Tuesday, September 30, 2014

Purchase Contracts Dip in August

Pending home sales slowed in August, with all regions posting declines except for the West, according to the National Association of REALTORS®' Pending Home Sales Index, a forward-looking indicator based on contract signings. NAR says that fewer distressed sales and less investor activity most likely contributed to August's decline in contract signings.
The index slipped 1 percent in August, falling 2.2 percent below year-ago levels, NAR reports. However, the index was at 104.7 in August. Anything above 100 is considered an average level of contract activity, according to NAR.
"Fewer distressed homes at bargain prices and the acknowledgment that we're entering a rising-interest-rate environment likely caused hesitation among investors last month," says Lawrence Yun, NAR's chief economist. "With investors pulling back, the market is shifting more toward traditional and first-time buyers who rely on mortgages to purchase a home."
However, first-time home buyers have made up less of the market share in recent years, representing less than a third of all buyers each month for the past two years. Yun expects first-time buyers to gradually resurface, despite persistent tight credit conditions.
"The employment outlook for young adults is brightening, and their incomes finally appear to be rising," Yun says. "Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years."
Yun expects existing-home sales to strengthen in the second half of the year as inventory conditions improve. He expects existing-home sales to slip 3 percent overall and the median existing-home price to grow between 5 and 6 percent this year.

Regional Breakdown

Here's a snapshot of the Pending Home Sales Index across the country in August:
  • Northeast: The index slipped 3 percent to 86.5 but remains 1.6 percent above year-ago levels.
  • Midwest: The index dropped 2.1 percent to 102.4 and is 7.6 percent below August 2013 levels.
  • South: The index fell 1.4 percent to 117, holding steady compared to year-ago levels.
  • West: The index increased 2.6 percent in August, the fourth consecutive month of gains, but remains 2.6 percent below year-ago levels.
Source: National Association of REALTORS®

Nearly 1 Million Homes Regain Equity

Nearly 950,000 homes returned to positive equity in the second quarter, now bringing the total number of residential homes with equity nationwide to more than 44 million, according to CoreLogic’s Equity Report.
“The increase in borrower equity of $1 trillion from a year earlier is evidence that things are moving solidly in the right direction,” says Sam Khater, deputy chief economist for CoreLogic. “Borrower equity is important because home equity constitutes borrowers’ largest investment segment and, as a result, is driving forward the rise in wealth for the typical home owner.”
Still, home price rises are needed to help more home owners feel more confident in their equity position. Of the 44 million properties with positive equity, about 9 million – or 19 percent – have less than 20 percent equity (labeled “under-equitied”), and 1.3 million have less than 5 percent (considered “near-negative equity”), according to CoreLogic.
About 5.3 million homes – or 10.7 percent of all residential properties with a mortgage – remained in negative equity as of the second quarter. The number is falling. A year ago, 7.2 million homes – or 14.9 percent –were in negative equity. Negative equity is when borrowers owe more on their mortgages than their homes are currently worth.
“Borrowers who are ‘under-equitied’ may have a more difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints,” according to CoreLogic’s report.
If home prices rise by just 5 percent, an additional 1 million home owners currently in negative equity could regain equity, according to CoreLogic’s analysis.
“Many home owners across the country are seeing the equity value in their homes grow, which lifts the economy as a whole,” says Anand Nallathambi, president and CEO of CoreLogic. “With more and more borrowers regaining equity, we expect home ownership to become an increasingly attractive option for many who have remained on the sidelines in the aftermath of the Great Recession. This should provide more opportunities for people to sell their homes, purchase a different home or refinance an existing mortgage.”

State Breakdown

The states with the highest percentage of properties with a mortgage in negative equity as of the second quarter were:
  • Nevada: 26.3%
  • Florida: 24.3%
  • Arizona: 19%
  • Illinois: 15.4%
  • Rhode Island: 14.8%
On a metro level, Tampa-St. Petersburg-Clearwater, Fla., had the highest percentage of mortgaged properties in negative equity at 26.2 percent, followed by Phoenix-Mesa-Scottsdale, Ariz., at 19.5 percent.
On the other hand, the following states had the highest percentage of properties with a mortgage that were in an equity position:
  • Texas: 97.3%
  • Alaska: 96.5%
  • Montana: 96.4%
  • North Dakota: 96%
  • Hawaii: 96%
On a metro level, Houston-The Woodlands-Sugar Land, Texas, boasted the highest percentage of properties with a mortgage in an equity position at 97.5 percent, followed by Dallas-Plano-Irving, Texas, at 97 percent.
Source: CoreLogic

Borrowing Costs Ease Slightly This Week

Fixed-rate mortgages dropped slightly from the previous week, holding near yearly lows, Freddie Mac reports in its weekly mortgage report.
Freddie Mac released the following national averages with mortgage rates for the week ending Sept. 25:
  • 30-year fixed-rate mortgages: averaged 4.20 percent, with an average 0.5 point, dropping from last week’s 4.23 percent average. Last year at this time, 30-year rates averaged 4.32 percent.
  • 15-year fixed-rate mortgages: averaged 3.36 percent, with an average 0.5 point, dropping from last week’s 3.37 percent average. A year ago, 15-year rates averaged 3.37 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.08 percent, with an average 0.4 point, rising from last week’s 3.06 percent average. Last year at this time, 5-year ARMs averaged 3.07 percent.
  • 1-year ARMs: averaged 2.43 percent, with an average 0.4 point, holding the same as last week. A year ago, 1-year ARMs averaged 2.63 percent.
Source: Freddie Mac

