NAR Survey Finds American Dream Depends on Affordability

by: Jann Swanson

Homeownership as an American dream is alive and well according to new data from the National Association of Realtors® (NAR) 2018 Housing Opportunities and Market Experience (HOME) Survey.  The survey was conducted across all 12 months of last year.  Sixty-four percent of respondents were homeowners, 27 percent were renters, and 9 percent were non-homeowners living with a family member without paying rent.

NAR just released Aspiring Home Buyers Profile, which focuses on survey responses from non-homebuyers, both those who rent and those living with a family member. Of the non-owners, 45 percent were 34 years or under, 59 percent make an income of under $50,000, and 43 percent live in suburban areas.  Across the quarters of 2018 non-homeowners were consistent in their desire to own a home in the future, with about three-quarters saying it was part of their American Dream. Nine out of ten homeowners gave that same response.

However, over the course of the year, non-owners’ perception of whether it was currently a good time to buy that home decreased from 51 percent in the first quarter to 47 percent in the fourth.  Over the same period homeowner perceptions dropped only 1 point to 72 percent.  There was little variation among non-owners by age groups, income, or city size. The single exception was in the West where the perception it was a good time to buy was lower than in all other regions.



Non-homeowners said their chief reason why they do not own a home is their inability to afford a mortgage.  The second biggest reason was that current life circumstances mitigate against it, while a smaller number said they need the flexibility of renting.



When asked what might provide the trigger for buying a home in the future, 28 to 31 percent of non-owners each quarter said an improvement in their financial situation would be the top reason that would encourage them to buy a home in the future. In each quarter, 26 to 30 percent of non-owners said a change in lifestyle – such as getting married, starting a family or retiring – would be the primary reason they would make a future home purchase.



Both homeowners and non-owners were asked about adult family or friends moving into their homes, the span of time this individual(s) lived within the household, and if they thought about moving to a new home because of the change.  Eleven percent of homeowners and 14 percent of non-owners said they had an adult, usually an adult child, move into with them.  Of those, 44 percent said that the individual intended to stay for over one year or permanently. Eighty-eight percent of those surveyed who had someone move into their home reported that their living situation remained acceptable and therefore did not warrant consideration of moving into a different home. Twelve percent said they did consider moving or ultimately did move due to their home situation changing.

Lawrence Yun, NAR chief economist, says unaffordable housing has caused a number of potential buyers to hold off on purchasing a new home. “The lack of affordable and moderately priced homes has forced non-homeowners to delay achieving that part of the American Dream. However, as the survey confirms, significant lifestyle changes like marriage or starting a family often spur non-owners to pursue home-ownership.”

“While home sales were slightly down in 2018, there is still a sizable pent-up housing demand. Economic growth, interest rates, and the supply of moderately priced-homes will dictate how well the real estate industry will do this year,” said Yun.”

NAR’s survey was conducted by random dial telephone surveys each month in 2018.  An average of 680 interviews were conducted each month.

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Mortgage rates hit a 4-month low, so what’s holding back the housing market?


Joe Raedle/Getty Images A for-sale sign is posted in front of a home in Miami.

Rising mortgage rates are quashing the housing market.

Sound familiar?

It’s a truism that’s been repeated frequently over the past year or so, as mortgage rates have climbed and housing market activity has faltered. The only problem is, it’s not all that straightforward. There’s a lot going on in the housing market right now, and mortgage rates may just be the easiest culprit.

See also: Here’s what mortgages will do in 2019 — from the people who usually get it wrong

First, some background: the 30-year fixed-rate mortgage averaged 4.51% in the first week of the new year, according to mortgage finance provider Freddie Mac. Throughout all of 2018, the 30-year-fixed averaged 4.55%, 56 basis points higher than in 2017.

What matters more, as MarketWatch has chronicled extensively, is the fact that the inventory of properties is slim, and prices are still rising far too fast for buyers to keep up. Nationwide, home price appreciation slowed for the third straight month in October, according to Case-Shiller’s closely-watched price index. But that meant prices were still up 4.7% compared to a year earlier. Meanwhile, even a blowout jobs December jobs report couldn’t get wages that high — they rose 3.2% compared to a year earlier.

Read: U.S. gains 312,000 jobs in 10-month high that shattered Wall Street forecasts

Americans are surprisingly attentive to price fluctuations. In the most recent home purchase sentiment survey from Fannie Mae, the net share of respondents saying that home prices would go up fell for the third straight month.

But they’re also attuned to other market movers, like Washington uncertainty, the reality that financial market gyrations are taking a bite out of their down payments, and the fact that the long economic expansion may be coming to an end sooner rather than later. In December, Fannie also found that the number of respondents saying their personal financial situation would likely get better declined, even as the number of those saying their situation would get worse increased.

“Low mortgage rates combined with decelerating home price growth should get prospective homebuyers excited to buy,” Freddie Chief Economist Sam Khater said last week. “However, it will be interesting to see how the recent turmoil in the stock market will affect homebuying activity in the coming months.”


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Housing market expected to stabilize in 2019: Fannie Mae

Slower economic growth will mean more static interest rates and increasing affordability, a new study from Fannie Mae says.

Economic growth is expected to slow in 2019 leading to stabilized home sales and mortgage rates, according to Fannie Mae‘s economic and strategic research group.

