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Survey of Mortgage Originators, Fourth Quarter 2016

Mon, 01/30/2017 - 11:25

This quarter marks the 13th Survey of Mortgage Originators in which lenders shared insights about current trends in lending. This survey covered lenders’ experiences in the 4th quarter of 2016 and included questions on shortages of appraisers and the impact of rising mortgage rates. Lenders remain optimistic, but wary of rising rates with the majority indicating that rising rates will be offset in full or in part by improved income and employment growth.

Some of the key finds were:

  • Non-QM lending inched back, while rebuttable presumption lending moderated. However, there was a significant increase in interest by investors and lenders who expect to expand credit for non-QM over the next six months. This trend may represent a strong bounce from a post-QRM nadir. However, investor demand for non-QMs is expect to ease.
  • Investor demand for and lender willingness to expand access to prime borrowers, both low and high credit, is expected to continue to strengthen over the next six months.
  • 55.6 percent of lenders indicated some level of problems getting appraisals, with 11.1 percent indicating it was significant.
  • Lenders viewed fewer new appraisers, a reluctance to perform certain appraisals, and high refinance volumes as the main drivers of the shortage
  • However, 27.8 percent of lenders do not accept appraisals in which any part is performed by a trainee, while 44.4 percent require direct supervision of all aspects performed by a trainee.
  • 9.8 percent of respondents had faced a “rush fee” in which fees are increased to meet a time constraint. Rush fees averaged 37.1 percent higher than a normal appraisal fee.
  • 16.7 percent of respondents felt that rising rates will weaken demand for purchase mortgages, but 44.4 percent felt that strong employment and income growth will partially offset rising rates and another 16.7 percent saw those same factors as a full offset to higher rates.

December 2016 Existing-Home Sales

Thu, 01/26/2017 - 15:29
  • NAR released a summary of existing-home sales data showing that housing market activity this December fell from last month. Despite the decrease this month, 2016 was still the best year of existing-home sales in the last ten years. December’s existing-home sales reached the 5.49 million seasonally adjusted annual rate and existing-home sales are modestly up 0.7 percent from a year ago as the year ends on a good note.
  •  The national median existing-home price for all housing types was $232,200 in December, up 4.0 percent from a year ago. The median price for the year was $233,900, which is 5.2 percent higher than last year’s price. Total existing-home sales for the year finished at 5.45 million, which is also higher than last year at 5.25 million.
  • Regionally, three of the four regions showed growth in prices from a year ago, with the Northeast being the only region to have a decline of 3.8 percent. The South had the biggest increase of 6.5 percent followed by the West with 6.0 percent. The Midwest had the smallest gain of 4.6 percent increase from December 2015.
  • From November, three of the four regions experienced declines in sales while the South remained flat. The Midwest had a decline of 3.8 percent. The West had a decline of 4.8 percent while the Northeast had the biggest decline of 6.2 percent.
  • Three of the four regions showed an increase in sales from a year ago with the West being the only region with a decline of 1.6 percent. The South had a modest gain of 0.4 percent. The Midwest had a gain of 2.4 percent and the Northeast had the biggest increase of 2.7 percent. The South headed all regions in percentage of national sales at 41.0 percent while the Northeast has the smallest share at 13.8 percent.
  • December’s inventory figures are down 10.8 percent from last month to 1.65 million homes for sale and the level is the lowest since tracking began in 1999. Inventories are down 6.3 percent from a year ago which is 19 months of year over year declines. It will take 3.6 months to move the current level of inventory at the current sales pace. It takes approximately 52 days for a home to go from listing to a contract in the current housing market, down from 58 days a year ago.
  • Single-family sales declined 1.8 percent while condos also declined 10.3 percent compared to last month. Single-family home sales inclined 1.5 percent and condo sales were down 4.7 percent compared to a year ago. Both single family and condos had an increase in price with single family up 3.8 percent at $233,500 and condos up 5.5 percent at $221,600 from December 2015.

Properties Sold Faster in 2016 at 43 Days

Thu, 01/26/2017 - 11:17

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?”

REALTORS® reported that properties typically stayed on the market for fewer days than in 2015, according to the December 2016 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] In 2016, properties stayed on the market for 43 days (50 days in 2015). The length of time properties are on the market has fallen as demand has outpaced the inventory of homes for sale. In 2011, properties were typically on the market for 97 days.

