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Homes Sales and Prices in California May Have Hit an Affordability Tipping Point

It may be that California, where home prices have exploded over the last few years, has jumped the shark when it comes to affordability.  CoreLogic's Andrew LePage writes in the company's Insights blog that September home sales in the state were the lowest in the country since September2007. The sales report comes in the wake of reports from several sources showing an abrupt slowdown in home price growth in many of the state's largest metros.  CoreLogic says the state's annual gain of 4.1 percent in the median home price statewide was the lowest in more than two years. 

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Mortgage Rates Steady Ahead of Holiday Weekend

Mortgage rates were mixed today, depending on the lender.  Most lenders began the day in slightly worse shape compared to yesterday.  Bond markets improved enough by mid-day that many lenders were able to offer positive reprices (new, better rate sheets).  Lenders typically don't change mortgage rates more than once a day unless underlying markets have moved enough.  Lenders who repriced generally ended up slightly better off compared to yesterday.  The remainder were in worse shape.  On average, rates were unchanged.

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Delinquency Recovery Interrupted by Natural Disasters

The ongoing improvement in mortgage performance hit a slight snag in the third quarter of 2018, one that appears to be disaster related.  The Mortgage Bankers Association (MBA) said the National Delinquency Survey found the national delinquency rate grew by 11 basis points (bps) from the second quarter to 4.47 percent.  This was, however an improvement of 41 bps from the same quarter in 2017.  Foreclosure starts continued to decline, dropping 1 bp quarter-over-quarter to 0.23 percent, its lowest level since, not just the recession, but 1985.

 

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Mortgage Rates Edge Back Up to Early 2011 Levels

Mortgage rates moved back up today, leaving them right in line with the highest levels of the week.  These also happen to be the highest levels since early 2011, but let's not get bogged down in unfortunate details!  Rates will definitely move lower at some point in the future.  That's the way economic cycles work--and they always work eventually.  The big questions are twofold: how long will it take for fortunes to change and how high will rates go in the meantime?

In terms of timing, we could be looking at anywhere from a few months to more than year before seeing a shift that's big enough to get excited about.  That said, there will still be pockets of positivity at times, even in a rising rate environment.  Whatever the case may be, the higher rates go, the closer we're getting to the end of the tunnel.  That doesn't make the tunnel any more pleasant, but perhaps knowing it will eventually end is enough to make it somewhat more bearable.

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Share of “Affordable” Homes Falls to 10-Year Low

Housing affordability crept down again in the third quarter of 2018 reaching, according to the National Association of Home Builders (NAHB), a ten-year low.  The NAHB/Wells Fargo Housing Opportunity Index (HOI) indicates that 56.4 percent of new and existing homes that were sold nationwide during the quarter were affordable to families earning the U.S. median income of $71,000.  In the second quarter 57.1 percent of homes were affordable by this measure.  Affordability, according to the 2nd quarter reading, is the lowest since mid-2008.

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CoreLogic: Easing Standards for DTI, LTV Underwriting

A deep dig into recent home purchase loans shows that some of the underwriting standards employed by FHA and the GSEs (Fannie Mae and Freddie Mac) eased over the year that ended with Q2 2018.  Archana Pradhan, an analyst with CoreLogic's Mortgage Finance and Risk Management Department writes in the company's Insights blog that neither conventional nor FHA lending extended the easing to their respective treatment of credit scores.    CoreLogic looked at the three key factors in mortgage underwriting, debt-to-income (DTI) and loan-to-value (LTV) ratios along with credit scores.  

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Mortgage Rates Edge Lower, But Don’t Get Used to It

Mortgage rates were slightly lower today.  Unfortunately, that may not be the case by tomorrow morning.  Underlying bond markets (which dictate rates) lost ground throughout the day.  If trading levels don't change by tomorrow morning, the average lender will be back up at the highest rates in 7+ years.  Many are close enough as it is.

The key feature of the past 24 hours was the midterm elections.  Bonds improved when democrats won control of the house.  This was in line with the average prediction for how elections might impact rates.  That said, the fact that bonds have already fully erased that overnight move should let you know just how little the elections mattered in the bigger picture.  The longer-term headwinds for interest rates remain entrenched, and it will take a long time or a massive amount of drama for that trend to change.  Drama can come in the form of a shift in the economy or a much bigger stock sell-off than we saw in October.

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Housing Sentiment Continues to Sour as Economy Booms

Despite the success of the U.S. economy as of late, housing sentiment seems to have hit a rough patch.  Fannie Mae said its Home Purchase Sentiment Index (HPSI) continued to decline in October, moving lower for the third time in four months.  The index, based on responses to a portion of questions in the National Housing Survey, fell by 2.0 points to 85.7 with five of the six components posting declines and the fifth unchanged from September. The net share of Americans who say it is a good time to buy a house fell 5 percentage points to only 21 percent. 

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Mortgage Apps: Down to Four-Year Low, Highest Rates Since 2010

The week ended November 2 was another week of retreat for mortgage applications as the Mortgage Bankers Association's (MBA's) Market Composite Index dropped by 4.0 percent on a seasonally adjusted basis. This brought the index to its lowest level since December 2014. The index was down 2.0 percent on an unadjusted basis compared to the previous week. The Refinance Index decreased 3 percent and the share of applications that were for refinancing shrunk to 39.1 percent from 39.4 percent of the total.  Despite fluctuating almost weekly and even with rising interest rates, the share of loans that were for refinancing has declined by only a  net of 2 percentage points since the end of July.

 

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Mortgage Rates Steady at Long Term Highs Ahead of Election

Mortgage rates didn't move much today.  A few lenders were microscopically stronger or weaker, and the average lender was perfectly unchanged.  That's fairly decent news, considering underlying bond markets suggested higher rates by the end of the day.  That said, this could easily be one of those situations where lenders are heading into tomorrow morning with a bit if an upward adjustment to make to rates (reason being: they need to see a certain amount of movement in any given day before "repricing."  Otherwise, they'll just wait for the following morning). 

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