential by $66 billion.

They also ran a macro simulation of the U.S. economy, housing, and mortgage market. That showed the decline relative to the February analysis increased refinance activity by about $50 billion.  Based on these calculations, Freddie Mac revised its 1-4 family mortgage originations estimate for 2016 up by $50 billion to $1.70 trillion.

Posted by Chris Styner on April 26th, 2016 3:22 PM

Frank Nothaft    |    Market Trends

Demographic forces will power housing demand in coming years as the millennial cohorts come into prime ages for forming households and buying first or second homes. The housing market has begun to feel the effects of this trend and the aging of the second largest cohort—the baby boomers.

Census Bureau data shows that during 2014, the largest single-age group of younger Americans was 23, with ages 22 and 24 right behind them, all clustered in the 4.5 million range (see Exhibit 1). The average age for a first-time homebuyer is 31. So in six to eight years, this bulge will become prime candidates for home sales and mortgages

But that’s not the only demographic driver at work. The average age of a “move-up” or “repeat” homebuyer is 39. Right now there are about 3.9 million people in this age group. Eight years from now, there will be 4.2 million potential repeat candidates in the sweet spot. There may even be a third wave, as the largest cohorts of baby boomers (those born in 1956 through 1958) hit retirement age and start looking for retirement homes, second homes, or empty-nest condos.

Millennials’ high student debt ratios and antipathy to buying homes is the stuff of legend. But that is likely to change as they advance in their working careers and plan families. Surveys of millennials indicate that they have a similar desire for homeownership as their parents’ cohort, but recognize that they plan to transition into ownership at a later age. Six to eight years from now, it’s a good bet they will look more like the home-buying cohorts of the past.

Household formations have doubled in 2015 (1.6 million) over 2014 (700,000), as an improving economy has allowed young people to get into the labor force and out of their family’s basement (see Exhibit 2). For now, those household formations likely will be rentals. But in a few years, they likely will be looking to buy homes.

An important difference between millennials and older cohorts is their greater racial and ethnic diversity. Forty-five percent of millennials are minorities, compared with 28 percent of baby boomers. Minority-headed households are projected to make up approximately three-fourths of the net households formed over the next decade.1 Historically, minority-headed households have had a lower homeownership rate than non-Hispanic whites. During the first three quarters of 2015, the homeownership rate for non-Hispanic whites was 72 percent, compared with 47 percent for minority-headed households.2 Whether the homeownership gap by race/ethnicity narrows or not over time depends on many factors outside of the housing industry, such as quality of workforce skills, labor-force opportunities, and access to credit. Nonetheless, the demographic bulge represented by the millennials will boost home sales in the future and is likely to boost rental demand as well.

[1] Joint Center for Housing Studies of Harvard University, State of the Nation’s Housing 2015, p. 14.
[2] U.S. Census Bureau, Housing Vacancy Survey, Table 6A.

© 2015 CoreLogic, Inc. All rights reserved.

Posted by Chris Styner on November 16th, 2015 11:38 AM
Nov 2 2015, 11:25AM                 

Purchase lending in June was at its highest level since the beginning of the housing crisis and early reports from the third quarter indicate that this trend is continuing.  Black Knight Financial Services said today that the 15 percent annual increase in the whole of the second quarter of this year and the apparent 11 percent increase in the third quarter were driven primarily by high credit borrowers, those with credit scores of 700 or better. Only 20 percent of purchase loans in that quarter went to borrowers with lesser scores.

At the same time refinancing is dropping among high-credit borrowers, indicating that there is a refinance "burn-out" after such a prolonged period of low rates.  This is tipping average credit scores lower. This, Black Knight says in its latest Mortgage Monitor based on September data, might be mistakenly interpreted as signaling a loosening of credit.

 

 

The company's Senior Vice President Ben Graboske explains that the two factors are related.  He said that role of high credit buyers in the increase in purchase originations means that year-over-year comparisons show that purchase volumes from lower-credit borrowers are actually flat to slightly down.  "Only 20 percent of purchase loans originated in the past three months have gone to borrowers with credit scores below 700. That's the lowest level we've seen in well over 10 years. The weighted average credit score for purchase mortgages has also hit an all-time high of about 755," he said

 

 

"At the same time, refinance originations have been steadily declining since March, signaling a degree of 'burnout' as those both interested and able to take advantage of currently low interest rates likely already have refinanced. We've also noticed that prepayment speeds - historically a good indicator of refinance activity - as well as refinance originations have been dropping most significantly among these same high-credit borrowers. In contrast to purchase mortgages, we've seen average credit scores for refinance originations decline, which has some suggesting that credit is loosening for these products. As these higher-credit borrowers - in many cases, 'serial refinancers' who have repeatedly taken advantage of drops in interest rates and their good credit standings - hit 'refi burnout,' and total originations decline, lower-credit borrowers make up a larger share of total volume, and weighted average credit scores for the total population naturally decline. It's not an indicator of loosening credit standards at all."

