Chris Styner

Homeowner Equity is on the Rise, Slightly Faster Than Home Prices

By: Jann Swanson

Jun 10 2019, 9:57AM

The increase in homeowner equity has slightly exceeded the pace of housing appreciation. CoreLogic says that the 63 percent of homeowners nationally who have a mortgage on their property saw their equity grow by 5.6 percent between the first quarter of 2018 and the same quarter in 2019.

The national increase in the value of homeowner equity aggregates to nearly $486 billion. On average, homeowners gained about $6,400 in housing wealth during the year that ended in the first quarter of 2019. Nevada had the highest year-over-year average increase at $21,000.

The number of homeowners who are upside-down in their mortgage, those owing more to the lender than the market value of their home, is declining, although the cost of that negative equity grew slightly. Underwater properties dipped by 1 percent from the fourth quarter and 11 percent year-over-year to 2.2 million homes or 4.1 percent of all mortgaged homes. The aggregate value of that negative equity grew to approximately $305.4 billion at the end of the first quarter, a $2.5 billion increase from the fourth quarter of 2018. Negative equity is caused by falling home prices, an increase in mortgage debt, or both.

CoreLogic’s chief economists Frank Nothaft says the company’s forecast for its Home Price Index is for another 4.5 percent gain in home value from the end of 2018 to December 31 of this year. “If all homes experience this gain,” he says, “this would lift about 350,000 homeowners from being underwater and restore [their] positive equity.”

Negative equity peaked at 26 percent of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009.

As can be seen in the graphic below, homeowners with near-negative equity, loan-to-value (LTV) ratios between 80 and 100 percent, present a danger of rapid growth in the negative statistics should home prices decline. while only a small share of the negative equity totals are among those with LTVs between 100 and 125 percent. Those with significant negative equity – LTV’s higher than 125 percent, represent a large number of those who are still underwater.


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Mortgage Rates Move Even Deeper Into 3% Territory After Jobs Report

by: Matthew Graham

Jun 7 2019, 3:26PM

Mortgage rates moved decisively lower today following a much weaker-than-expected reading on new job creation in a key report from the Department of Labor. The payroll count in the big jobs report fell to 75k in May compared to a median forecast of 185k. The previous two months were also revised moderately lower.

Taken together the update on jobs calls into question the strongest and most resilient component of the current economic expansion in the US. This is important for two reasons. First, a strong economy is better able to support higher rates (more people working = more people able to make higher payments). Second, one of the Fed’s mandates is “full employment.” If this drop in the job count precedes an increase in unemployment, it adds to the already growing case for a Fed rate cut this summer.

While the Fed doesn’t set 30yr fixed mortgage rates, Fed rate hike/cut expectations definitely correlate quite well with movement in longer term rates like 10yr Treasury yields and mortgages. Markets think the Fed stands a very good chance to cut rates by July–a viewpoint that has just come into full focus this week. As it has, rates have dropped at their best pace of the year to the lowest levels since September 2017.

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Prepayments, Refinance Pool, Affordability all Increase as Rates Decline

Jun 3 2019

As the current issue of Black Knight’s Mortgage Monitor was going to “press” mortgage rates dropped under 4.0 percent for the first time in more than a year.  Black Knight spokesperson Mitch Cohen says the decline to 3.99 percent sent what the company considered the refinanceable population of homeowners up by 2 million in just a month and a total of 3 million in two months.  Black Knight considers refinanceable homeowners as those who can both qualify for refinancing and would save at least 75 basis points by doing so.  The company now counts 5.9 million potential refinancing candidates in that pool, the largest group in nearly three years. The figure below shows the distribution of potential refinance candidates across origination vintages as of mid-May, prior to the most recent pullback in rates.



Today those borrowers could achieve an aggregate of $1.6 billion in monthly savings, an average of $271 per household.  Nearly 1 million of these borrowers took out their mortgage last year. That vintage represents a greater potential for early payoff than the 2012 to 2017 vintages combined, but also the greatest business potential.

The most recent rate drop hasn’t had time to percolate through the system and be reflected in prepayment statistics, but the easing of rates that began last November is definitely being felt.  Black Knight notes that April, the month examined in the current Mortgage Monitor, marked the third consecutive month in which the prepayment or single month mortality rate (SMM) increased.  It is now up 67 percent over those months, the largest increase in more than 10 years.  Of course, not all of the prepayments are rate-related, ’tis the season for home sales and those accounted for more than half of the increase (about 89 percent over the three months) in FHA and VA loan prepays. Despite the surge in prepayments, the total SMM rate of 0.99 percent is below the 5-year average of 1.04%.



