Archive for the ‘Fed and Economy Watch’ Category

Purchase loans held on to the June share of 71 percent of closed loans in July which remains the highest share in the seven-year history of Ellie Mae's Origination Insight Report. Refinances also held steady, remaining at 29 percent although the percentage of refinancing through the VA gained 2 percentage points to 25 percent. Conventional and FHA stayed at 31 and 19 percent respectively.   The distribution of new loans remained the same as in June as well, with 66 percent of originations going to conventional loans, 20 percent FHA, and VA loans accounting for 10 percent.  

An aging housing stock is usually thought of as a problem.  Older homes can be more expensive to maintain and easily fall into enough disrepair to be a health or safety hazard or completely uninhabitable.  Construction since the housing crisis has not kept pace with the homes that age out or are otherwise removed from the housing stock and this means that the overall age of the U.S. housing stock is gradually aging. Na Zhao, writing in the National Association of Home Builders' (NAHB's) Eye on Housing blog says data from the 2016 American Community Survey (ACS) puts the median age of owner-occupied homes at 37 years compared to a median age of 31 years in 2005. 

Fannie Mae has informed us that they too have activated their disaster response policies for homeowners, this time for those affected by the California wildfires. Homeowners impacted are eligible to stop making mortgage payments for up to 12 months during which time they will not incur late fees or have delinquencies reported to the credit bureaus. While homeowners are advised to contact their mortgage servicers as soon as possible those servicers are also authorized to suspend or reduce a homeowner's mortgage payments immediately for up to 90 days if they believe a homeowner has been affected, even without homeowner contact.  Any eligibility for up to 12 months forbearance will not be affected.  

Attitudes about buying and selling a home degraded in July.  Fannie Mae said its National Housing Survey (NHS) for the month found a net decrease among respondents of 4 percentage points who thought it was a good time to buy a home and a net decrease of 6 points in those who think it is a good time to sell. Those two components of the company's Home Purchase Sentiment Index (HPSI) helped pull it lower for the second consecutive month.  The Index dropped 4.2 points to 86.5, after reaching survey highs in April and May. Two others of the six components fell as well.

Mortgage credit availability scored a significant gain in July.  The Mortgage Bankers Association (MBA) said its Mortgage Credit Availability Index (MCAI) rose 1.7 percent in July to 184.1, apparently the highest level since MBA began publishing it in 2012.  An increase in the MCAI indicates that lending standards are easing while a decline is indicative of tightening credit.  The index was benchmarked to 100 in March 2012. "Credit availability continued to expand, driven by an increase in conventional credit supply. More than half of the programs added were for jumbo loans, pushing the jumbo index to its fourth straight increase, and to its highest level since we started collecting these data. 

Altough it was forecast to happen long ago, it seems price gains throughout the U.S. are moderating. Black Knight, in its August Mortgage Monitor, claims that is the case. While prices are still rising, the company says its Home Price Index slowed each month from March through May, the first three-month slide in nearly four years. Prices in 32 states and 33 of the 50 largest markets exhibited that same pattern. Ben Graboske, executive vice president of Black Knight's Data & Analytics division said, "In May - typically one of the strongest months of the year for home price growth - every state in the nation saw home prices increase. 

A recent research paper from the Urban Institute (UI) looks at the benefits provided by real denial rates (RDR) over the traditional measure of credit availability, the observed mortgage denial rate (ODR).  The authors, Laurie Goodman and Bing Bai from UI and Wei Li of the Federal Deposit Insurance Corporation (FDIC) maintain that the ODR can be misleading.  Higher denial rates can result from either a tight credit environment or because of an increase in applications from less creditworthy buyers and can affect measures over time, across credit channels and for demographic groups.

Construction spending fell unexpectedly in June.  The U.S. Census said overall spending was down 1.1 percent from the May estimate to a seasonally adjusted annual rate of $1.332 trillion.  Spending was still higher, by 6.1 percent, than the June 2017 annual rate of $1.241 trillion.  The loss was somewhat mitigated by a substantial revision to the May numbers.  Originally estimated at a rate of  $1.310 billion, an 0.4 percent increase from April, the total was revised up to $1.332.2 billion, a healthy 1.35 percent gain. 

Analysts had expected a small gain in June.  Those polled by Econoday reached a consensus of an 0.3 percent uptick, although the estimates ranged from an 0.3 percent loss to a positive 1.1 percent.

Mortgage activity declined again during the week ended July 27.  The Mortgage Bankers Association's (MBA's) Market Composite Index, a measure of loan application volume was down for the third consecutive week, falling by 2.5 percent on a seasonally adjusted basis from the July 20 level.  On an unadjusted basis the index lost 3 percent. Bost the seasonally adjusted and the unadjusted Purchase Indicies were also down 3 percent.  The adjusted Purchase Index has declined an aggregate of 9 percentage points over the last three weeks, reflecting the recent softening of both new and existing home sales. 

Baby Boomers, the largest generation of Americans in history until the Millennials came along, have influenced the country since their birth and have created what could be described as a pig in a python in homeownership rates.  They are ageing, the leading edge of the group is now in their 70s, but still, according to Fannie Mae, inhabit 46 million owner-occupied homes with an estimated $13.5 trillion.  What happens to the housing market when that generation, voluntarily or not, exit homeownership?  Will the four generations following behind the Boomers step up and assume the mantle of homeownership?