Mortgage Rate News
Although a press release last week about a Gallup survey showed Americans view real estate as a better long term investment than stocks, gold, savings accounts, or bonds, another report from the company indicates they are less enthusiastic about buying a home.
Gallup said today that 69 percent of Americans responding to their survey said it was a good time to buya home while 74 percent thought this in both 2013 and 2014 surveys. The current number is similar to that measured by Gallup from 2009 to 2012 and showed a more positive attitude toward buying than between 2006 when home values stopped rising and interest rates increased and 2008, after the housing bubble burst. During that period only 50 percent thought it was a good time to buy.
Many lenders are watching this battle of industry frustration from the sidelines: Quicken vs. the DOJ, and vice versa. Prior to the government suing Quicken, Matthew Schwartz, a former federal prosecutor who is now a partner at Boies, Schiller & Flexner in New York, wrote, "Quicken Loan's decision to sue the Government over what it has alleged is arbitrary and capricious conduct related to the investigation of Quicken's lending practices is unconventional, to say the least. The lawsuit itself is a legal long shot. The government generally has immunity and great discretion where it doesn't, over how it conducts its investigations or settles enforcement actions. But the lawsuit gives voice to an increasingly popular sentiment among financial institutions: that the government is, for political reasons, extracting hundreds of millions, if not billions, of dollars in settlements for what are at best technically and immaterially incorrect claims. While the government will probably win this lawsuit, if Quicken's allegations are correct, it may be forced to explain its conduct in a way that will undermine the law enforcement effect of this and other recent enforcement actions."
The Department of Housing and Urban Development (HUD) is tweaking its bulk loan sales program to give distressed borrowers a better shot at staying in their homes. HUD announced today that investors who purchase delinquent mortgages through the Department's Distressed Asset Stabilization Program (DASP) will have to delay foreclosures for one year after purchase rather than the six month hiatus that had previously been required.
In addition loan servicers will have to evaluate all borrowers in the loan pool for eligibility for the Home Affordable Modification Program (HAMP) or a similar loss mitigation program. In the past the assessment of borrowers for loan modifications was encouraged but not required.
Lenders appear at least moderately encouraged by new efforts on the part of Fannie Mae and FHA to lower the costs and increase the availability of mortgage financing. Fannie Mae's most recent quarterly Mortgage Lender Sentiment Survey, conducted in February found about 2/3s of lenders thought the initiatives would be beneficial.
Fannie Mae introduced a new 97 percent home mortgage late last year and a similar program was unveiled by Freddie Mac starting this month. In January FHA reduced its annual mortgage insurance premiums (MIP) by 0.5 percent on new loans. Fannie Mae's Economic & Strategic Research Group surveyed senior mortgage executives in February to examine lenders' views about the expected impact of these initiatives.
Apparently all is forgiven and forgotten and Americans are again embracing real estate as more than just shelter. For the second year in a row a Gallup telephone survey conducted in April found Americans think it is the best kind of long-term investment.
Investing in real estate outstripped stocks, gold, traditional savings instruments and bonds with 31 percent of survey respondents preferring it. Stocks and mutual funds were second at 25 percent. "A return of Americans' confidence in real estate and stocks as solid long-term investments was first evident a year ago, paralleling real world improvements in these areas," Gallup said. "Their continued strength this year indicates that was no fluke."
A second company has now reported a recent increase in the number of underwater residential properties in the U.S. Last month Corelogic said that approximately 172,000 homes slipped from positive to negative equity in the fourth quarter of 2014, a change the company called "seasonal." Today RealtyTrac reported an increase in the first quarter of 2015 of 0.4 percent in the number of properties with negative equity, the first increase in nearly three years. Both reports noted year-over-year declines in underwater properties for the respective quarters.
In its U.S. Home Equity & Underwater Report for the first quarter RealtyTrac estimated a total of 7,341,922 properties were seriously underwater, i.e. the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value - representing 13.2 percent of all properties with a mortgage. The increase, while slight, was the first uptick since the second quarter of 2012. The number of underwater homes was down 4 percentage points from the first quarter of 2014.
New home sales settled down a bit in March after a dramatic surgein the Northeast in February that drove national sales figures up nearly 8 percent. The Census Bureau and U.S. Department of Housing and Urban Development reported today that sales of newly constructed single family homes in March were at a seasonally adjusted annual rate of 481,000 units. This was down 11.4 percentfrom February's sales, originally reported at 539,000 but revised even higher to 543,000 with today's report.
Sales for the month were up 19.4 percentcompared to the same period in 2014. The rate at that time was estimated at 403,000 units.
On a non-adjusted basis there were 45,000 new homes sold in March, unchangedfrom February. Thirty-nine thousand homes sold during the month of March in 2014.
Freddie Mac's Multi-Indicator Market Index (MiMi) for February shows that the U.S. housing market continues to stabilize and has recovered from a slight stumble - what Freddie Mac had called "the winter doldrums" - in January. The MiMi tracks the top 100 housing markets in the country and 60 percent are now showing an improving three-month trend.