Prepayments due to rate/term refinances have grown by 180 percent over the last three months and are now five times their rate in November of last year when interest rates peaked and the highest since October 2017. The largest share of the increase is due to the seasonal jump in new home sales, accounting for 45 percent.



Home prices usually enjoy the largest home price gains of the year in March as the “spring market” kicks off.  However, As Black Knight’s Data& Analytics Division President Ben Graboske explains, in March of this year prices rose by only 1.0 percent compared to 1.25 percent the prior March.  “Likewise, the annual rate of appreciation has now slipped to 3.8 percent, the first time annual home price growth has fallen below its 25-year average of 3.9 percent since 2012. That makes 13 consecutive months of home price deceleration.”



Eighty-five of the 100 largest housing markets have posted lower gains over the last year, including some very dramatic changes.  San Jose’s appreciation has declined by 30 percent; Seattle’s by 13 percent and San Francisco’s by 12 percent, dropping them from the top 1st, 2ns, and 5th gainers in the nation to numbers 100, 97, and 99 respectively.  Their prior standings have been assumed by two Rocky Mountain states, Idaho and Utah, and parts of eastern Washington.



Even better news for homebuyers is that among those 85 markets where appreciation decelerated, 65 had more of a slowdown at the low end of the market than at the high end.  However, that lower tier end of the market did continue to gain the faster, outpacing the high end in all but one of the 85 markets.  On average, the appreciation among the bottom 20 percent of properties in terms of price (Tier 1) was 5.8 percent compared to 2.2 percent in Tier 5, the highest priced 20 percent..  The difference between those tiers however has shrunk from 4.9 percent a year ago to 3.6 percent as the lower end cools more rapidly.

The most positive result of these price changes as well as lower rates is the impact on affordability. Graboske says “Home prices began to decelerate in February 2018 as rising interest rates put pressure on affordability, intensifying toward the end of the year as 30-year fixed rates peaked near 5 percent in November, bringing affordability levels close to their long-term averages. Of course, rates have since declined, and are now hovering close to 4 percent. However, they didn’t fall below 4.25 percent until the last week of March, meaning we likely won’t see the impact – if any – on home prices until May or June housing numbers.”

Today the monthly payment needed to purchase the average priced home with 20 percent down has declined by 6 percent over the last six months.  That payment is now $1,172 per month, the lowest in more than a year.  This equates to requiring 22 percent of the median income to make that payment, the lowest ratio in more than a year and well below the long-term average of 25.1 percent.  That sales slowed forcing price growth lower suggests that a 25 percent ratio may not be sustainable today, perhaps because of the levels of other mortgage debt, lending standards, or other factors.  In four states – California, Hawaii, Maine and Nevada – plus the District of Columbia home prices are still less affordable than their own long-term averages The disparity is most noticeable in California, where – despite interest rate declines and, in some cases, rapidly slowing home price growth – it requires 4 percent more of the median household income to buy the average-priced home.  This is far less affordable than long-term benchmarks and suggests that, while falling rates may have the ability to reheat some housing markets across the country, it may not be enough to alleviate the affordability constraints that have been putting downward pressure on California housing markets.



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Mortgage Rates Lowest Since January 2018

Mortgage rates fell again today, just barely inching to the lowest levels since early 2018. Keep in mind, that factoid is based on an average of multiple lenders. Some of them aren’t quite back to the low rates seen at the end of March. Others had crossed that line several days ago. Either way, the actual NOTE RATE at the top of the average rate quote would be the same then and now. The EFFECTIVE RATE would be just slightly lower due to a small advantage in upfront lender costs (origination or points, depending on the lender).

Relative to market sentiment at the beginning of May, the last 3 weeks have been unexpected. In other words, there was no obvious reason to expect or fear the sort of slide in stocks and yields that we’ve seen since then. But of course, that’s just the sort of thing financial markets like to do! If there’s one overarching reason for the move, it’s the trade war between the US and China. Just when it seems the issue is put to bed, more drama unfolds. In general, trade war drama damages the economic outlook and a weaker economy is generally good for rates.

Other factors have joined in the fight to push rates even lower so far this week. The longer the broad rate rally continues, the more inevitable a bounce becomes. There’s no telling how big the bounce would be or how long it would last, but there’s no question each day brings us closer. With rates at the lowest levels in more than a year, and next week bringing lots of potential volatility, this week has been and continues to be a fairly compelling lock opportunity.