During October—December 2016, properties were typically on the market for less than 31 days in Washington, Oregon, California, Alaska, Utah, Nebraska, Massachusetts, and the District of Columbia. Looking at the values over the last few years, in most states the median length of time that properties stay on the market has trended downwards, though the graphs also show that days on market in some states vary seasonally.[2]

[1]The author acknowledges Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

[2]To increase the number of observations for each state, the analysis is based on a 3-month rolling period. The states shown in these charts are those with approximately 150 observations.

EHS in 2016 by the Numbers – Part 1 – Popular Closing Dates

Wed, 01/25/2017 - 11:26

This blog post was written by Managing Director of Housing Research, Danielle Hale, and Data Analyst, Hua Zhong.

You probably know that home closings predominate on Fridays and the end of the month. Here is the data to back up your intuition:

  • As we start the New Year, this is a good time to take a look and recap the year behind us to see what insights 2016 holds for 2017. The last sales data for December 2016 is in, and we can get a good sense of the year by looking at the data we currently have[1].
  • A list of top closing days of 2016 shows that the last business day of a month and Fridays are the most popular days to complete a home sale transaction. In fact, these days are so popular that the top 25 closing days accounted for roughly a quarter of all home sale closings for the year.
  • The top 6 closing days were the last business days of April, May, June, July, August, and September. The number one closing day, which was also on top in each of the last two years we did this analysis, was June 30. In 2016, it fell on a Thursday. The next 19 most popular days were all Fridays except for three dates, all of which were at the end of the month: Wednesday, November 30; Monday, October 31; and Monday, February 29.
  • Because this ranking was compiled with data that was not seasonally adjusted, we see that spring and summer days figure prominently in the top of the list, but all seasons are represented.
  • This day by day data confirms the preliminary unadjusted monthly EHS data which shows that June and July were the top months for home sales in 2016, followed by August and May. In fact, June and July alone account for more than 20% of sales for 2016.
  • It is expected that spring and summer months will be strong from a home sales perspective. This is why NAR Research reports seasonally adjusted home sales data each month, so we can see how sales are performing relative to what we might typically expect given the season.
  • Using the seasonally adjusted data, the second half of 2016 was stronger than the first half of the year. We expect the strength in the second half of 2016 will carry through into 2017, as strong buyer demand offsets the headwind of higher mortgage rates in most areas.
  • What was your busiest day in 2016?

 

[1] This analysis considers data from January 1, 2016 to December 31, 2016.

REALTORS® Reported Stronger Housing Demand Amid Tight Supply in 2016

Tue, 01/24/2017 - 16:02

REALTORS® reported stronger homebuying demand in 2016 compared to 2015, according to the December 2016 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] For the year 2016, the REALTORS® Buyer Traffic Index registered at 63 (60 in 2015), indicating that more respondents viewed buyer traffic conditions as “strong” rather than “weak.”[2] Homebuying demand is likely being bolstered by sustained job and income growth, with approximately six million net jobs gained since the recession that ended in 2009.

Meanwhile, home selling activity continued to be weak. For the year 2016, the REALTORS® Seller Traffic Index registered at 43 (40 in 2015), indicating that more respondents viewed seller traffic conditions as “weak” rather than “strong.”. In spite of a small increase from 2015, supply conditions have remained largely tight in many areas, with the index registering below 50 since November 2008.

Looking back historically, while the REALTORS® Seller Traffic Index has not registered above 50 since tracking began, from 2009 to 2011 the REALTORS® Seller Traffic Index exceeded the REALTORS® Buyer Traffic Index. Starting in 2012, as the housing market recovery began to gain momentum, the REALTORS® Buyer Traffic Index grew at a faster pace than the REALTORS® Seller Traffic Index by increasingly large margins in the last three years.

 During October—December 2016, the REALTORS® Buyer Traffic Index indicates that buyer traffic conditions can be characterized as “moderate” to “very strong” in many states except in the few states where buyer traffic was “weak”.[3] Buyer traffic conditions were “very strong” only in the state of Washington and the District of Columbia.

During the same period, the REALTORS® Seller Traffic Index indicates seller traffic conditions were “weak” in most states, although 14 states had “moderate” seller traffic conditions. Only the District of Columbia had “strong” seller traffic conditions. Respondents reported that demand is strong, but there is a severe lack of supply, especially of homes that are affordable to buyers.

