by LLT | Mar 29, 2017 | LLT, News
Zillow, Quicken Loans, First American and others weigh in
The latest S&P CoreLogic Case-Shiller Indices showed that home prices hit a 31-month high in January, but will those record prices be a speed bump or a brick wall for home buying moving forward?
Opinions appear to be a bit mixed in that regard, with some analysts viewing January’s data as a significant drawback for certain segments of the home-buying market, while others say the rising prices aren’t a concern, yet.
Case in point: Zillow Chief Economist Svenja Gudell said the rising prices won’t impact home buying, but another factor could dampen 2017’s prospects – rising interest rates.
“Today’s Case-Shiller data showed continued growth in home prices, but don’t account for the millions of home shoppers nationwide who pushed the start of their home shopping efforts into February and early March, hoping to get a jump on their competition in the face of persistently low inventory,” Gudell said Tuesday.
“By now, the familiar dynamics driving the U.S. housing market to new heights – namely, high demand from home buyers and limited supply of homes for sale – are well-entrenched, and the next few months look to be as competitive and fast-moving as ever,” Gudell continued.
“Over the long term, the prospect of rising mortgage interest rates looms large over the market. Rising rates may cool rapid home price growth – especially in more-expensive coastal markets – but will also dent overall home affordability,” Gudell added. “But rates are rising slowly and what inventory is available continues to fly off the shelves. Nobody should expect these overall market forces to shift meaningfully overnight.”
Trulia’s senior economist, Cheryl Young, said that the impact of rising prices and rising rates will really be felt by would-be, first-time buyers.
“There is little sign of relief from high home prices as we enter the spring home-buying season. The tough buying market is characterized by competition driven by low inventory and challenges for first-time homebuyers as prices outpace income growth,” Young said.
“Low inventory continues to drive prices higher and indicates spring home-buying season will be a challenge for first-time homebuyers,” Young continued.
“Mortgage rates are trending lower than expected despite the Fed rate hike earlier this month,” Young said. “This points to uncertainty in the financial markets, which will continue to color mortgage rate performance and keep home prices tracking higher.”
Quicken Loans Vice President Bill Banfield said the latest data just continues the ongoing story of the housing market these days.
“Home prices continue to reach new heights, propelled by the lack of available housing,” Banfield. “This is the narrative we have heard many times, and it is likely to continue until construction increases and provides more options to both move-up and first-time buyers.”
On the other hand, First American Chief Economist Mark Fleming suggested that January’s house price data and the specter of rising interest rates won’t actually impact home buying because houses will remain affordable even as prices and interest rates rise.
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by LLT | Mar 28, 2017 | LLT, News
Steve Murray sometimes gets together with other old-timers in the real estate industry, shares some wine and inevitably gets around to remarking, “I sure would’ve thought it would’ve changed more by now.”
Murray, president of consulting firm Real Trends, has been tracking for 40 years how U.S. real estate agents do their jobs. And over the past decade, the Internet has disrupted almost every aspect of a transaction that sits at the core of the American Dream. Everyone now has free access to information that used to be impossible to find or required an agent’s help.
But as a new home-buying season kicks off, one thing remains mostly unchanged: the traditional 5-to-6-percent commission paid to real estate agents when a home sells.
While the Internet has pummeled the middlemen in many industries — decimating travel agents, stomping stock-trading fees, cracking open the heavily regulated taxi industry — the average commission paid to real estate agents has gone up slightly since 2005, according to Real Trends. In 2016, it stood at 5.12 percent.
“There’s not a shred of evidence that the Internet is having an impact,” Murray said, sounding like he almost can’t believe it himself.
The stickiness of the real estate commission is a source of fascination for economists and curiosity for consumers who are doing an increasing share of the home-buying legwork themselves online. It also offers potential lessons for workers in other industries worried about the Internet’s destructive powers. The Web has changed how agents hustle for a share of the estimated $60 billion paid each year in residential real estate commissions. But it hasn’t taken their jobs. In fact, the number of agents has grown 60 percent in the past two decades.
It wasn’t supposed to be like this.
Consider the title of a 1997 article in the Journal of Real Estate Portfolio Management: “The Coming Downsizing of Real Estate: The Implications of Technology.”
In the mid-2000s, the arrival of real estate tech start-ups like Zillow, Redfin and Trulia spurred a fresh dose of anticipation. “Realtors’ sacrosanct commission rates of 6 percent may be in danger,” warned “60 Minutes” in 2007. Jeff Jarvis, a City University of New York professor who examines the Internet’s effects, wrote a 2006 blog post predicting, “Real estate agents are next.”
Agents thought so, too.
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by LLT | Mar 27, 2017 | LLT, News
Charts break down servicing at the top seven banks
Keeping up with the rest of the year, the Office of the Comptroller of the Currency’s latest quarterly report on mortgages showed that borrowers are continuing to get better at paying their mortgages.
The overall performance of first-lien mortgages continued to improve, while the number of loans in delinquency continued to decline, according to the OCC’s fourth quarter 2016 report.