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Mortgage Rates Are Great, But They Could Be Greater

by: Matthew Graham

May 28 2019, 5:20PM

The world of mortgage rate analysis is both simple and complicated. On a simple note, rates are near long-term lows and they’ll generally continue to follow the broader market for interest rates (which is largely based on US Treasuries, domestically). On the more complex note, mortgage rates aren’t directly tied to Treasuries, don’t move frequently throughout the day, and can vary from lender to lender. Due to those 3 factors, we get days like today where 10yr yields are down significantly (normally a good indication that mortgage rates will be down), yet some lenders are actually offering somewhat higher rates compared to last Friday! What’s up with that?

Generally speaking, the lenders who are worse off today are those who were more aggressively priced on Friday. Compare today to last Wednesday, and most lenders have dropped by a similar amount. Even then, the average lender is just slightly lower in rate today, which means we’re still operating on the edge of the lowest levels in more than a year.

The biggest issue–and the one that’s most difficult to explain in simple terms–is that mortgages have not been doing a good job of keeping pace with Treasury yields lately. This has happened for a variety of reasons. If we could only discuss one overarching reason, it would be that mortgages are based on different bonds than Treasuries. Although their supply/demand characteristics are usually almost perfectly similar, there are times when that correlation breaks down due to the unique underlying investments (i.e. one is US government debt and the other is consumer mortgage debt that’s merely guaranteed to be repaid by the US government). Notably, there has been increasing chatter regarding the re-privatization of Fannie Mae and Freddie Mac. If that happens, the aforementioned government guarantee would no longer be in place. This alone could explain some of the drift seen in mortgages vs Treasuries lately.

Zooming back out to the more simple point of view, suffice it to say that both mortgages and Treasury yields are as low as they have been any time recently, and that a big move higher in one will likely coincide with a big move higher in the other. Mortgage rates have a bit of an advantage there. Since they’ve seen fewer gains on the way down, they have less to lose on the way up.

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Rates Are Back to Lowest Levels in More Than a Year

May 24 2019, 2:52PM

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.

Markets closed early today and will be fully closed on Monday for Memorial Day.  Interest rate volatility should increase steadily after that, with the first week of June bringing the biggest risks/opportunities.

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Incomes are finally outpacing housing costs in all major cities

Aly J. Yale The Mortgage Reports contributor

May 20, 2019

100 largest cities take home more cash

American incomes are on the rise. According to a new analysis, income growth has outpaced housing costs in all 100 of the country’s biggest cities.

Take-home cash on the rise

A new analysis from MagnifyMoney shows that incomes are finally outpacing housing cost growth. In fact, in all 100 of the nation’s largest metros, the median household has the most post-housing cash in three years.

And that’s true for both homeowners and renters.

As MagnifyMoney’s Elyssa Kirkham explains, “Compared to three years ago, the typical household in these cities has more money left over after paying for housing. In other words, even though housing costs have risen over the last three years, the dollar amount of wages have grown faster and exceeded the dollar pricing increases for both renting and owning a home.”

In San Francisco, homeowners have $12,178 more left over after housing costs, while renters have $9,982 more.

Other cities with serious post-housing gains include San Jose, California ($9,909 more per year across all households); Seattle ($7,136); Austin, Texas ($6.737); Portland, Oregon ($6,733); Denver ($6,418); Boston ($6,336); Bridgeport, Connecticut ($6,178); Nashville, Tennessee ($5,984); and Salt Lake City ($5,853).

Improvements across the board

Even the cities with the smallest gains are still seeing serious improvement. In Albuquerque, New Mexico for example, homeowners make $2,194 more, while renters make $1,438.

“Rent costs are increasing at a faster rate than costs for households who own their own homes and still have a mortgage in every metro,” Kirkham said. “Even so, wage growth has outstripped those increases.”

In some cities, median housing costs have actually decreased in the last three years. This occurred in Las Vegas (down $216); Detroit (-$144); Jacksonville, Florida (-$36); Atlanta (-$24); Birmingham, Alabama (-$24); and Chicago (-$24).


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6 Reasons You Should Never Buy or Sell a Home Without an Agent

It’s a slow Sunday morning. You’ve just brewed your Nespresso and popped open your laptop to check out the latest home listings before you hit the road for a day of open houses.

You’re DIYing this real estate thing, and you think you’re doing pretty well—after all, any info you might need is at your fingertips online, right? That and your own sterling judgment.