Employment conditions affect the supply and demand for housing. The chart that follows shows the change in non-farm employment from November 2015 to November 2016 by state. Employment growth was strongest in Washington and Florida, and buyer traffic was “moderate” to “very strong” in these states. Non-farm employment contracted in the oil-producing states of North Dakota, Wyoming, Kansas, Oklahoma, New Mexico, Louisiana, and Mississippi.[4] In some of these states, the job cutbacks have led to “moderate” seller traffic conditions, based on the REALTORS® Seller Traffic Index. Texas has been more resilient than other oil-producing states, with employment growing slightly above the national average.[5]

[1]The author acknowledges Danielle Hale, Meredith Dunn, and Amanda Riggs for their comments. Any errors are attributable to the author.

[2]The REALTORS® Buyer Traffic Index provides information on the level of homebuying demand or interest, which may materialize as a contract to purchase or closed sale after two or three months.

[3] To increase the number of observations for each state, the index is based on data for the last three months. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents are asked, “How do you rate the past month’s buyer/seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. For graphical purposes, index values 25 and lower are labeled “Very Weak,” values greater than 25 to 45 are labeled “Weak,” values greater than 45 to 55 are labeled “Moderate,” values greater than 55 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.” The range of +/-5 around 50 approximates the historical margins of error at the 95 percent confidence level for small states.

[4] Source: U.S. Department of Energy. See https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm.

[5] For a review of states in which oil has an outsized economic impact, see this blog: http://economistsoutlook.blogs.realtor.org/2016/03/21/is-california-an-oil-producing-state/

FHA Fee Suspension

Mon, 01/23/2017 - 10:42

On Friday, the new administration suspended a 25 basis point fee reduction that the past administration announced on the 9th of January. NAR research estimated that the fee reduction would have benefited 750,000 to 850,000 homebuyers in 2017 who’s mortgages were backed by the FHA. In addition, it would have opened homeownership to an additional 30,000 to 40,000 homebuyers.

It is important to note that the fee reduction has been suspended pending a review by the new administration and not eliminated. However, a wrinkle in the suspension of the fee change will have market effects. Typically, mortgage insurance premium (MIP) changes are set to affect mortgages that are endorsed by the FHA for insurance on a given date or after. However, this fee change was set to affect FHA-backed loans that close on the 27th or after. Thus, recent deals that are under contract and endorsed by the FHA would have benefited from the change as long as they settled on the 27th or later. Furthermore, under the TRID or Know Before You Owe rules that govern the settlement process, a quarter point (12.5 basis point) or more increase in yield on a mortgage is one of three reasons that a new closing disclosure (CD) and 3-day waiting period must be issued before settlement. In short, the impact of the 25 basis point fee change could cause a small number of settlements to fall apart or to be delayed to February.

Drivers of Tight Mortgage Credit

Thu, 01/19/2017 - 11:21

In recent years, pundits have spoken of tight lending and the need to expand access to credit to the broadest group of credit worthy borrowers. A number of issues have been cited as reasons for tight credit including law suits from the Department of Justice, investors forcing lenders to re-purchase loans, weak demand for riskier loans by investors, and the high cost to service non-prime loans.

Lenders who responded to NAR’s 12th Survey of Mortgage Originators indicated that the general risk of default and weak investor demand their restrictions. 25 percent of respondents indicated they had no overlays on riskier borrowers. Surprisingly, only 8.3 percent of respondents cited servicing issues like the higher cost of servicing riskier loans.

Wishing for Spring? Dream Up Your Next Outdoor Remodeling Project Now

Wed, 01/18/2017 - 13:30

While you’re waiting for the snow to thaw this winter, now is the time to start planning how to reinvest that homeowners tax refund back into your property. Envision a quaintly tiled walk-way leading up to an outdoor fire place, children laughing by the pool on lazy summer days, and a multi-colored flowerbed in the front lawn. Can’t wait for spring and summer? Let NAR help guide you to the perfect outdoor remodeling project. With virtually every project, investing money into your home will not only increase your enjoyment, but reap returns down the road if you decide to sell.