The national MiMi increased 0.65 percent from January to February to 74.7, a three month gain of 0.30 percent, indicating a weak but improving housing market. On a year-over-year basis the national value has improved 3.53 percent. The nation's all-time MiMi high of 121.7 was April 2006 and the national value has rebounded 31 percent since hitting its low of 57.4 in October 2010.
Home prices nationally are now within 3 percentof the peak they reached in March 2007. The Federal Housing Finance Agency (FHFA) released its purchase only Home Price Index (HPI) for February showing that home prices increased 0.7 percent on a seasonally adjusted basis compared to January and were 5.4 percent higher than in February 2014. The increase brought home prices back to January 2006 levels and within 2.7 percent of the pre-crash peak.
The numerical index number in February was 220.5 compared to 219.0 in January and 209.2 in February 2014. The index is calculated using home sales price information from mortgages sold to or guaranteed by the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. The basis for the index is January 1991=100.
Seeing opportunity from the inevitable flood of aging baby boomers, Wells Fargo has announced formation of a new specialty business group focused on their housing and health. A new Senior Housing Finance group has been established within the bank's Commercial Real Estate Group to "provide a dedicated, comprehensive suite of traditional banking and credit services for senior housing developers, investors, and operators."
Well Fargo estimates that the U.S. population of those over the age of 65 will grow by 67 percent over the next 25 years, from 48 million today to approximately 80 million in 2040. Over 21 percent of seniors over the age of 75 reside in senior housing or care facilities today and the bank said that percentage will continue to grow. The Department of Health and Human Services estimates that nearly 70 percent of people who reach age 65 will ultimately need some form of long-term care.
The spring housing market blasted in across the county last month and existing home sales jumped 6.1 percentfrom the February level to the highest annual rate in 18 months. The National Association of Realtors® (NAR) said March sales were at a seasonally adjusted annual rate of 5.19 million units compared to 4.89 million in February. The rate of sales tied those in September 2013, which had been the most recent high in sales. The March increase was the largest month-over-month gain since a +6.2 percent change in December 2010.
The pace of sales of existing single-family homes, townhomes, condominiums, and co-ops in March was 10.4 percent higher than in March 2014and represented the sixth consecutive month of annual increases. It was also the largest year-over-year increase since August 2013's 10.7 percent rise.
Borrowers responded to some of the lowest interest rates in several months by stepping up applications for mortgage financing. The Mortgage Bankers Association (MBA) said that its Market Composite Index, a measure of mortgage application volume, increased 2.3 percenton a seasonally adjusted during the week ended April 17 when compared to the previous week. On an unadjusted basis applications were 3 percent higher than during the week ended April 10.
The Refinancing Index rose 1 percent from the previous week but the share of all applications that were for refinancing dropped from 58 percent to 56 percent, the lowest share for that sector since October 2014. The seasonally adjusted Purchase Index increased 5 percent from the previous week. The unadjusted Purchase Indexwas up 6 percent week-over-week and was 16 percent higher than during the same week in 2014.
There are 9.3 million former homeowners who were displaced by foreclosures, short sales, and deeds in lieu of foreclosure between 2006 and 2014. Do they constitute a potential marketthat could drive demand for new and existing homes over the next decade? The National Association of Realtors® (NAR) has just released a study of that pool and their findings that many of them are already homeowners again and many others will never return to homeownership.
To date, nearly a million of these former owners have returned to the market and many more of these "return buyers" (also referred to as "boomerang buyers") are already qualified, but waiting. Overlays and credit impairment have held a significant number back and could impact thousands more potential return buyers in the coming years....(read more)
Changes to Fannie Mae and Freddie Mac's fee structure were announced by the Federal Housing Finance Agency (FHFA) on Friday. But in the words of The Wall Street Journal, "the changes are so small that few borrowers will notice."
Modifications to the Loan Level Price Adjustments (LLPA) will result mainly in slightly lower fees to borrowers with weaker credit. FHFA said it was directing the government sponsored enterprises (GSEs) to eliminate the 25 basis point adverse market fee they implemented in March 2008 and replace if "with targeted increases in guarantee fees to address various risk-based and access-to-credit considerations."
The rate of permitting for construction of single family housing and residential construction completions were both down in March, Housing starts did rise slightly.
The Census Bureau and the Department of Housing and Urban Development reported that permitsfor privately owned housing were at a seasonally adjusted annual rate of 1,039,000 in March, a 5.7 percent drop from the February rate of 1,102,000 (revised from an original estimate of 1,092,000) The March number was an increase of 2.9 percent from 1,010,000 a year earlier.
Single-family permits were issued at a rate of 636,000 units compared to 623,000 units the previous month. This was a gain of 2.1 percent for the month and an annual increase of 4.1 percent. Authorizations for construction of units in buildings of five or more units fell 16.0 percent to 378,000 and were down 1.6 percent from the previous March.