Oh, dear home buyer (or seller!)—we know you can do it on your own. But you really, really shouldn’t. This is likely the biggest financial decision of your entire life, and you need a Realtor® if you want to do it right. Here’s why.

1. They have loads of expertise

Want to check the MLS for a 4B/2B with an EIK and a W/D? Real estate has its own language, full of acronyms and semi-arcane jargon, and your Realtor is trained to speak that language fluently.

Plus, buying or selling a home usually requires dozens of forms, reports, disclosures, and other technical documents. Realtors have the expertise to help you prepare a killer deal—while avoiding delays or costly mistakes that can seriously mess you up.

2. They have turbocharged searching power

The Internet is awesome. You can find almost anything—anything! And with online real estate listing sites such as yours truly, you can find up-to-date home listings on your own, any time you want. But guess what? Realtors have access to even more listings. Sometimes properties are available but not actively advertised. A Realtor can help you find those hidden gems.

Plus, a good local Realtor is going to know the search area way better than you ever could. Have your eye on a particular neighborhood, but it’s just out of your price range? Your Realtor is equipped to know the ins and outs of every neighborhood, so she can direct you toward a home in your price range that you may have overlooked.

3. They have bullish negotiating chops

Any time you buy or sell a home, you’re going to encounter negotiations—and as today’s housing market heats up, those negotiations are more likely than ever to get a little heated.

You can expect lots of competition, cutthroat tactics, all-cash offers, and bidding wars. Don’t you want a savvy and professional negotiator on your side to seal the best deal for you?

And it’s not just about how much money you end up spending or netting. A Realtor will help draw up a purchase agreement that allows enough time for inspections, contingencies, and anything else that’s crucial to your particular needs.

4. They’re connected to everyone

Realtors might not know everything, but they make it their mission to know just about everyone who can possibly help in the process of buying or selling a home. Mortgage brokers, real estate attorneys, home inspectors, home stagers, interior designers—the list goes on—and they’re all in your Realtor’s network. Use them.

5. They adhere to a strict code of ethics

Not every real estate agent is a Realtor, who is a licensed real estate salesperson who belongs to the National Association of Realtors®, the largest trade group in the country.

What difference does it make? Realtors are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.

6. They’re your sage parent/data analyst/therapist—all rolled into one

The thing about Realtors: They wear a lot of different hats. Sure, they’re salespeople, but they actually do a whole heck of a lot to earn their commission. They’re constantly driving around, checking out listings for you. They spend their own money on marketing your home (if you’re selling). They’re researching comps to make sure you’re getting the best deal.

And, of course, they’re working for you at nearly all hours of the day and night—whether you need more info on a home or just someone to talk to in order to feel at ease with the offer you just put in. This is the biggest financial (and possibly emotional) decision of your life, and guiding you through it isn’t a responsibility Realtors take lightly.

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House prices drop in three Southern California counties

Single-family home prices fell in Los Angeles and San Diego counties for the first time in seven years, California Association of Realtors figures show. Orange County’s median house price fell for the third time in the past four months.

House prices fell last month in Los Angeles, Orange and San Diego counties and in half of all counties included in the California Association of Realtors’ latest housing report, released Tuesday, April 16.

It’s the first year-over-year price drop for Los Angeles and San Diego counties in seven years and the third in Orange County in the past four months.

House sales, meanwhile, were down in all major regions in the state – falling 12 percent year over year in the Los Angeles metro area, CAR reported.

March’s price and sales declines occurred even though the economy remains strong and despite recent drops in mortgage rates, said Jordan Levine, a CAR senior economist.

Low mortgage rates may yet reignite demand during this year’s spring homebuying season, when sales typically are at their highest, he said. “It’s tough out there,” Levine said, “but there’s no reason (for sellers or their agents) to panic.”

He attributed last month’s price weakness to three key factors: House hunters remain nervous about buying at what many see as a market peak; many home shoppers still can’t afford to buy after nearly seven years of steady price gains, and listings in the state have jumped 14 percent.

“As a seller, you have a lot more competition for your unit than a year ago or even two years ago,” Levine said. With more homes to choose from, buyers are taking their time.

One sign of wariness emerged from CAR’s monthly survey of more than 400 homebuyers. Just 22% said during the first week in April now is a good time to buy a home, down from 27% six months earlier, Levine said.

