Discussing new home purchase mortgage applications, home builder confidence, older home owners and the equity in their homes, housing finance reform plus more!
New Home Purchase Mortgage Applications Increase
From the MBA:
The Mortgage Bankers Association Builder Application Survey data for October 2017 shows mortgage applications for new home purchases increased 16.1 percent compared to October 2016. Compared to September 2017, applications increased by 23 percent relative to the previous month. This change does not include any adjustment for typical seasonal patterns.
Obviously this is good news for home builders…
Home Builder Confidence Hits 8 Month High
From the NAHB:
Builder confidence in the market for newly-built single-family homes rose two points to a level of 70 in November on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This was the highest report since March, and the second highest on record since July 2005.
NAHB Chief Economist Robert Dietz said:
Demand for housing is increasing at a consistent pace, driven by job and economic growth, rising homeownership rates and limited housing inventory. With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017.
Will the prediction I wrote about yesterday of home builders focusing more on entry level homes pan out? Hard to say but there is no doubt that we need more affordable homes in many areas of the country.
Should Older Home Owners Tap Into Their Home’s Equity
From the Urban Institute:
Many Americans are concerned they lack enough savings for a comfortable retirement. The postcrisis rebound in the housing and equity markets notwithstanding, only half of American workers say they are confident about their retirement savings. Similarly, in Fannie Mae’s National Housing Survey of homeowners ages 55 and older, conducted in the second quarter of 2016, 37 percent of respondents were either somewhat concerned or very concerned about their financial situation in retirement.
Retirees could improve financial security by liquefying home equity to supplement their retirement income or reduce their debt burden.
Home equity extraction can be useful for seniors who lack sufficient funds to live comfortably during retirement. This report shows that millions of US households lack adequate income and savings but possess a significant amount of home equity wealth. For these households, liquefying a portion of their home equity by converting it into cash could allow them to pay back debt to eliminate or reduce monthly debt payment burden, or boost household income. This is especially true for homeowners with very low income and savings.
Just like I will not say that everyone should buy a home, I will not say that all older home owners should tap into the equity in their homes. However, this is an option that many may want or need to explore in the coming years.
As is selling their current home and downsizing or moving into a condo…
The best advice I can give you is to talk to your tax and financial advisors to see what they suggest BEFORE doing anything.
CFPB Director Cordray Announces Resignation
The evil financial institutions that love to prey on consumers must be rejoicing since Richard Cordray announced his resignation Wednesday.
The Hill said that Treasury Secretary Steven Mnuchin has reportedly considered appointing himself to fill the acting CFPB director role until Trump’s nominee is confirmed. Since Mnuchin is from Wall Street, this does not bode well for consumers…
We already saw the elimination of the CFPB’s rule on forced arbitration. I fear the CFPB becoming nothing but a puppet show to give the illusion that consumers they stand a chance against big business and the banks.
The CFPB was far from perfect and needed work. Maybe they were overzealous sometimes. But without them, consumers stand a much greater chance of getting screwed…
Housing Finance Reform Next for Trump and Congress?
From American Banker:
The White House and congressional GOP leaders are eyeing a tight window between tax reform passage and the 2018 midterms to pass housing finance reform. And with key policymakers readying their exit, the effort could be the most concerted push yet.
Considering proposed changes in the GOP tax reform seem to be bad for the average American and a gift for the ultra wealthy, I fear any changes will not be good.
Well, not good for the average American. The banks, Wall Street and the super wealthy will probably be the winners once again.
However, there is no doubt that something must be done…
Precarious Health of FHA a ‘Clear and Present Danger’ to the Economy
Comments from Financial Services Committee Chairman Jeb Hensarling (R-TX):
The declining fiscal condition of the Federal Housing Administration (FHA) Mutual Mortgage Insurance Fund represents “a clear and present danger to taxpayers, homebuyers and the U.S. economy” and must be addressed by Congress. FHA has suffered a severe case of mission creep, and the unfortunate truth is that the lack of sound underwriting and risk management puts taxpayers, homebuyers and our overall economy in harm’s way. The danger is real. Unless and until Congress passes serious reforms to give Americans a sustainable housing finance system, we will constantly be on the edge of another housing meltdown and financial crisis. To be successful, the FHA must be fiscally sound and have a clearly defined mission to ensure homeownership opportunities for creditworthy first-time homebuyers and low-income families.
Hensarling’s comment is a reaction to the FHA’s fiscal report for 2017. The FHA’s capital reserve fund has declined to 2.09% of the mortgages it guarantees. The FHA is required to maintain at least 2% and even 2% may be too low in my opinion.
While Hensarling is correct that something needs to be done about the FHA Mutual Mortgage Insurance Fund, I do not have a warm fuzzy feeling about anything that Congress does…
I am pretty pessimistic when it comes to politicians. But I am glad to see Hensarling say that the FHA must ensure home ownership opportunities for first-time home buyers and low income families.
Sadly, Hensarling does not go into any detail about how to accomplish this. He only gives some butt kissing to Trump for the elimination of Obama’s bone headed cut to FHA mortgage premiums before he left office.
Growth of Property Values
Home price appreciation and depreciation is an important topic in today’s economy. Using data from the American Community Survey (ACS), we can analyze the gains and losses of property values over time. Looking at the 2005 – 2016 period, the figures point to trends, which vary by region and state. To summarize, price growth appears to be the strongest in the South and is weaker in the Northeast. Overall, all regions are displaying growth in property values with only a few states showing no growth or loses.
Interesting but even more interesting is this chart:
Not every home has increased by the percentage in the chart above! But it is pretty encouraging for anyone looking to sell their home in the South. If you have any questions about selling a home in the Anderson area, please contact me!
Home Sizes Decrease as Incomes Struggle to Keep Pace with Prices
Interesting snippets from an article on HomeUnion:
When one looks at the ratio between home prices and median household income, the housing market has been relatively predictable since 2013. Given current market forces, the housing market – at least on a national basis – is not overvalued.
Owner-occupied home prices have soared 24 percent since 2013, while median income has only grown by approximately half that amount. As a result, home buyers are purchasing smaller homes with fewer bedrooms and bathrooms. The average home sized has dipped 4 percent over the past four years to 1,905 square feet, as buyers can acquire what they can afford.
I agree that home buyers will buy what they can afford but there is also a shift away from the ostentatious McMansions. The increase in home prices compared to incomes is distressing but you have heard me repeatedly say we need more income growth for years…
That is all I have time for today! Be sure to subscribe so you never miss another post!