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Archive for the ‘MND NewsWire’ Category

“Homeowners are in Great Shape,” Delinquencies Improve Across the Board

Mortgage loan delinquencies were down from the third quarter of 2018 in the fourth quarter. The Mortgage Bankers Association (MBA) said the improvements held across all loan types and all stages of delinquency although there was a slight uptick in foreclosure starts. The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.06 percent of all loans outstanding, down 41 basis points (bps) from the third quarter and 111 bps from the fourth quarter of 2017 according to MBA's National Delinquency Survey.

 

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Mortgage Bankers Estimate 29% Surge in New Home Sales

While we have not yet seen figures from the Census Bureau for December let alone January, the Mortgage Bankers Association (MBA) is reporting a surge in new home sales last month.  Information from MBA's Builder Application Survey (BAS) indicates that those sales, while unchanged from January 2018, increased by 43 percent compared to December 2018.  The change does not include any adjustment for typical seasonal patterns.

On a seasonally adjusted basis, MBA estimates sales were at an annual rate of 713,000 units. This is an increase of 29.2 percent from the December estimate of 552,000 units. Before adjustment MBA estimates that there were 54,000 new home sales in January 2019, up 45.9 percent from 37,000 new home sales in December.

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Delinquencies and Foreclosures at 10-Year Lows

According to CoreLogic, loan performance continues to improve on a national basis, with delinquencies dropping more than 1 percentage point over the 12 months ended in November 2018.  Frank Nothaft, CoreLogic's Chief Economist, said the decline was driven by solid income growth, a record amount of home equity and an absence of high-risk loan products.  "This put the U.S. homeowner on solid ground. All of this has helped push delinquency and foreclosure rates to the lowest levels in almost two decades, and will provide a cushion if the housing market should turn down," he said.

 

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NAR’s Proposal to Restructure Fannie/Freddie

The second proposal for reform of the housing finance system in a week was just introduced by the National Association of Realtors® (NAR). Their "vision" for reform is centered on Fannie Mae and Freddie Mac (the GSEs). The future of the two companies, in federal conservatorship since 2008, barely got a mention in the outline for reform legislation released a few days ago by Mike Crapo (R-ID), chair of the Senate Bankin Committee. NAR unveiled its proposal, developed in collaboration with Susan Wachter, the Albert Sussman Professor of Real Estate and Professor of Finance at The Wharton School of the University of Pennsylvania, and Richard Cooperstein, head of Risk Management at Andrew Davidson and Company, Inc., before a sold-out forum audience of 400 on Thursday.

 

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Aging-in-Place Trend Contributing to Tight Inventories

In their December Insight report Freddie Mac's economists estimated the country will fall short of its housing needs this year by about 2.5 million units. Yet at the same time, fewer members of the Millennial generation are buying houses than young people did in earlier periods. This month the Insights report examines the intersection of these facts, asking who is living in those homes that young people were expected to buy, and how this relates to the shortfall. Freddie Mac' research finds that today's seniors (persons born after 1931) are staying in their homes longer, and aging in place. 

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Banks Have Big Tech Breathing Down Necks, Competition Heats Up

We usually hear about Fannie Mae's National Housing Survey (NHS) in terms of whether respondents think it is a good time to buy or if they see the economy moving in the right or the wrong direction. But the third quarter survey looked at consumers' relationship with their banks and their comfort level with Big Tech's Tech (e.g., Google, Amazon, Apple, and Facebook) foray into financial services. Only 43 percent of respondents say they would be very likely to recommend their bank, but when asked why they tend to stay with them the most common answer (43 percent) was force of habit.  

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Lower Rates and Slower Price Gains to Help Affordability in 2019

Although they covered the topic in last month's Mortgage Monitor, further declines in interest rates have prompted Black Knight to take another look at the impact on the refinance pool. The previous edition reported that the 30-basis point drop in the 30-year fixed rate mortgage from a post-recession peak in November to 4.55 percent by the end of December had boosted the pool of borrowers who could qualify for and benefit from refinancing by more than a half million. At that point the pool had returned to 2.4 million homeowners who could reduce their rate by at least...

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Is Student Loan Debt Driving Homeownership Lower?

It's widely known that homeownership rates are historically low and that they peaked at 69 percent in 2005.  They began dropping a year or two later and had lost about 4 percentage points by 2014. They did not stabilize until 2016.  The 2005-2014 drop was most dramatic among young adults.  Three analysts from the Federal Reserve Board's Division of Research and Statistics have now drawn a direct line between their 9-percentage point decline in homeownership and student loan debt. The three, Alvaro Mezza, Daniel Ringo, and Kamila Sommer, looked specifically at household heads aged 24 to 32. Among those in this category in 2005, 45 percent owned their home, but just 36 percent did in 2014. Over that same time frame, per capita student debt levels went from $5,000 in 2005 to $10,000 in 2014 and the total has reached $1.5 trillion.  

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Delayed November Construction Numbers Largely Positive

Construction spending rose 0.8 percent in November to a seasonally adjusted rate of $1.30 trillion compared to $1.29 trillion in October. The Census Bureau report, delayed from its original release date in early January by the partial government showdown, shows overall construction spending up 4.5 percent from November 2017. On an unadjusted basis there was $108.33 billion spent on overall construction, both private and public, during the month compared to $115.84 billion in October.  Year-to-date (YTD) spending through the end of November was $1.20 trillion, up from 1.15 trillion during the first 11 months of 2017.

 

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Why Are Mortgage Payment Amounts Rising 3 Times Faster Than Home Prices?

While the median price of a home sold nationally increased more than 5 percent over the 12 months ended in October, the monthly payment on that home went up by more than three times as much.  That's the bad news.  The good news is, that may be as bad as it gets.  Andrew LePage writes in the CoreLogic Insights blog that the median price of a home sold in October 2018 was $218,733, a 5.2 percent annual increase.  Over that same period mortgage interest rates rose by 0.9 percentage point.  This magnified the home price appreciation and led to a 17 percent increase in the principal and interest payment on that home.

 

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