So how big were the drops? CAR single-family home figures for March show:

  • The median price of an existing Los Angeles County house, or price at the midpoint of all sales, was $525,520, down 0.7% from March 2018 levels. L.A. County single-family home sales were down 13% year over year.
  • Orange County’s median was $809,500, down 1.8%, while O.C. sales were off 12.5% from year-ago levels.
  • San Diego County’s median was $623,800, down 0.3%, while sales were down 3.9%.
  • Riverside County’s median was $412,000 in March. That’s up 3.5% year over year, although sales were 9.3% below March 2018 levels.
  • San Bernardino County’s median was $309,950, up 10.7%. Sales there fell 12.2%
  • House prices fell 4.1 percent in the San Francisco Bay area, with price drops in every county but Napa.
  • Price drops occurred in 25 of the 50 counties included in CAR’s report, with a 20.5% drop in Santa Barbara County and a 10.6% decline in Santa Clara County, home to Silicon Valley.

By comparison, California’s statewide median was $565,880, up a mere 0.2% from a year ago. Statewide, sales were down 6.3%.

California’s sales picture actually showed signs of improvement, considering that transactions were down by double digits in four of the previous five months, CAR figures show.

CAR Chief Economist Leslie Appleton-Young noted the state’s median house prices have been softening since hitting an all-time high last June. But she held out hope for a rebound in sales later this year.

“The flattening home prices, coupled with low mortgage rates, bode well for housing affordability and may bring more buyers who may have given up back to the market,” Appleton-Young said.

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10 Influences on Hard Money Loan Rates

With conventional mortgage rates near historic lows, I often get the question about: “What factors impact Hard Money Loan Rates (HMLR) and the subsequent yield on Trust Deed Investments?” The influences on conventional rates funded by our Government vs. hard money rates funded by private parties are completely different. This diagram describes the supply of capital for Hard Money Loans vs. the demand for capital. Economics dictate that as the supply increases, demand decreases and conversely as supply decreases, demand increases.
A few years ago, I blogged about why HMLR’s were declining. This blog expands on the topic and discusses 10 of the many supply and demand related positive and negative influences on HMLR’s:
  1. Debt Capital Availability – Supply and Demand drives HMLR’s. The more capital pouring into financing private money loans forces lenders to lower their rates to acquire borrowers. Less capital chasing loans allow lenders to raise rates and their risk adjusted returns. HMLR’s will fluctuate depending on the Capital entering the hard money lending space from a wide range of sources including: Bank Lines of Credit, Individual investors leery of stock market volatility, Wall St. institutions, Hedge Funds, Fintech’s, Private Equity funds and REIT’s.
  2. Loan to Value (LTV) – Contrary to the Supply and Demand curve, LTV’s have a direct relationship to Hard Money Loan Rates. The lower the loan to value, the lower the Rate. As equity protection increases, the security of the loan increases and hence a lower rate will be acceptable to a Lender.
  3. Credit Score – Credit Scores do matter for Hard Money. While low scores are typically acceptable due to the underlying equity in the property, Credit Scores also indicate payment likelihood. Loan Rates differ for a person who has a low score due to a loss of a job or a medical issue vs. someone who can’t seem to manage their obligations.
  4. Location – It is widely recognized that HMLR’s are lower in California than other States. The competitive lending market, a large population of borrowers seeking real estate (RE) fortune and the historical real estate appreciation bring more capital to the Golden State.
  5. Loan Term – The longer the loan term, the greater the risk of rate rising inflation. Shorter duration loans of 1-3 years carry less inflation risk and typically can be priced less expensively than >3-year loan terms.
  6. Ability to Pay – Typically, Business Purpose loans do not require the stringent Ability to Repay (ATR) rules of conventional consumer loans. However, Lenders do want to see where the income for the mortgage payments will come from. Positive cash flow income properties or other steady income streams will garner better HMLR’s.
  7. Product type – Liquidity matters. The more liquid the property type, the lower the Rate. SFR’s are the most liquid while Raw Land is typically the most illiquid.
  8. Benchmarks – The conventional lending world relies on LIBOR, the 10 Year Treasury, Fed Funds Rate and other benchmarks. HMLR’s don’t directly correlate to benchmarks, but capital flows follow yield.
  9. Current Real Estate Market Environment – Rising RE prices make profit seeking borrowers jump into purchasing or rehabbing. More borrowers during good times drive rates up and fewer borrowers drive rates down.
  10. Property Condition and Exit Strategy – Newer and already rehabbed properties have less construction risk and hence greater liquidity. Liquidity means a faster sale which reduces risk and lowers the HMLR. Other viable exit strategies including a clear path to a conventional refinance will also lower HMLR’s.
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