The OCC collects data on first-lien residential mortgage loans serviced by seven national banks with large mortgage-servicing portfolios. The seven national banks include: Bank of America, Citibank, HSBC, JPMorgan Chase, PNC, U.S. Bank and Wells Fargo. However, data through the fourth quarter of 2015 includes CIT/OneWest.
The report falls in line with previous reports that showed the overall performance of mortgages improving from the previous year.
As of Dec. 31, 2016, the reporting banks serviced approximately 19.8 million first-lien mortgage loans with $3.45 trillion in unpaid principal balances, making up 35% of all residential mortgage debt outstanding in the United States.
The chart below displays the outstanding principal balance of reported loans and shows the declining amount of unpaid balance from the fourth quarter of 2014 through the fourth quarter of 2016.
Click to enlarge
(Source: OCC)
Of the loans serviced by the seven largest banks, the overall performance of mortgages improved from a year earlier. The percentage of mortgages that were current and performing at the end of the fourth quarter of 2016 increased to 94.7%, compared with 94.1% a year earlier.
Servicers also initiated less foreclosure actions. The OCC noted that foreclosure actions progress to sale of the property only if servicers and borrowers cannot arrange a permanent loss mitigation action, modification, home sale, or alternate workout solution.
Servicers initiated 45,495 new foreclosures in the fourth quarter of 2016, falling 5.1% from the previous quarter and 28.2% from a year earlier.
Lastly, home forfeiture actions during the quarter— completed foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions—dropped 32.3% from last year, to 25,818.
As mentioned in previous reports, it’s important to note that the servicing share that the seven banks hold is dropping.
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by LLT | Mar 24, 2017 | LLT, News
How more granular information will change lending behavior
With foreclosures at a 10-year low, a good case can be made to take a look at strict lending standards that may be doing more harm than good.
For example, during the period immediately following the housing bust, from 2009 to 2014, 5.2 million mortgages that would have passed muster under cautious lending standards in place for many years before they slackened during the housing boom were denied.
Today’s standards, except for FHA borrowers, haven’t changed much since then.
Some proponents believe new techniques to analyze creditworthiness, like trended data, will also help some marginal borrowers qualify for loans.
Trended credit data takes a deeper dive into creditworthiness than the snapshots provided by credit scores and looks at multiple snapshots going backward in time to track trends in past behavior.
Trended data reports include up to 24 months of tradeline level credit information such as balance, credit limit, high credit, scheduled payment and actual payment. It exposes much more granular data about a borrower’s payment history on a monthly basis than traditional credit histories.
Will trended credit result in more approvals?
Late last year, Fannie Mae required trended data for its automated underwriting software, Desktop Underwriter.
“Leveraging trended data in the DU risk assessment allows a smarter, more thorough analysis of the borrower’s credit history. The use of trended data is a powerful predictor of risk, and its use enhances the DU risk assessment to better support access to credit for creditworthy borrowers,” said Fannie in its release notes to lenders.
An Equifax December 2016 Consumer Credit Impact analysis found that on an annual basis the addition of trended credit data could result in 4 percent, or 267,000, more mortgages or improved loan terms for consumers who may have previously been ineligible.
Also, 4.1 percent or 65,000 more home equity lines of credit (HELOC) were issued to consumers who may have previously been ineligible.
In fact, in its notes to underwriters accompanying the new release of Desktop Underwriter, Fannie Mae said trended credit is expected to have minimal to no impact on the percentage of Approve/Eligible recommendations that lenders receive today.
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![Mortgage rates fall back as investors’ concerns mount]()
by LLT | Mar 23, 2017 | LLT, News
Mortgage rates retreated this week after a one-week spike following the Federal Reserve’s decision to raise its benchmark rate.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average fell to 4.23 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.30 percent a week ago and 3.71 percent a year ago.
The 15-year fixed-rate average dropped to 3.44 percent with an average 0.5 point. It was 3.50 percent a week ago and 2.96 percent a year ago. The five-year adjustable rate average slid to 3.24 percent with an average 0.4 point. It was 3.28 percent a week ago and 2.89 percent a year ago.
“This marks the greatest week-over-week decline for the 30-year mortgage rate in over two months, a stark contrast from last week’s jump following the FOMC announcement,” Sean Becketti, Freddie Mac chief economist, said in a statement.
Financial markets had been betting on fiscal stimulus through tax cuts and infrastructure spending. Instead, President Trump has been bogged down by the health care overhaul bill. Anxious investors worry that health care reform will tie up Congress and delay implementation of Trump’s other policies.
Because of these concerns, they have been moving from stocks to bonds, driving down yields. The yield on the 10-year Treasury has plummeted 22 basis points — a basis point is 0.01 percentage point — since March 13.
Mortgage rates tend to follow the movement of long-term bonds. When the yield on the 10-year Treasury falls typically so do home loan rates.
Experts are divided on where rates are headed. Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than half the experts it surveyed said rates will remain relatively stable in the coming week, moving less than two basis points up or down. About a third of the experts said rates will fall. Greg McBride, chief financial analyst at Bankrate.com, was among them.
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