This past fall, NAR asked its members how much curb appeal 10 outdoor remodeling projects would have for potential buyers, as well as the cost estimate that sellers can recover from investing in outdoor remodeling. In partnership with the National Association of Landscape Professionals (NALP), we also asked landscape professionals to estimate the actual cost of the 10 projects. We released a joint report detailing the reasons why homeowners completed outdoor remodeling, the value of taking on such projects, and the increased happiness experienced by homeowners once a project was finished in our 2016 Remodeling Impact Report: Outdoor Features. Here’s a short recap of some of the findings to help you in your winter planning.

New Patio or Wood Deck

Installing a new patio or a new wood deck can be the perfect fix for your home. These projects can improve livability and upgrade worn-out spaces. According to the report, installing a new patio received a Joy Score of 9.6 out of 10 and a new wood deck received a Joy Score of 9.7. The Joy Score is calculated by the share of those who were happy and satisfied upon seeing the completion of their project. According to REALTORS®, a patio recovers 102 percent of the costs and a wood deck recovers 106 percent.

Landscape Upgrade

You may envision a new landscape project for your summer gatherings as it improves livability, provides a much needed change, and adds more personality to the home. An overall landscape upgrade received a Joy Score of 9.8 and REALTORS® estimated that landscaping received a cost recovery of 105 percent. If you are leaning towards selling your home, investing in a seed lawn upgrade rendered a cost recovery of 417 percent, a standard lawn care program recovered 303 percent of costs, sod lawn recovered 143 percent, and a softscape upgrade rendered a cost recovery of 100 percent.

New Pool

One of the most enjoyable outdoor projects you can undertake this spring is investing in a new backyard pool. When we surveyed consumers, this project received the highest Joy Score of 10 above all other projects. Ninety-five percent of consumers said they have a greater desire to be home since installing a pool, 80 have an increased sense of enjoyment, and 90 percent feel a major sense of accomplishment. On the flip side, REALTORS® estimate that having a pool on the property only recovers 50 percent of the project’s cost.

Outdoor Fireplace and Firepit

If you’re ready to do a project now, such as an outdoor firepit and fireplace, these projects are likely to increase your personal enjoyment if you live in your forever home. However, REALTORS® estimated the cost recovery for both of these projects to be 78 and 60 percent respectively upon sale.

Lenders Rounding Home on TRID

Tue, 01/17/2017 - 15:52

A year after TRID, lenders show signs of growing optimism. The TRID or the Know Before You Owe rules were implemented in October of 2015 and indented to streamline and safeguard consumers in the closing process. Delays and closing times leapt in the wake of the change, but eased to a lower, but elevated plateau.

When asked in NAR’s 12th Survey of Mortgage Originators, 75.1 percent of lenders who took part indicated that they would normalize operations in six months or less, the second consecutive gain.  However, a significant 16.7 percent indicated that settlement delays were the new norm, a finding that dovetails with continued delays in the settlement process.

The locus of the problem may be with the investors who purchase the mortgages that lenders originate. When lenders were asked about investors’ ability to adapt to the TRID environment, there too was growing optimism, but 25 percent felt that lower demand (e.g. higher rejection and put back rates) from investors because of TRID errors was the new normal. Some argue that improving lenders’ ability to fix TRID errors in loans after origination and before sale to investors might help ease sales to investors. A smooth flow of funds from investors to home buyers is critical for housing.

Raw Count of Home Sales (November)

Tue, 01/17/2017 - 10:16
  • Existing home sales rose 0.7 percent in November from one month prior while new home sales increased 5.2 percent.  These headline figures are seasonally adjusted figures and are reported in the news.  However, for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures.  The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 415,000 existing homes were sold in November while new home sales totaled 41,000.  These raw counts represent a 7 percent decrease for existing home sales from one month prior while new home sales dropped 9 percent.  What was the trend in recent years?  Sales from October to November decreased by 19 percent on average in the prior three years for existing homes and declined by 12 percent for new homes.  So this year, both existing and new home sales outperformed to their recent normal.
  • Why are seasonally adjusted figures reported in the news?  To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate that have an effect on data around the same time each year.  For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity.  Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends.  That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month.  When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
  • What to expect about home sales in the upcoming months in terms of raw counts?  Independent of headline seasonally adjusted figures, expect busier activity in December while activity will get slower in January. For example, in the past 3 years, December sales rose by 7 percent to 24 percent from November while January sales declined by 22 to 32 percent from December. New home sales market tends to get busier in both December and January. For example, in the past 3 years, raw home sales in December typically increased by 6 to 13 percent from November while January sales rose by 3 to 11 percent from December.
  • For more, click here to view the comparison of seasonally adjusted and non-seasonally adjusted existing-home sales visualization.