Black Knight also looked briefly at adjustable rate mortgages (ARMs) which currently have about a 5 percent share of originations, down from a 5 to 10 percent range pre-crisis.  There are about 5.7 million active ARMs nationwide, down 57 percent since 2006 and the lowest number outstanding since 2003.  Black Knight says this low inventory will limit the market impact of increasing interest rates. 

 

 

About 1.5 million of the outstanding ARMs are still under teaser rates; about three out of four active loans have already reset.  In 2006, on the cusp of the crisis, there were 13.3 million outstanding ARMs 10.7 million of which were in pre-reset status.  That is 2.5 and 7 times respectively the number in each category today.

In addition to fewer ARMs being originated, the initial term has changed.  In 2005-2006 nearly 60 percent of ARMs originated were 3/1 hybrids.  Today 90 percent of ARMs are originated with an initial reset of five years.  Black Knight says these longer initial fixed terms increase the likelihood that "whether through refinance of the purchase of a new home - many of these loans won't exist at the point of an ARM reset."

Black Knight also looked at some key Q3 2015 mortgage performance indicators and found that as of the end of the quarter, all but five states had seen reductions in their foreclosure inventories. As Graboske noted, Florida's improvement stands out.

"As of the end of September," he said, "Florida has ended its 8-year reign as having the highest number of loans in active foreclosure in the U.S. Over the past 12 months, the state has reduced its inventory of loans in active foreclosure by 43 percent."  The state, however, still has the largest number of properties 90 or more days past due but not in foreclosure.   That's nearly twice the national average of 22.5 percent.  New York - which has seen only a 19 percent reduction in its foreclosure inventory over the past year - is now the state with the most loans in active foreclosure with New Jersey in third place.  Outflow or foreclosure completions has been an issue in both New York and New Jersey since the foreclosure moratorium ended in 2010/2011.

 

 

While repeated foreclosure starts were up, first time foreclosure starts in the third quarter were at the lowest level in more than 10 years.  Completed foreclosures also fell in the third quarter, down 10 percent from the second quarter and the lowest they have been since 2006.

 

 

Posted by Chris Styner on November 2nd, 2015 3:40 PM

Nick Siebert  September 30, 2015

Mortgage rates fell appreciably on Tuesday, marking the second straight day of improvements, and as a result current 30-year mortgage rates are now hovering at 4-month lows. The stock market fell yesterday, and investors flocked into ultra-safe haven assets, such as U.S. government securities. Pricing on mortgage bonds, such as mortgage-backed securities (MBS) increased and as a consequence a number of lenders released improved rate sheets during mid-day. The bottom line is, that current mortgage rates are now close to such low levels, that we haven’t seen since May 2015.

On Tuesday, the yield on the benchmark 10-year treasury note fell by 5 basis points and this type of government bond finished the trading session at 2.05%. The longer-term 30-year treasury yield declined as well, coming out at 2.85% versus 2.87% that it had a day earlier.

This morning MBS is in the red, while stocks are rallying and as a result mortgage interest rates are slightly higher, as of this writing.

At its last policy meeting in September, the Federal Reserve decided to hold off on increasing short-term interest rates. The decision, to leave interest rates unchanged, has been causing some swings in the financial markets, as market participants are unsure about the direction of the U.S. central bank’s monetary policy. Lately investor sentiment is down, equities are falling and there’s low confidence in global growth. Overall, recent market trends and economic headlines have been supportive for low mortgage rates, but the upcoming Non-Farm Payrolls report, which is the most influential domestic economic report this week, could potentially break this trend.

This mid-week two pieces of economic data saw the light of day, including the ADP National Employment Report for September and the upcoming Chicago PMI. According to fresh jobs data from payroll processor ADP, U.S. private payrolls rose by 200,000 jobs in September. As far as job growth is concerned, the current figure marks a three-month high. This is a strong report, which exceeds the projected increase of 190,000 jobs. On the other hand, August’s job numbers were revised down to 186,000 from the previously reported 190,000.

Today’s other notable domestic economic report is the latest Chicago Business Barometer, also known as the Chicago PMI, which shows regional manufacturing activity in the Chicago area. According to a fresh report released by the Institute for Supply Management, business activity in the Midwest contracted this month, as a result of declines in production and new orders. This month’s Chicago PMI came in at 48.7, falling sharply from 54.4 last month, and it’s the fifth time this year that the Chicago region’s manufactury activity index signals contraction. The consensus expectation was for a reading of 53.3 for September’s Chicago PMI. In normal circumstances, you could expect that such a weak domestic economic data would have at least some kind of impact on the bond market, and indirectly on mortgage rates, however, bonds are seemingly driven by stock market movements and overseas economic headlines these days.