Wednesday, September 24, 2014

Short-Lived Surge? Loan Demand Drops Again

Following last week’s nearly 8 percent spike in mortgage application activity, mortgage application volume reversed course and was back on its falling trend, as interest rates increased to the highest levels in several months, the Mortgage Bankers Association reports.
The MBA’s seasonally adjusted index of mortgage application activity showed applications down 4.1 percent in the week ending Sept. 19 compared with the previous week.
Applications for home purchases remain mostly stagnant on a seasonally adjusted basis, says Michael Fratantoni, the MBA’s chief economist. Applications for home purchases, viewed as a leading indicator of future home sales, fell 0.3 percent during the week and are down 16 percent from a year ago, a widening gap than in recent weeks.
"Purchase mortgage applications have trended down over the past three months, despite the declining interest rate environment," Doug Duncan, Fannie Mae's chief economist, noted in his monthly economic outlook. "This suggests a residual conservatism on the part of consumers and supports our view that the pace of growth in the housing sector will be subdued during the remainder of 2014, with modest improvement in 2015."
Meanwhile, applications for refinancings dropped 7 percent during the week, as interest rates rose during the week. The 30-year fixed-rate mortgage rose to 4.39 percent, the highest rate since May 2014, according to the MBA.
"Following last week's [Federal Open Market Committee] meeting, interest rates continued to inch up, as the end of QE [quantitative easing] was confirmed, and investors anticipate the first increase in short-term rates by the middle of next year," says Fratantoni.
Source: “U.S. Mortgage Applications Fall in Latest Week: MBA,” CNBC (Sept. 24, 2014)

Household Formation Is 'Disturbingly Slow,' Analyst Says

Household formation slowed significantly last year, a signal that more people are continuing to move in with family or double up as roommates, which could slow the housing market recovery, according to the latest annual Census Bureau survey.
The United States added 476,000 households for the year ending in March. That compares to 1.3 million households added, on average, in each of the two years prior.
The survey shows “disturbingly slow growth,” Thomas Lawler, an independent housing economist in Leesburg, Va., told The Wall Street Journal.
Additional surveys show that the U.S. population increased by 2.3 million last year. If household formation continues at the same rate of the past few years, the country should have added 1.2 million households last year, The Wall Street Journal reports. Instead, studies are showing that only 400,000-plus households were added last year, and the majority of those were renter households.
Recent surveys have shown that the share of young adults living with their parents is falling, but they aren’t necessarily forming their own households once they move out. They may be moving in with other relatives or friends. The home ownership rate of 18- to 34-year olds continued to drop last year, The Wall Street Journal reports.
Source: “Rate of Americans Starting Own Households ‘Disturbingly Slow,’” The Wall Street Journal (Sept. 22, 2014)

Sunday, September 21, 2014

Mortgage Rates Make Biggest Jump of the Year

Mortgage rates were on the rise this week, with fixed-rates making the biggest one-week leap so far this year, Freddie Mac reports in its weekly mortgage market survey. Fixed-rate mortgages are now at the highest level since the week ending May 1.
Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 18:
  • 30-year fixed-rate mortgages: averaged 4.23 percent, with an average 0.5 point, rising from last week’s 4.12 percent average. Last year at this time, 30-year rates averaged 4.50 percent.
  • 15-year fixed-rate mortgages: averaged 3.37 percent, with an average 0.5 point, rising from last week’s 3.26 percent average. A year ago, 15-year rates averaged 3.54 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.06 percent, with an average 0.5 point, increasing from last week’s 2.99 percent average. Last year at this time, 5-year ARMs averaged 3.11 percent.
  • 1-year ARMs: averaged 2.43 percent, with an average 0.4 point, dropping from last week’s 2.45 percent average. A year ago, 1-year ARMs averaged 2.65 percent.
Source: Freddie Mac

The 12 Best Cities to Live Are ...

Newton, Mass., has been crowned as this year’s best U.S. city to live in, according to rankings from 24/7 Wall St. The publication narrowed its list to 550 cities (all of which have more than 65,000 residents) and ranked the cities based on seven major categories: crime, economy, education, housing, environment, leisure, and infrastructure.
The labor market was one of the key measures used to identify the best cities, with top cities having to show positive employment growth between 2011 and 2013.
24/7 Wall St. noted that “surprisingly, none of America’s largest cities are on this list,” citing that the largest cities tend to have higher crime rates that automatically excluded them from consideration, as well higher poverty rates.
Below are the 12 cities that topped 24/7 Wall St.’s list. Visit 24/7 Wall St. to view the full methodology used in the rankings for each of the top cities.
  1. Newton, Mass.
  2. Bellevue, Wash.
  3. Mountain View, Calif.
  4. Pleasanton, Calif.
  5. Evanston, Ill.
  6. Irvine, Calif.
  7. Troy, Mich.
  8. Cary, N.C.
  9. Flower Mound, Texas
  10. Johns Creeks, Ga.
  11. Boca Raton, Fla.
  12. Carmel, Ind.
View the full list of the top 50 best places to live at 24/7 Wall St.
Source: “America’s 50 Best Cities to Live,” 24/7 Wall St. (Sept. 17, 2014)