November 2016 Housing Affordability Index

Fri, 01/13/2017 - 15:01

After moving up in four consecutive months at the national level, housing affordability is down 1.1 from last month and down from a year ago. Mortgage rates increased to 3.82 this November and current home shoppers may want to lock in at current rates before they rise again.

  • Housing affordability declined from a year ago in November moving the index down 1.8 percent from 169.9 to 166.8. The median sales price for a single family home sold in November in the US was $236,500 up 6.8 percent from a year ago. Bonus equity gains for owners but not helpful to potential homebuyers.
  • Nationally, mortgage rates were down 19 basis points from one year ago (one percentage point equals 100 basis points) while incomes rose 2.4 percent.
  • Regionally, the South had the biggest increase in price at 9.1 percent. The West had an increase of 8.5 percent while the Midwest had a 6.6 percent gain in price. The Northeast had the smallest increase of 2.5 percent.
  • Regionally, the Northeast was the only region that saw an increase in affordability from a year ago. The Northeast had an increase of 2.0 percent. The Midwest had the smallest decline of 1.3 percent. The West had a decline in affordability of 3.5 percent while the South had the largest decline of 4.5 percent.
  • By region, affordability is down regions from last month. The Northeast had the biggest decline of 3.5 percent. The South followed with a decline of 1.2 percent and the Midwest had a decline of 0.4 percent. The West had the smallest decline in affordability of 0.2 percent.
  • Despite month-to-month changes, the most affordable region is the Midwest where the index is 215.2. The least affordable region remains the West where the index is 119.3.  For comparison, the index is 168.4 in the South, 172.2 in the Northeast.
  • Mortgage applications are currently up this week. Modest changes to the credit box could help offset rate increases. Rents are up 3.9 percent and rising while vacancy rates are low. Housing shortages will distress the opportunities of first time homebuyers.
  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

Martin Luther King, Jr. Day 2017

Fri, 01/13/2017 - 14:54

Martin Luther King, Jr. Day is observed on the third Monday of January and marks the birthday of Rev. Dr. Martin Luther King, Jr. This holiday is also recognized as a day of service, and is an opportunity to serve your community. Based on data from the 2016 Member Profile and 2016 Firm Profile we can see how REALTORS® are volunteering in their community.

  • Seventy-one percent of all REALTORS® volunteer in their community, and the typical REALTOR® who volunteers is 52 years old.
  • Fifty-nine percent of REALTORS® aged 50 and older volunteer in their community.
  • Sixty-four percent of the REALTORS® volunteering are females, and 36 percent are males.
  • Fifteen percent of volunteers were fluent in a language other than English.
  • REALTORS® who volunteered typically had previous careers in management, business, or financial field were more likely than any other previous career to volunteer (16 percent).
  • Among firms there is encouragement of REALTORS® to volunteer.  Eighty-two percent encourage volunteering in the local community, 48 percent encourage volunteering with their local association, 28 percent encourage volunteering with their state association of REALTORS®, and 19 percent with the National Association of REALTORS®.

 

Find more information on Martin Luther King, Jr. Day and opportunities to volunteer in your area at: http://www.nationalservice.gov/mlkday

For more highlights on REALTORS® view the Martin Luther King, Jr. Day infographic  2016 Member Profile and 2016 Firm Profile.

NAR Commercial Members Optimistic About Business Creation Throughout 2016

Wed, 01/11/2017 - 11:28

By the nature of the profession, commercial real estate agents have a unique perspective on business creation as they play a key role in helping companies lease or own office space and commercial facilities. For that reason, the NAR Research team has surveyed its commercial membership each month from August to December 2016 to track whether businesses were opening or closing in their communities.

In each 30-day period, NAR commercial members were asked their perspective on three key questions related to business in their local markets, namely had they seen:

  1. An increase of businesses opening in local communities in the last 30 days
  2. An increase of businesses closing in local communities in the last 30 days
  3. Net businesses opening and closing in local communities in the last 30 days

With regards to businesses opening, NAR commercial members were optimistic throughout the second half of 2016. Each month, more commercial members cited that they had seen an increase in businesses opening. In September, commercial members saw the most businesses openings at 50 percent, compared to 42 percent that said they had not seen an increase of businesses opening in their communities. August and December were also good months, where commercial members reported that they had seen an increase of businesses opening at 49 percent. Around the holiday season, November was the slowest month where only 43 percent of commercial members cited that they had seen an increase in businesses opening.