With regards to this week’s Fedspeaks, yesterday we reported that several U.S. central bank officials, including New York Fed President William Dudley and San Francisco Fed President John Williams, chimed in with their opinions about the central bank’s monetary policy. In an interview with Nikkei on Tuesday, Cleveland Fed President Lorett Mester said, that the U.S. central bank’s decision to hold off on increasing rates at its September policy meeting “was really a decision about risk management”. On the other hand, she reiterated her views, that she believes the economy is strong enough for an initial rate hike.

Another top Fed policymaker, Chicago Fed President Charles Evans, who is one of the dovish members of the U.S. central bank said in remarks prepared for a speech at Marquette University on Monday, that the Fed should leave interest rates near-zero until some time next year, citing risks that prematurely hiking rates could come with “substantial costs”. According to Evans, the Fed should take an “extra patient approach” when it comes to tightening its monetary policy for the first time since 2006, due to risks that inflation may not reach the Fed’s target levels and this could complicate the U.S. central bank’s monetary policy plans.

In other news, financial firm Zillow reported earlier this week, that the average interest rate on the benchmark 30-year fixed mortgage remained unchanged at 3.73% on Zillow Mortgages during the wraparound week ended on Tuesday. The company’s findings also showed, that the shorter-term, 15-year fixed mortgage averaged a rate of 2.92%, while the 5/1 adujstable-rate mortgage (ARM) came out at 2.74% during the said period.

A quick look at current average mortgage rates by state, shows that in California, the 30-year FRM is now hovering at 3.71%, a 1 basis point drop compared to data in the prior week. The biggest weekly drop in rates took place in Colorado and Massachusetts states, where the current average interest rate on the 30-year fixed mortgage is coming out at 3.71%. Zillow’s data also revealed that the lowest interests rate on the 30-year FRM was measured in Texas during the wraparound week, with the average rate coming out at 3.70%. On the other hand, the highest average rate for this type of long-term, conventional loan was measured in New York state (3.78%).

Posted by Chris Styner on September 30th, 2015 3:15 PM
In the midst of last week’s mixed job’s report and the upcoming Federal Open Market Committee meeting next week, mortgage rates remained largely unchanged for the week ending September 10, 2015.

According to the August 2015 Employment Summary released by the Bureau of Labor Statistics (BLS), nonfarm employment increased in August by 173,000, which is well below the monthly average for the previous 12 months of 247,000. The unemployment rate dropped to 5.1 percent while the number of unemployed persons in the nation fell below eight million. The unemployment rate and number of unemployed persons are down by 1 full percentage point and 1.5 million people, respectively, year-over-year in August.

"The soft headline may not even be an issue next month, as August payroll gains typically get meaningful upward revisions," said Doug Duncan, SVP and Chief Economist with Fannie Mae. "While the Fed could find reasons to delay raising rates, including increased downside risk for inflation and financial instability, we believe that it will not find one in this jobs report. We continue to call for a September lift-off, with a one-and-done hike this year on the way to normalizing monetary policy going forward."

Freddie Mac’s Primary Mortgage Market Survey (PMMS) found that the 30-year fixed-rate mortgage (FRM) edged up 1 basis point to 3.90 percent with an average 0.6 point. Last week the rate was 3.89 percent and one year ago, the rate averaged 4.12 percent.

"Following a shortened week, mortgage rates were virtually unchanged, inching up 1 basis point to 3.90 percent,” said Sean Becketti, chief economist, Freddie Mac. “The employment report released last Friday provided mixed signals, adding one more note of uncertainty prior to the Fed's September meeting. The unemployment rate dropped to 5.1 percent in August, the lowest rate since April 2008, but only 173,000 jobs were added, well below expectations. Wages grew 2.2 percent, a neutral indication at best."

Freddie Mac also reported that the 15-year FRM this week averaged 3.10 percent with an average 0.7 point. This rate up from last week’s average of 3.09 percent, and a year ago at this time, the 15-year FRM averaged 3.26 percent.

The survey data showed that the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.91 percent this week, down from last week when it averaged 2.93 percent. The 5-year ARM averaged 2.99 percent one year ago.

The average 1-year Treasury-indexed ARM was 2.63 percent this week, up from last week when it averaged 2.62 percent. Last year, the 1-year ARM averaged 2.45 percent.

