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2016 Survey of Mortgage Originators, Fourth Quarter

Tue, 02/07/2017 - 11:29

Anecdotes have increased in recent quarters that there is a growing shortage of appraisers.  55.6 percent of lenders who took part in the most recent Survey of Mortgage Originators indicated some level of issues getting appraisals.  However, 11.1 percent indicated that the issue was significant.

Respondents indicated that roughly 9.8% of volume was hit with a rush fee for getting an appraisal within a short time-frame.  On average, those fees were 37.1 percent higher in this sample.

NAR will work with appraiser-members to continue to monitor constraints in the appraisal industry

 

Highlights of the December 2016 REALTORS® Confidence Index Survey Report

Mon, 02/06/2017 - 11:38

While local conditions vary, the REALTORS® Buyer Traffic Index and the REALTORS® Confidence IndexCurrent Conditions for single-family homes remained above 50 in December 2016, indicating that more respondents reported “strong” than “weak” conditions, according to the December 2016 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Both indices were higher than their levels in December 2015 and were essentially unchanged from November 2016 levels.[2] The REALTORS® Seller Traffic Index slightly increased from one year ago, but it has remained below 50 since November 2008, indicating that seller activity is still “weak.”

In December 2016, first-time homebuyers accounted for 32 percent of sales (32 percent in 2016; 30 percent in 2015) .[3] With fewer new foreclosures, distressed properties accounted for seven percent of sales (seven percent in 2016; nine percent in 2015), purchases for investment purposes made up 15 percent of sales (14 percent in 2016; 14 percent in 2015), and cash sales accounted for 21 percent of sales (23 percent in 2016; 24 percent in 2015). Amid tight supply, half of properties that sold in December 2016 were on the market for 52 days or less compared to 58 days in December 2015 (43 in 2016; 50 in 2015).

Lack of supply and appraisal-related problems were the main issues reported by REALTORS®. Respondents also expressed concern about the impact of rising mortgage rates. Overall, respondents were confident about the outlook over the next six months for the single-family homes, townhomes, and condominiums markets, with the six-month outlook confidence indices for these markets registering at 50 and above.

[1] An index greater than 50 indicates the number of respondents who reported “strong” (index=100) outnumbered those who reported “weak” (index=0). An index equal to 50 indicates an equal number of respondents reporting “strong” and “weak” market conditions. The index is not adjusted for seasonality effects.

[2] An index greater than 50 indicates the number of respondents who reported “strong” (index=100) outnumbered those who reported “weak” (index=0). An index equal to 50 indicates an equal number of respondents reporting “strong” and “weak” market conditions. The index is not adjusted for seasonality effects.

[3] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 35 percent were first-time homebuyers, up from 32 percent in 2015. The HBS surveys primary residence homebuyers, while the monthly RCI Survey surveys REALTORS® and includes purchases for investment purposes and vacation/second homes.

Distressed, Investment, and All-cash Sales Continued to Decline in 2016

Fri, 02/03/2017 - 11:27

REALTORS® reported that sales of distressed properties continued to fall in 2016, according to the December 2016 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Distressed sales accounted for seven percent of sales (eight percent in 2015). With rising home values, improved economic conditions, and fewer foreclosures, the share of sales of distressed properties has continued to decline since 2009 (36 percent).

Purchasing for investment has become less attractive with fewer distressed sales on the market and with home prices rising. In 2016, investment sales accounted for 14 percent of sales (14 percent in 2015). Purchases for investment purposes have generally been on the decline since 2011–2012 when investment sales accounted for 20 percent of sales.

As the shares of distressed and investment sales have declined, so has the share of cash sales. In 2016, cash sales accounted for 23 percent of sales (24 percent in 2015). Buyers of homes for investment purposes, distressed sales, second homes, and foreign clients are more likely to pay cash than first-time homebuyers.

[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.

81 Percent of First-time Homebuyers Made a Downpayment of Less than 20 Percent

Thu, 02/02/2017 - 15:25

More first-time homebuyers avail of a low downpayment loan compared to all homebuyers, according to the December 2016 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Among first-time homebuyers who obtained a mortgage and whose transactions closed in October—December 2016, 81 percent made a downpayment of less than 20 percent.[2] In comparison, 62 percent of all buyers who obtained a mortgage and whose transaction closed in December 2016 made a downpayment of less than 20 percent.

