Real estate housing and economic news round up for October 23 2016 plus looking at this week’s mortgage rates…
Mortgage Insights from Ellie Mae
Check out a few tasty tidbits from the latest Ellie Mae Origination Report for September 2016:
- Closing time for all loans increased to 48 days in September, the highest since January
- Time to close for refis increased to 50 days
- Time to close for purchases increased to 47 days
- The average 30-year rate for all loans continued to drop from 3.77% in August to 3.75% in September
- The average FICO Score for all closed loans was 731 in September 2016
- 69% of purchase loans had FICO scores over 700. 76% of refis had FICO scores over 700.
- Closing rates for all loans decreased to 71.8% in September
- Closing rates on refis decreased to 66.4% in September
- Closing rates on purchases held steady at 76.4%
Now check out the chart showing the FICO Scores for different types of mortgages in September 2016:
Is Inventory Tight or Demand Low?
Interesting quote from article I just read:
2016 is almost over and it hasn’t been a bad year for housing. The facts are that home sales are at cycle highs with the highest mortgage demand in this cycle and the lowest demand from cash buyers. But demand hasn’t breached 21st century levels in terms of the mortgage purchase application data. If cash buyers weren’t 11%-20% above historical norms then existing home sales wouldn’t have too many prints above 4.5 million. 2016 housing is about demand not tight lending or low inventory.
Mohtashami is speaking about the BIG picture of inventory and demand. If you look locally, you will see a different picture…
For example, it might appear there are lots of homes for sale in Anderson SC. But if you narrow your criteria to a certain price range, size, number of beds baths etc etc…
Then you will see that inventory can be tight.
I am not disagreeing with Mohtashami regarding the big picture of low demand, inventory and tight lending.
Just pointing out it is best for consumers to work with a local REALTOR to determine what is happening in their neck of the woods.
Superhero or Princess? Why Not Both?
Consider this quote from recent article:
A new survey by the National Retail Federation shows princess costumes have fallen from the top of the chart for the first time in more than a decade, with action and superheroes taking number one.
I think the main thing is to encourage kids to choose and imagine and have fun.
If they want to be a Super Hero or a Princess or a Super Hero Princess, let them.
Slow and Steady Growth in Commercial Real Estate
The month is the latest in a period of modest growth encompassing the entirety of 2016, in which the office, industrial, and apartment sectors have remained robust. Meanwhile, shifts in consumer behavior have slowed the retail sector and hotel pricing has fallen sharply amid supply concerns. According to Ten-X Research, overall CRE valuations are now 6.9 percent higher than a year ago, despite growth being stuck at roughly half the growth rate seen in 2015.
2017 should be an interesting year as we will have a new POTUS. Plus we have the possibility of a rate change from the FED in December which could affect the economy and the housing market.
Friday’s Internet Outages May Be Just the Tip of the Iceberg
This attack was big, disrupting consumer services like Spotify and Netflix, all the way to enterprise-grade providers like Heroku and Zendesk. Once the dust has settled, it’s likely that this attack will have impacted more people, in more ways, than any other in memory.
A DoS attack is an attempt to make something on the network unavailable to users, for example, a website. A distributed denial-of-service (DDoS) is when the attack is launched by many unique IP addresses—or, as in this case, devices—all aiming traffic at one or multiple targets. The target simply crumbles under the pressure of so much traffic.
I suffered my own technical difficulties Friday but it was NOTHING compared to this. As someone that depends on the internet for my business, this is scary stuff.
Mortgage Delinquencies Rise for Older Consumers
Considering the changing demographics of the US, I found this both interesting and scary:
FICO research consistently shows that older consumers have higher FICO® Scores than their younger counterparts. But a recent report by the Mortgage Bankers Association (MBA) provides evidence that people become less reliable at making their mortgage payments as they age. Can both of these assertions be right?
To get to the bottom of this, FICO conducted fresh research on credit behavior trends by age. Our study revealed not only that mortgage delinquency rates rise for US consumers beyond a certain age, but that these delinquency increases were observable across other loan types.
We may see more and more sad stories of older Americans facing tough times. Or even losing their homes.
Apartment Markets Softened
Apartment markets softened across all four indexes in the October 2016 National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The Market Tightness, Sales Volume, Equity Financing and Debt Financing Indexes all landed below the breakeven level of 50 – showing weaker conditions from the previous quarter.
I found this surprising since the demand for rentals has been so high. Does this mean the apartment market is shifting back to a normal growth pattern?
How Worrisome Is the Decline in Labor Mobility?
From CBS News:
Americans have long been willing to relocate in pursuit of a job, and economists believe this willingness is an important factor in the success of the U.S. economy. When workers are highly mobile, it’s much easier for the country to recover from recessions, adjust to technological shocks that create layoffs and to match workers with the jobs they’re best suited for.
In the 1980s, around 3 percent of the workforce moved to a different state each year, but mobility has declined steadily over time, and now approximately just 1.5 percent move today, according to research by the New York Federal Reserve (roughly half of these moves are job-related).
I would call this very worrisome and not solely because I am a REALTOR. I want the best for America.
I think this decline is a bad sign for our future. Sadly, I don’t have any solutions or suggestions to get Americans moving again. Do you?
Multifamily Lending Up 28 Percent in 2015
In 2015, 2,855 different multifamily lenders provided a total of $249.8 billion in new mortgages for apartment buildings with five or more units. The 2015 dollar volume represents a 28 percent increase from 2014 levels. Sixty-three percent of the active lenders made five or fewer multifamily loans over the course of the year.