Posted by Chris Styner on September 11th, 2015 4:20 PM
Jul 17 2015, 11:17AM by: Jann Swanson                

Home remodeling is expected to soon kick back into gear.  LIRA, the Leading Indicator of Remodeling Activity produced by the Joint Center for Housing Studies at Harvard University is projecting that annual spending growth for home improvements will accelerate to 4.0% by the first quarter of 2016.

LIRA is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry.

Expenditures on remodeling reached a recent peak of $146.0 billion in the third quarter of 2014 but declined over the following two quarters to an estimated $140.0 billion in the first quarter of this year.  Second quarter totals were estimated at 144.7 billion.  For the upcoming three quarters LIRA estimates the moving average will change by 3.5, 2.9 and 4.0 percent respectively.

 

 

"A major driver of the anticipated growth in remodeling spending is the recent pick up in home sales activity," says Chris Herbert, Managing Director of the Joint Center.  "Recent homebuyers typically spend about a third more on home improvements than non-movers, even after controlling for any age or income differences, so increasing sales this year should translate to stronger improvement spending gains next year."

"Other signals of strengthening remodeling activity include sustained growth in retail sales of home improvement products and ongoing gains in house prices across much of the country," says Abbe Will, a research analyst in the Remodeling Futures Program at the Joint Center.  "Rising home prices means rising home equity, which should encourage improvement spending by a growing number of owners."

Posted by Chris Styner on July 17th, 2015 6:43 PM

by: Jann Swanson, Jul 9 2015

Payments on a mortgage used to purchase a three-bedroom home were more affordable than paying rent on a similar home in 66 percent of the counties recently analyzed by RealtyTrac.  The company, which looked at data in 285 U.S. counties found that buying beat out renting in 188 of them.  

RealtyTrac's "buy-or-rent" analysis compared the percentage of median household income in 285 U.S. counties that would be needed to pay the fair market rent on a 3-bedroom property to the percentage that would be needed to make monthly house payments - including mortgage, insurance and property taxes - on a similar property.

Across all 285 counties analyzed, the average percentage of median household income needed to rent was 29.96 percent while the average percentage of median household income needed to buy was 29.00 percent.

Areas where it was cheaper to buy than rent, however, did tend to be those that had been most impacted by foreclosures including Miami-Dade, San Bernardino County, Clark County (Las Vegas), Broward County, Florida, and Wayne County (Detroit.)  The portion of income needed to buy in those counties ranged from 42 percent in Miami-Dade to 23 percent in Wayne County.

Thirteen counties switched from being more affordable to rent in 2014 to more buyer friendly in 2015.  These included counties housing Seattle, Reading, Pennsylvania, Indianapolis, Olympia Washington, and Cincinnati.

There were 97 counties where renting is more affordable than buying and among the top three - where the income required to buy exceeded 50 percent - were in California.  Rounding out the top five were the counties in which Seattle and Denver partially reside.

Twelve counties moved from being more affordable to buy in 2014 to being more affordable to rent in 2015 including Sacramento County and San Joaquin County, California; Lancaster County, Pennsylvania; Spokane County, Washington; and Polk County, Iowa.  

RealtyTrac also looked at properties that were what they called "Buy-to-Rent" purchased during the first five months of 2015.  They found those properties are showing a slightly decreased return on investment than properties purchased during the same time period in 2014 in 169 of the 285 counties analyzed (59).  The more recently purchased homes had a gross rental yield of 8.94 percent compared to 9.07 percent for an equivalent three-bedroom property bought a year earlier. 

Average rental rates on 3-bedroom properties increased 3 percent from a year ago across all 285 counties analyzed, while average home prices on 3-bedroom properties increased 4 percent across those same counties.

"As home price appreciation moderates and aligns more closely with trends in rental rates, the returns in the buy-to-rent market are stabilizing and becoming more predictable - if not as lucrative as they were for investors who purchased a few years ago near the bottom of the market," said Daren Blomquist, vice president at RealtyTrac. "Buying rentals continues to be a brilliant strategy that allows investors to hedge their bets in a real estate market shifting away from homeownership and toward a sharing economy."

Returns on investment increased in 41 percent (116) of the counties as rental rates outpaced home price appreciation.  Major counties where potential buy-to-rent returns increased from a year ago included Orange County, California; King County, Washington; Santa Clara County, California; Philadelphia County, and Suffolk County.

Counties with the highest potential rental returns for 3-bedroom properties purchased in the first five months of 2015 were Clayton County, Georgia (Atlanta) (24.05 percent annual gross rental yield), Bay County, Michigan (19.23 percent), Mahoning County, (Youngstown) (19.04 percent), Bibb County (Macon) metro area (18.11 percent), and Philadelphia County, Pennsylvania (17.67 percent).

Posted by Chris Styner on July 10th, 2015 1:13 PM

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