From August to December, 65 percent of commercial members cited that retail industries were opening in their communities, followed by the food and beverage industry at 61 percent, and health, medical, and dental industries at 41 percent.

When NAR commercial members were asked the second question—whether they saw an increase in businesses closing in their communities—the share that cited that there was not an increase actually grew over the five-month period. Specifically, in August 64 percent said that there was not an increase in businesses closing, compared to December where 73 percent cited that there was not an increase in closings in their communities. Commercial real estate agents were thus optimistic about business creation in their areas.

When we asked commercial members what the net ratio of businesses opening to closings in the five-month period, roughly half of commercial agents were said more businesses were opening (50 percent in August and 53 percent in December). Only a quarter said that openings to closing remained the same each month (25 percent in August and 28 percent in December).

How Much Will Your Monthly Payment Change?

Tue, 01/10/2017 - 14:32

Mortgage rates have been rising sharply over the past couple of months. The 30-year fixed-rate mortgage was 4.2 percent in December, the highest of 2015 and 2016, and it appears to stay above 4 percent for a long while. Mortgage rates are still historically low, but crossing over from the 3 percent range to 4 percent range raises worries to potential homebuyers. But, should they be worried? How much can this rise of mortgage rates change their monthly payment? How does this change of monthly payments vary by county?

We calculated the monthly payment by county based on the mortgage rate prevalent a couple of months ago (3.5 percent), the rate as of early January (4.2 percent) and a higher rate likely to be seen within the next two years (5.0 percent).

Nationwide, it is estimated that the rise of mortgage rates from 3.5 to 4.2 percent increased the monthly payment by $75 while a rise from 4.2 to 5.0 percent will increase the monthly payments by $90[1].

But the effect depends on the location. At the high end, San Francisco homebuyers have seen a nearly $375 increase in monthly payments so far, and if rates were even higher now, financing the same-priced home would cost an extra $450 per month.  At the low end, in Cochrane County, TX, home buyers are paying an extra $13 per month on account of the mortgage rate rise since November, and they could see an extra $16 per month as rates rise to 5 percent. At this end of the spectrum, the change in monthly payments seems much more manageable.

However, these examples only use the current price of homes to see the difference.  In the years ahead, NAR expects that the 30 year fixed-rate will increase to 4.4 percent in 2017 and 4.8 percent in 2018 while home prices are expected to rise 3.9 and 3.2 percent, accordingly. Rising prices in addition to rising mortgage rates will push the monthly cost of housing up even higher for new homebuyers. Existing homeowners will have the same monthly payment for those who took out fixed rate mortgage.

Select a County from the dropdown and see how much monthly payments change over the different mortgage rates:

Nationwide, it looks like monthly mortgage payment will be affected mostly in the following counties:

Data by State

Data by Price

Methodology

 

[1] The U.S. median home value matches the county prices calculations. For comparisons purposes, the calculated median home value reflects all homes while NAR’s U.S. median price represents home sales. Thus, the calculated price ($207,566) is expected to be lower than NAR’s home value ($239,500). Please see Methodology for more details.

December HOME Survey: Moving Near Family and Hosting Friends

Tue, 01/10/2017 - 11:16

In the Housing Opportunities and Market Experience (HOME) Survey, respondents are asked a series of unique questions each quarter. In the December survey, consumers were asked whether they hosted family and friends at home during the holidays, on weekends, and for regular gathers, as well as whether moving near family was important to them.

Fifty-one percent of all respondents said that they do host family friends four or more times a year, compared to only six percent that hosted once a year. Of those that own their own home, 57 percent said they host four or more times a year. Compared to those that rent a place, only 38 percent said they host four of more times and year and 30 percent said they rarely or never host.

When segmented by location, of those who said they host four or more times a year, 54 percent live in rural areas and 53 percent live in suburban areas. Those that hosted frequently was lower in urban areas at 42 percent. When segmented by income, respondents that said they host four or more times a year increased with income, 64 percent with an income of more than $100,000 a year compared to 43 percent with an income of under $50,000. Those that hosted frequently was nearly the same in all regions, albeit slightly lower in the South.