The Federal Housing Authority (FHA) and the Government Sponsored Enterprises (GSEs) have implemented policies to make credit more widely available for first-time buyers. In January 2015, the Federal Housing Authority reduced the annual mortgage insurance premium by 0.5 percentage points ( from 1.35 percent to 0.85 percent).  In 2015, Fannie Mae and Freddie Mac also accepted mortgages with three percent downpayment.

However, the impact of these measures in attracting first-time homebuyers appears to be modest for a variety of reasons. Lack of information about low downpayment products may be one reason. In fact, NAR’s 2016 Q3 Housing Opportunities and Market Experience (HOME) Survey found that only 13 percent of those aged 34 or under believe they need a downpayment of five percent or less.[3] Additionally, although low downpayment loans are available, some buyers may want to save for a bigger downpayment to meet underwriting standards (e.g., debt-to-income ratios, loan-to-value ratios), save on mortgage insurance, or get a lower interest rate.

[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] The estimate for first-time homebuyers is based on a 3-month period to increase the sample size.

[3] See: http://www.realtor.org/reports/2016-q3-homeownership-opportunities-and-market-experience-home-survey.

EHS in 2016 by the Numbers – Part 2 – Least Common Closing Dates

Thu, 02/02/2017 - 11:24

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

You probably know that home closings slow down during the holidays and the earlier part of the week. Here is the data to back up your intuition:

  • The sales data for December 2016 is still preliminary, but we can get a good sense of the year by looking at the data we currently have for the past 12 months[1]. In our first post, we looked at top closing days of 2016.
  • In this list, we see the slowest closing days of 2016. The resulting list depends very much on how you define the eligible days.
  • Very few closings happen on weekends, federal holidays, and the Friday after Thanksgiving. Excluding these days, we find that the slowest closing day was Wednesday, February 3. Last year’s slowest day—January 13—again made the list, but was number four instead of number one this year. January 2 is often on the list, but because it fell on a weekend, it was excluded this year.
  • In 2016, Wednesday, February 3 was slower than both Columbus Day (Monday, October 10) and Memorial Day (Monday, May 30), but these holidays had fewer sales than all other dates on the list.
  • One holiday that REALTORS® may not have taken off was Veteran’s Day. Perhaps because it fell on a Friday (November 11, 2016), Veteran’s Day had more home closings than all of the bottom 25 dates listed below. All other weekend days and holidays were slower than the slow business days listed below.
  • Because this ranking was compiled with data that was not seasonally adjusted, we see that winter days figure prominently in the list of slowest days for home closings.
  • Those who have been in business a few years can probably expect these seasonal fluctuations, but for those who are new to real estate, take note and plan your vacations accordingly.

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

December Pending Home Sales

Wed, 02/01/2017 - 11:20
  • NAR released a summary of pending home sales data showing that December’s pending home sales made a comeback and are up 1.6 percent from last month and also up 0.3 percent from a year ago.
  • Pending sales are homes that have a signed contract to purchase on them but have yet to close. They tend to lead Existing Home Sales data by 1 to 2 months.
  • Two of the four regions showed inclines from a year ago. The West lead with an increase of 5.0 percent followed by the South 0.5 percent. The Northeast had a decline of 1.2 percent. The Midwest had the biggest decline of 3.4 percent.
  • From last month, again the South and the West were the only regions to have an increase. The West has the biggest increase of 5.0 percent followed by the South with 2.4 percent. The Midwest had a decline of 0.8 percent and the Northeast had the biggest decline 1.6 percent.
  • The pending home sales index level was 109.0 for the US. November’s data was unrevised to 107.3.
  • The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing home sales above the 5 million mark.

 

FHA Mortgage Insurance Premium Flash Survey

Tue, 01/31/2017 - 10:22

On January 10th, the FHA lowered its annual mortgage insurance premium (MIP) by 25 basis points. That decision was put on hold pending a review on January 21st. This alteration to the FHA’s fee structure was unique as it made many borrowers in the current pipeline eligible for the fee reduction. NAR Research surveyed a panel of mortgage originators to gain insights on the impact of the change to consumers and the market. The respondents felt that the impact would be small in part due to the time of year, but many borrowers would be inconvenienced, some incurring expense, and a few no longer eligible to purchase a home.