Multifamily mortgage borrowing and lending set a new record in 2015. Demand for mortgages was driven by strong property fundamentals, increasing property values, a robust transaction market and low interest rates. Supply of mortgage capital came through record levels of lending by banks, Fannie Mae, Freddie Mac and life insurance companies. As we look at 2016 and 2017, those factors appear to remain in place.
Will the US Become a Nation of Renters?
I hope not since I feel that home ownership is the foundation of the American Dream!
The United States has long been a nation of homeowners, but in the aftermath of the housing bubble and the Great Recession, the rate of homeownership has been falling.
If the US wants a higher homeownership rate–and doesn’t want to go through another housing price bubble (!)–it needs to think about the policies that might move toward that goal.
There have been much said or written about the falling home ownership but this is a must read! Read it at The Conversable Economist
Google Has Quietly Dropped Ban on Personally Identifiable Web Tracking
Remember that Google is NOT your friend:
The change is enabled by default for new Google accounts. Existing users were prompted to opt-in to the change this summer.
Getting It Wrong on Higher Minimum Wages?
From Ritholtz on Bloomberg:
In 2014, Seattle passed an ordinance to eventually raise the minimum wage in the city to $15 an hour, giving the Pacific Northwest city the highest pay floor in the U.S. The ink wasn’t even dry on the wage legislation when the dire warnings of economic collapse began. Unemployment would skyrocket, economic growth in the state would be hurt, restaurants and small businesses would close en masse. Unemployment fell, most recently to less than 4 percent, more than a full percentage point lower than the national rate.
I was quite curious to see what the effect would be of the minimum rate being raised.
However, this is just 1 place and as Ritholtz points out, the results may not be the same everywhere.
I wonder what effect raising the minimum wage has on prices of goods and services?
Making more money is great but if it means everything costs more, does it really change anything for the better?
Your Tax Dollars and HUD
From the HUD OIG:
HUD paid claims for an estimated 239,000 properties that servicers did not foreclose upon or convey on time. HUD paid an estimated $141.9 million for servicers’ claims for unreasonable and unnecessary debenture interest that was incurred after the missed foreclosure or conveyance deadline and an estimated $2.09 billion for servicers’ claims for unreasonable and unnecessary holding costs that were incurred after the deadline to convey. While it was reasonable for servicers to pay costs to preserve the property and complete the foreclosure process, it was unnecessary and unreasonable for HUD to pay for such costs after the date the servicer was required to convey. The claim would have been reduced if servicers conveyed on time and these funds would have been available for the needs of the FHA mortgage insurance fund.
What this means is that HUD paid extra because the servicers did not do their job on time.
Over $2 BILLION of tax payers money…
The Effects of Increasing Fannie Mae’s and Freddie Mac’s Capital
The Congressional Budget Office has studied this and written a must read article:
Lawmakers have introduced proposals that would allow the GSEs to retain some or all of their income and thereby increase their equity capital.
Allowing the GSEs to retain a portion of their net income would increase the government’s investment in the GSEs, providing them with additional resources to cover potential losses and thereby slightly increasing the stability of mortgage markets and the availability of credit. But providing those additional resources would expose the federal government to increased risk of losses.
Not saying I agree or disagree with the CBO. Just sharing some food for thought…
This has drug on for too long and needs to be addressed in a manner that would not harm consumers, put taxpayers at risk or screw up the housing market.
Easier said than done…
Mortgage Rates This Week
Instead of writing a post solely about mortgage rates, I am going to add it to this post:
Freddie Mac on Mortgage Rates:
Freddie Mac reported that mortgage rates were at the their highest level in 4 months but are still at record lows:
- 30-year fixed rate mortgages averaged 3.52%
- Last week, 30-year fixed rate mortgages also averaged 3.47%
- Last year at this time, 30-year fixed rate mortgages averaged 3.79%
- 15-year fixed rate mortgages this week averaged 2.79%
- Last week, 15-year fixed rate mortgages also averaged 2.76%
- Last year at this time, 15-year fixed rate mortgages averaged 2.98%
Check out the chart from Freddie Mac:
Bankrate on Mortgage Rates:
Bankrate.com said that mortgage rates were mostly unchanged this week:
- The average 30 year fixed rate mortgages increased to 3.64%
- The average 30 year fixed rate jumbo mortgages decreased to 3.63%
- The average 15 year fixed rate mortgage increased to 2.93%
The MBA on Mortgage Rates:
The MBA reported that applications increased slightly this week:
The average contract interest rate for 30 year fixed rate mortgages with conforming loan balances ($417,000 or less) was 3.73% for 80% loan-to-value ratio (LTV) loans. This is the highest level since June 2016.
The average contract interest rate for 30 year fixed rate mortgages with jumbo loan balances (greater than $417,000) was 3.72% for 80% LTV loans. This is also the highest level since June 2016.
The average contract interest rate for 15 year fixed rate mortgages was 3.03% for 80% LTV loans. 3rd times a charm as this is also the highest level since June 2016.
As always, I am providing this to you for informational purposes only! I am a blogger and REALTOR in Anderson SC and not a mortgage lender.
You should contact the lender of your choice directly to learn more about its mortgage products and your eligibility for such products.
My suggestion is that ALL serious legitimate buyers take the first step and talk with a mortgage professional.