Seventy-eight percent of all respondents said moving near family is important (45 percent said very important and 33 percent said somewhat important). The importance of moving near family increased with age, from only 36 percent stating very important for those 34 years and under to 57 percent for those 65 years and over. While the importance of moving near family was nearly the same across locations, it was slightly higher in rural areas. Moving near family went down slightly as income went up, from 46 percent with an income under $50,000 a year to 43 percent that have an income of more than $100,000 a year. Moving near family was very important in the Midwest at 47 percent compared to 43 percent in the South. For homeowners, 49 percent said that moving near family was very important compared to only 37 percent of renters.

FHA’s Reduces Fee to Pre-Crisis Level

Mon, 01/09/2017 - 09:58

In a move that signals greater normalization of the housing market, the FHA announced a reduction in its annual insurance premium of 25 basis points. This move would reduce the fee it charges from its 0.85 percent to 0.6 percent. NAR estimated the merit of such a 10 to 25 basis point reduction last spring. On a monthly basis, an FHA borrower who purchases a home at the November median home sale price of $234,900 would save $48 each month or nearly $3,000 over five years.

In the wake of the subprime crisis, private mortgage insurers pulled back from the market and the FHA expanded in a countercyclical role to support the housing market and the greater economy. To offset rising losses on its portfolio, the FHA raised fees and tightened its underwriting. In the spring of 2015, the FHA made its first cut to its then high 1.35 percent premium down to 0.85 percent.

The last FHA premium cut was credited with helping to shore up the FHA’s books and to help restore its capital ratio above the statutory 2.0 percent level.  Lower fees helped FHA to retain better borrowers from refinancing to private mortgage insurers who had re-entered the market, but more importantly it helped to improve affordability allowing many previously sidelined borrowers to qualify for a home purchase.  An analysis by the Federal Reserve Board economists conservatively estimated a 2.0 percent expansion of the purchase mortgage market as a result of the last 50 basis point reduction in the fee or roughly 70,000 additional home purchases annually. Based on the Fed economists’ methodology, this 25 basis point reduction could result in an additional 35,000 buyers entering the market. The change in fees could delay some closings as borrowers jockey for the reduced premium and due to temporary boost in refinances, but the net effect would be greater home sales.

The FHA has once again reduced its premium. This change is important support for entry-level and non-pristine borrowers, particularly as mortgage rates begin to tick upward.  However, this change is also an important signal to the market that the Federal agency has successfully recovered after its critical mission of supporting the housing market during the great depression.

2017: What You Can Look Forward to from NAR Research

Fri, 01/06/2017 - 11:00

The new year has already started off with a bang and NAR’s Research Team has many projects in the works for our members, the media, and the general public related to the housing market. We’ve compiled a little cheat sheet below to help you navigate our resources and keep you up to date with the latest reports and statistical releases.

First, all of our Housing Statistics are released either monthly or quarterly and have a set release date. We post the dates each month on our website to provide consistency and planning predictability for our members. The release dates can be found on the 2017 NAR Statistical News Release Schedule. Included in those dates are the monthly Existing Home Sales and Pending Home Sales releases as well as the quarterly Metropolitan Home Prices and Affordability Index and Commercial Real Estate Report/Forecast.

To help you navigate how to read each statistical release, check out each page’s methodology for the definition of terms and the formulas in each calculation. If you’re not familiar with the current format, most of our housing statistics are released in national and regional medians only. We do not release state, city, or zip-code level data, with the exception of major metropolitan cities in our Metropolitan Median Home Prices and Affordability Index.

 

If you’re just scanning our resources for the first time, you can browse our NAR Research Resource Guide 2016, which details the research reports we produced last year. You can expect many of the same major reports to be released in 2017, while a few many be bi-annual.

Generally, we release our annual reports in the same quarter each year. Our flagship reports include the NAR Profile of Home Buyers & Sellers—released in the 4th quarter of the year—provides insight into detailed information about the experiences with the home buying and selling transaction. The NAR Home Buyer & Seller Generational Trends—released in the 1st quarter of each year—examines the generational differences of home buyers and sellers. Our Investment and Vacation Home Buyer’s Survey comes out in the 2nd quarter, the Profile of International Activity in U.S. Residential Real Estate in the 3rd quarter of the year, and the Housing Opportunities and Market Experience (HOME) Survey as well as the Business Creation Index (BCI) are released quarterly.