A widening trade deficit and moderation of business investment growth have Fannie Mae’s team predicting that full-year gross domestic product growth (GDP) will slow to a 2.3 percent increase — down from this year’s projected 3.1 percent increase.

Consumer spending will continue to be the largest driver of growth, but in the third quarter of 2018 business investment growth slowed significantly. It could be even further impacted by higher tariffs, uncertainty around trade deals and rising interest rates.

“We expect full-year 2018 economic growth to come in at 3.1 percent — an expansion high — before slowing markedly to 2.3 percent in 2019 and 1.6 percent in 2020,” Doug Duncan, Fannie Mae’s chief economist said in a statement. “Fading fiscal policy, worsening net exports, and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019.”

Purchase mortgage originations are expected to climb in 2019, but a substantial decline in refinanced mortgages is expected, which should overall result in a small drop in total origination volume, the research team said. Stabilizing mortgage rates — along with expected strong job growth — should give more prospective homeowners a chance to adjust to the new rates, the report states.

“If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market,” Duncan said.

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Home for the holidays: Fannie, Freddie stall foreclosure evictions

The government-sponsored enterprises are suspending eviction lockouts for the holiday season.

Though legal and administrative proceedings may advance, evictions for units owned by Fannie Mae and Freddie Mac will be halted between Dec. 17 and Jan. 2. This means while other pre- and post-foreclosure activities will not be affected, and servicers may continue to file related documentation, homeowners may remain in their houses during this period.


The eviction moratorium applies to single-family and two-to-four unit properties, according to Fannie Mae.

The share of loans in the foreclosure process at the end of the third quarter was 0.99%, which is down 24 basis points from a year ago and 6 basis points from the previous quarter, according to the Mortgage Bankers Association. Mortgage delinquencies overall inched up, but a healthier economy is still keeping them low.

The suspension lockouts issued by Fannie and Freddie have also been issued in previous years to provide relief for households during the holidays.

This moratorium also comes at a time when legal proceedings, late payment fees and credit bureau reporting have been temporarily suspended for properties affected by natural disasters like the recent California wildfires.

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Uptick in Home Purchase Sentiment Reflects Increased Confidence

by: Jann Swanson

Fannie Mae’s Home Purchase Sentiment Index (HPSI) for November rose slightly, but within the 0.5-point increase was some increased confidence about personal finances and the wisdom of buying a home.  The index, which consolidates responses from a subset of questions on the company’s National Housing Survey, rose to 86.2 from 85.7 in November. The index is 1.6 points lower than in December 2017.



A survey high record was set in the net share of Americans who reported their income was up significantly over the last 12 months.  A 5-point increase brought the net share to 24 percent.

Fifty-seven percent of respondents told pollsters it was a good time to buy a home while 34 percent disagreed.  This resulted in net positive responses of 23 percent, up two points from October.

The other component of the HPSI that increased, by 1 point, were expectations that mortgage rates would go down.  That component, long in negative territory, rose to a net of -56 percent.

Those positives were largely offset by expectations that home prices would no longer continue to go up.  Net positive responses declined for the second straight month, down 4 points to 33 percent. The net share of respondents who were not worried about losing their job was down 1 point but was still at 77 percent.  The component representing those who think it is a good time to sell a home was unchanged at 35 percent.

“The HPSI has moved within a tight range over the past five months, as positive sentiment regarding the overall economy continued to offset cooling housing sentiment,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Consumers’ perceptions of growth in their household income reached a survey high this month, helping to absorb some of the impact of increasing mortgage rates on housing market activity. Meanwhile, the net share of consumers expecting home prices to increase over the next 12 months continues to moderate, dropping by 13 percentage points since this time last year.”

While not components of the HPSI, survey respondents are also asked about their expectations for the degree of increases or decreases in both home purchase and rental prices.  Among the 60 percent who said they do expect rents to go up, the average amount of the anticipated increase rose from 4.3 percent to 4.4 percent.  The 46 percent who still expect home prices to continue higher also lowered their expectations from a 2.6 percent annual increase to 2.5 percent.

The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

The NHS, from which the HPSI is constructed, is conducted monthly by telephone among 1,000 consumers, both homeowners and renters.  Respondents are asked more than 100 questions to track attitudinal shifts.  The November 2018 National Housing Survey was conducted between November 1 and November 2, 2018, but primarily during the initial two weeks of that period.

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Mortgage Rates Lowest Since September After Jobs Report

by: Matthew Graham

Mortgage rates held on to their recent improvements today after the important Employment Situation (the big “jobs report”) showed November job creation was lower than expected.  In general, weaker job creation is good for interest rates because it speaks to slower economic growth and inflation (both of which are enemies of rates).  This report was particularly important because a strong result would have cast doubt on several speeches from members of the Federal Reserve.  Those speeches have warned about slower economic growth in 2019 and the potential for fewer rate hikes than previously anticipated.

There were no clear winners or losers at first–probably because job creation is still historically solid.  Additionally, the unemployment rate remained ultra low, and wage growth remained above 3.0% on an annual basis.  Markets were indecisive at first, but stocks and bond yields eventually began to move lower.  Multiple mortgage lenders offered small improvements on rate sheets in the afternoon, after the bond market gained enough ground.  Today’s mortgage rates are the lowest in months and current trends are about as strong as they’ve been in more than a year.

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Interest Rates On The Rise

Interest rates are going up fast! Refinance now!

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