Highlights form the survey:

  • Respondents indicated that a range of 1 percent to 40 percent of their pipeline would be impacted with a weighted average of 15.1 percent
  • Of those affected, 5.7 percent of the affected loans will likely be cancelled, while 21.2 percent will be delayed as loan estimates (LE) or closing disclosures (CD) are reissued. This implies that roughly 0.86 percent of all mortgage production could be cancelled, in line with earlier NAR estimates.
  • Half of respondents indicated that consumers would absorb the higher MIP, while 22.2 percent said their firm would absorb a rate lock extension. One respondent indicated that consumers would absorb both costs.
  • Overall, lenders were optimistic that the impact would be limited in part due to the time of year, but for some that was not the case.

The suspension of the FHA’s fee reduction provides important lessons for how to inform the market of such changes. Furthermore, with the fee under review, many homebuyers may still benefit from a future reduction in the fee.

Instant Reaction: November Owners’ Gains Forecast

Tue, 01/31/2017 - 10:10

The S&P CoreLogic Case-Shiller National Index shows that U.S. prices of single-family homes continue to rise. The national index level in November reached a new high and 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 $354 billion. That means that 75 million homeowners each gained $4,720 on average in November 2016 from a year earlier while October’s gains were $4,590 per homeowner.

 

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

The S&P CoreLogic Case-Shiller National Index shows that U.S. prices of single-family homes continue to rise. The national index level in November reached a new high and 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 $354 billion. That means that 75 million homeowners each gained $4,720 on average in November 2016 from a year earlier while October’s gains were $4,590 per homeowner.

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

First-time Homebuyers: Slightly Up at 32 Percent of Residential Sales in 2016

Mon, 01/30/2017 - 15:32

REALTORS® reported that first-time homebuyers accounted for 32 percent of residential sales in 2016 (30 percent 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] Sustained job growth and improving incomes along with the aging of the Millennial generation are likely underpinning the continued, albeit modest, increase in homebuying by first-time buyers. [2],[3]

Low mortgage rates have also bolstered homebuying, although the increase in interest rates since November appears to have affected demand in some areas, according to survey respondents.[4] Mortgage rates are likely to continue to rise modestly in 2017.

 The share of first-time homebuyers increased in states such as Arizona, California, Florida, and North Carolina in 2016 compared to the rates in 2015.[5] The share of first-time homebuyers has also increased in Arizona, Florida, and New York since 2012, the first year of solid growth since the recession of 2008-2009.

 Buyers 34 years old and under, who are likely to be first-time buyers, accounted for 30 percent of residential buyers in December 2016, (29 percent in November 2016; 27 percent in December 2015). The share of buyers 34 and under has been on a gradual uptrend from the 26 percent share in July 2013 when this information started to be collected in the survey.[6]

Homebuyers who were renting prior to their recent home purchase accounted for 39 percent of sales in December 2016 (40 percent in November 2016; 38 percent in December 2015). The fraction of buyers who were renting prior to their recent home purchase has increased from the 36 percent share in November 2014 when this information started to be collected in the survey.[7]

[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] First-time buyers accounted for 35 percent of all homebuyers based on data from NAR’s 2016 Profile of Home Buyers and Sellers (HBS), up from 32 percent in 2016. The HBS is a survey of primary residence homebuyers and does not capture investor purchases but does cover both existing and new home sales from July 2015 to June 2016. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.

[3] NAR’s 2016 Profile of Home Buyers and Sellers (HBS), the median age of first-time homebuyers was 32 years old.

[4] Mortgage rates in this report refer to the average contract rates on 30-year conventional mortgages reported by Freddie Mac. The average 30-year mortgage rate was 3.54 percent in the week of November 3, 2016. It broke above four percent, to 4.03 percent, in the week of November 23, and it climbed to 4.32 percent in the week of December 29. The average rate eased to 4.12 percent in the week of January 12, 2017, with rates likely to remain above four percent during 2017.

[5]The analysis is among states that have at least 500 observations.

[6] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence homebuyers, 28 percent were 18-34 years old. The HBS surveys primary residence homebuyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes.

[7] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 41 percent rented an apartment or house. The HBS surveys primary residence homebuyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes.

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.

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