 

Our economists are always digging into the research and uncovering interesting findings. We release multiple blogs a week on The Economists’ Outlook Blog. Several notable blog topics from last year include:

 

NAR Research’s Chief Economist Lawrence Yun also is a regular contributor to Forbes online. Popular articles of his include Why Winter Could The Best Season To Buy A Home, The U.S. Cities Whose Housing Markets Are Likely To Outperform And Underperform In 2016, and Why Homeownership Matters. He monitors the housing market and writes about unique developments and emerging trends.

We promote all of our housing statistics and research reports across all social media platforms to help engage our members as well as the general public. We post a variety of content, including videos, articles, and infographics on Facebook. We live tweet and Periscope events on Twitter. Our infographics are accessible in our Pinterest boards. We create a visual story encompassing all news and reports on Instagram.

All this, and much, much more! For questions on our data releases, email data@realtors.org. You can find additional explanations on our Research and Data FAQ page. All historical reports and data are located in the REALTOR® Store.

Stressed Over Higher Interest Rates?

Thu, 01/05/2017 - 13:35

Mortgage rates have risen since the election of Donald Trump, from 3.5% to the recent 4.2%. Bond investors are perceiving an economic stimulus package to uplift the economy. More business activity, greater commerce, and faster job growth are certainly good news, which thereby also no longer justifies the ultra-low interest rate environment of the past decade. Some Wall Street players could be betting up the bond yields not because of stimulus but for negative factors of a much higher government budget deficit arising out of big tax cuts and increased government spending. Whether from good improved economic prospects or bad budget deficit projections, the rates have gone up and will likely continue to do so over the next two years, spanning the period when the impacts of the stimulus will have been fully felt.

So in the first week of 2017, the borrowing rate on a 30-year fixed rate mortgage averaged 4.2%. Taking a look back, let’s recall how high rates were in the distant past. In the 1970s, they averaged 8.9%; in the 1980s, 12.7%; in the 1990s, 8.1%; and in the first decade of the new century they came in at 6.3%. The in-and-around 4% rate is only a recent phenomenon from the year 2011 to today. Nonetheless, many consumers with a short-term memory, especially among the young, have often witnessed sub-4% rates and the latest rising rates feel financially discomforting and discouraging.

Read, NAR Chief Economist, Lawrence Yun’s full Forbes article here.

Instant Reaction: October Owners’ Gains Forecast

Tue, 12/27/2016 - 09:55

The S&P CoreLogic Case-Shiller National Index shows that U.S. prices of single-family homes continue to rise. The national index in October reaches a new high while it is up 5.6 percent from a year earlier.  But what does this mean for homeowners?

Home prices affect the wealth of homeowners. As the price of housing increases, the wealth of homeowners increases as well. Based on the above increase of home prices, it is estimated that owners’ equity[1] was increased by $351 billion. Thus, it seems that 75 million homeowners gained $4,680 from a year ago.

[1] Home equity is the difference between the value of one’s home and the amount of mortgage debt on the home.

Heating your Home for the Holidays 2016

Thu, 12/22/2016 - 13:44

When deciding on a home to purchase, recent buyers took into consideration a variety of different environmental features. The feature that was most important to buyers was heating and cooling costs. Eighty-four percent of recent buyers found heating and cooling costs to be at least somewhat important when deciding on a home to purchase. Thirty-three percent of buyers found heating and cooling costs to be very important. Using data from the 2016 Profile of Home Buyers and Sellers, we can see which buyers find heating and cooling costs most important.

  • Buyers in the Northeast (35%) and the South (37%) were more likely than other regions to find heating and cooling costs to be very important.
  • Heating and cooling costs were more important to buyers who purchased newer homes.
  • Only twenty-nine percent of buyers who purchased a home built between 2001 and 1987 or 1960 and 1913 found heating and cooling costs to be very important, compared to 49 percent of buyers whose home was built in 2015.
  • Eighty-three percent of all buyers purchased a detached single-family home, which was typically a median of 1,900 square feet.
  • Seventy-nine percent of buyers who found heating and cooling costs very important purchased previously owned homes.

View the 2016 Profile of Home Buyers and Sellers and the Heating your Home for the Holidays infographic.

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