Talking about the increasing size of mortgages, credit availability increasing, construction employment increases and much more…
For the past few years, the housing market has been unbalanced. Strong demand and lean supply keep pushing prices higher and higher.
On Wednesday, a fresh piece of data confirmed that trend. The Mortgage Bankers Association’s weekly purchase loan data showed that the average size of a home loan was the largest in the history of its survey, which goes back to 1990.
Home loan sizes aren’t the only things that have changed in the years since MBA started its survey. Back at the start of the survey, the median mortgage size was only about 3.3 times the median annual income. It’s now over five times as big – though buyers get bigger homes and lower interest rates.
It isn’t surprising that mortgages have grown. Compare the cost of a car or a TV or just about anything compared to the past. But there is no doubt that home prices have risen dramatically and at a faster pace than the prices of most other things in recent years.
But so has rent…
I am more disturbed by the MBA finding that the median mortgage is over 5 times the median income. How much you spend is up to you and your lender.
Just remember that bad things happen to good people…
Freddie Mac announced total multifamily origination volumes could increase by three- to six-percent this year, and even top $295 billion, depending on movements in the 10-Year Treasury rate.
According to a new Multifamily Pricing and Volume Outlook for 2017 prepared by the Freddie Mac Multifamily Research Group, if the 10-Year Treasury rate stays in the range of 2.5 percent, multifamily volume is estimated to grow to around $295 billion. While final numbers for 2016 volume are not yet in, this would equate to six percent growth from Freddie Mac’s 2016 estimated total mortgage origination volume of $280 billion.
But, volume growth could slow to 3 percent if the average 10-Year Treasury rate rises more abruptly, Freddie Mac predicts. Total origination volume would continue to grow even in the higher rates scenario because of the accompanying higher inflation and wage growth, as well as recent price appreciation.
Wow! This prediction is based on the 10-year rate and could change depending on what the 10-year does.
According to a survey conducted by the Mortgage Bankers Association, only $490.6 billion of commercial mortgages were originated last year, which was less expected when the year-end estimate was released in February. It’s also down 2.7% from the $504 billion of originations in 2015. Still, 2016’s total is the third-highest volume of originations ever, after 2007 and 2015.
The culprit behind the decrease in volume was the 11% drop in property sales volume last year. The MBA has found a very strong correlation between property sales volumes and loan origination volumes. While it’s still very early in the year, things don’t look good for lending volumes. Property sales volumes were down sharply in January and February.
Ouch. This does not look good for the commercial real estate market or the economy either.
Mortgage credit availability increased in March according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) which analyzes data from Ellie Mae’s AllRegs® Market Clarity® business information tool.
Lynn Fisher, MBA’s Vice President of Research and Economics:
Credit availability increased in March driven by increased availability of Jumbo loan programs and Government loan programs. Led by a wave of adjustable rate Jumbo offerings, the Jumbo MCAI surged in March, more than offsetting its 4.4% decline in February, which was the first tightening of the that component index in 11 months. Increases observed in the Government MCAI were driven by increased availability of FHA’s Streamline Refinance and 203 K home rehabilitation loan programs.
Interesting that FHA’s Streamline and 203K home rehab loans have increased. The 203K program is great for buying a home that needs some repairs. It does have some stiff requirements so it is best to talk with an experienced 203K lender first!
Construction employment increased by 6,000 jobs in March as a February hiring surge prompted by mild winter weather in much of the country prompted firms to hire fewer people last month, according to an analysis of new government data by the Associated General Contractors of America.
Residential construction—comprising residential building and specialty trade contractors—lost 7,600 jobs in March but is up by 112,600, or 4.4 percent, compared to a year ago. Declining public-sector investments in construction and infrastructure could impact future construction hiring unless the administration and Congress enact a new funding measure.
Ken Simonson, AGC’s chief economist:
Construction firms continued to add jobs over the past year at a higher rate than the overall economy. The small job gain in March most likely reflects ‘payback’ for unusually large hiring in February rather than a flattening of demand for projects. However, there has been a slowdown in public investment in highways and other infrastructure that could undermine construction hiring this year.
Overall, a positive report for both the economy and real estate. Interesting that the AGC points out that public-sector and infrastructure is declining. I thought Trump was going to work on our infrastructure?
Is it Tight Underwriting or Too Few Applicants with Less-Than-Perfect Credit?
According to Home Mortgage Disclosure Act (HMDA) data, single-family home-purchase activity has declined significantly compared with a decade ago. There were 10.9 million loan applications for single-family home-purchase mortgages in 2006, which plunged to 3.6 million in 2011 (the lowest in the decade), and rose to 5.2 million in 2015.
The decline in the number of applications from 2006 to 2015 represents an overall drop of 53 percent. Similarly, the number of loan originations to purchase a single-family home dropped from 6.7 million in 2006 to 3.7 million in 2015.
During this period the denial-rate for home-purchase loan applications dropped from 18 percent in 2006 to 12 percent in 2015. The drop in denial rate could be due to the decline in applications among borrowers with less-than-perfect credit.
Kind of like the question of which came first: the chicken or the egg.
I think that if someone has less than perfect credit, they should work on improving their credit BEFORE getting a mortgage so they will get a better rate and terms.
As far as underwriting being too tight, it probably is. But we do not want to repeat the mistake of giving mortgages to anyone that can fog a mirror.
There needs to be common sense lending that ensure people with decent credit and income can get a mortgage.
Fannie just released their latest Home Purchase Sentiment Index. Some of the highlights:
Fannie Mae’s 2017 Home Purchase Sentiment Index (HPSI) decreased in March by 3.8 percentage points to 84.5. The HPSI is up 4.3 percentage points compared with the same time last year.
The net share of Americans who say it is a good time to buy a house fell 10 percentage points to 30%.
The net percentage of those who say it is a good time to sell increased by 9 percentage points to 31%.
High home prices were the most important reason for both the bad time to buy and good time to sell indicators
I am amazed that the number of people saying it is a good time to sell was so low. I can understand that many potential buyers are discouraged by some of the misinformation floating around out there.
But sellers? Inventory is tight and demand is high. This makes it a good time to sell. Could it be that sellers are listening to the same falsehoods that potential buyers are?
Why Selling Your Home Now Is a Good Idea
Did you know that over 15,000 houses sold yesterday?
This is talking about the entire U.S. and is based on the average number of houses that sell every day according to the National Association of Realtors’ February 2017 Existing Home Sales Report.
NAR reported that home sales are at a yearly pace of 5.48 million. Divide the number of homes sold yearly by 365 days and we get an average of over 15,000 houses sold every day.
The Existing Home Sales report also said that there is only a 3.8-month supply of inventory houses for sale. This is below normal as a 6-months inventory is considered ‘historically normal’.
This indicates there is not an adequate supply of houses for sale to meet the demand.
And this is why it is a good time to sell a home!
This does not mean that seller can be unrealistic or unreasonable. It just means if you want or need to sell a home, now is a good time!
If you have any questions about selling a home in the Anderson SC area, please shoot me an email!