Purchase Applications Rise for Eighth Straight Week

The Mortgage Bankers Association (MBA) revealed mortgage applications rose 9.3% weekly for the week ending June 5.

Purchase applications continued its run of success, rising week-over-week by 15% and annually by 13%.

"Fueled again by low mortgage rates, pent-up demand from earlier this spring, and states reopening across the country, purchase mortgage applications and refinances both increased. The recovery in the purchase market continues to gain steam, with the seasonally adjusted index rising to its highest level since January. Purchase activity increased for the eighth straight week and was a notable 13% higher than a year ago," said Joel Kan, MBA's AVP of Economic and Industry Forecasting.

"Refinances moved higher for the first time in nearly two months, with both conventional and government applications rising and the overall index coming in 80 percent above year-ago levels."

Freddie Mac’s latest Primary Mortgage Market Survey found the average 30-year fixed-rate mortgage rose slightly to 3.18% from the survey’s low of 3.15%. The 15-year fixed-rate mortgage was 2.62%, which is unchanged from the prior week. The 15-year fixed-rate mortgage was 3.28% at this time last year.

“While the economy is slowly rebounding, all signs continue to point to a solid recovery in home sales activity heading into the summer as prospective buyers jump back into the market. Low mortgage rates are a key factor in this recovery,” said Sam Khater, Freddie Mac’s Chief Economist.

“While homebuyer demand is up and has been broad-based across most geographies, supply has been slower to improve. In fact, the gap between supply and demand has widened even further than the large gap that existed prior to the pandemic.”

Refinances accounted for 61.3% of total applications, which is an increase from the prior weeks 59.5%.

The MBA stated the Federal Housing Administration share of total applications rose to 11.5% from the previous weeks’ 11.2%. The VA share of total applications increased to 12.3% from 12.% the week prior.

Source: MReport 6-10-2020 Author: Mike Albanese

Home Flipping Represents Growing Share of Home Sales

Attom Data Solutions announced that 53,705 single-family homes and condos were flipped during Q1 2020—representing 7.5% of all home sales during the quarter.

This is an increase from 6.3% in Q4 2019 and 7.3% in Q1 2019. The most recent data is the highest level since Q2 2006.

The profit on the average home flip across the nation increased in the quarter to $62,300, which is up slightly from Q4 2019’s $62,000 and Q1 2019’s $60,675.

“Home flipping has gradually taken up a larger portion of the housing market over the last couple of years. But profits are down and are lower than they’ve been since the dark days following the Great Recession, which is a sign that investors aren’t keeping up with price increases in the broader market,” said Todd Teta, Chief Product Officer at ATTOM Data Solutions.

“Enter now the Coronavirus pandemic and the prospects for home flipping are notably uncertain, at least in the short term. We should know a lot more in a few months about whether home prices drop and investors get hit hard, or whether they can increase their profit margins.”

Home flips as a portion of all home sales rose from Q4 2019 to Q1 2020 in 122 of the 140 (87.1%) metros studied in the report.

The largest quarterly increase in home flipping was in Boston, which rose to 80.2%. Close behind was Springfield, Massachusetts (76%); Olympia, Washington (73%); York, Pennsylvania (71.4%); and Minneapolis (69.3%).

The only decline in annual flipping rates among metros with a population of at least 1 million were San Antonio (-12.9%); Austin (11.8%), Oklahoma City (-6.1%); and Houston (-0.6%).

Home flipped during Q1 2020 were sold for an average price of $232,000, with a gross flipping profit of $62,300 above the median purchase price of $169,700.

However, with purchase prices on investment properties continuing to rise faster than resale values, the 367% return on sales prices against Q1 2020 was down from 39.5% in Q4 2019 and 40.9% in Q1 2019.

Source: MReport 6-11-2020 Author: Mike Albanese

Home purchase sentiment inches upward, credit availability recedes

As the economy begins to show signs of recovery from the coronavirus crisis, more positive housing signals are beginning to surface as lenders continue to play it safe.

Fannie Mae reported this week that its Home Purchase Sentiment Index (HPSI), which expresses consumer views collected in a national housing survey, rose 4.5 points to a May reading of 67.5. It’s a slight improvement after the index came close to its all-time low the month prior, and marks the index’s first upturn since plummeting by double digits in March.

The index, distilled from survey answers to six component questions, was boosted by net increases in positive responses to two questions in particular. When asked whether it’s currently a good/bad time to buy a home, the net share of respondents who believe that it’s a good time to buy increased by 11 percentage points. The net share of Americans who believe mortgage rates will go down over the next 12 months also increased, up 10 percentage points from April.

“Low mortgage rates have helped cushion some of the impact of the pandemic on consumer sentiment regarding whether it’s a good time to buy a home, which picked back up this month to late-2018 levels,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

“Although weakened income perceptions and continuing job loss concerns, particularly among renters, are likely weighing on many would-be buyers, purchase mortgage applications have returned to mid-March levels when pandemic response measures began ramping up.”

The net share of respondents who say it’s a good time to sell increased six percentage points in May. This suggests that home-seller confidence is bouncing back a little more slowly than homebuyer confidence, though Duncan said that increased purchase activity in the near-term may improve the sentiments of some potential sellers.

The net share of respondents who believe home prices will rise increased two percentage points, while the net share of respondents who indicated that their household income is “significantly higher” than it was 12 months ago remained unchanged.

The survey did continue to show consumer apprehensions about financial security, as the net share of respondents who said they are not concerned about losing their job decreased two percentage points.

Overall, despite housing market concerns remaining “substantially elevated compared to survey history,” Duncan saw the index’s growth as encouraging news.

“As lockdown restrictions begin to ease across the country, we expect economic recovery to be largely shaped by consumers’ decisions regarding when and how to reengage in the economy. We believe this month's HPSI results and Friday's unexpectedly favorable labor market report to be encouraging signs for the months ahead,” he said.

Meanwhile, lenders continued to circle the wagons when it came to issuing credit in May. The Mortgage Bankers Association’s (MBA) Mortgage Credit Availability Index (MCAI) retreating by 3.1% to 129.3, signaling tightening credit. The MCAI, which fell sharply as the COVID-19 pandemic began to take hold, is now at its lowest level since June 2014.

"Mortgage lenders in May responded accordingly to the increased risk and uncertainty in the economy. … … There was a reduction in supply across all loan types, driven by further pullback in investors' appetites for loan programs with low credit scores and high LTVs,” said Joel Kan, associate vice president of economic and industry forecasting for the MBA.

Credit tightened at both the high and low ends of the market, Kan observed, evidenced by diminished access to jumbo loans as well as reduced availability of low downpayment programs for first-time buyers.

All of the MCAI’s sub-indices logged May declines. The Conventional MCAI dropped 5.7%, while the Government MCAI receded 0.8%. The component indices of the Conventional MCAI, tracking jumbo and conforming credit availability, decreased 4.4% and 6.9%, respectively.

Source: Scotsman Guide 6-9-2020 Author: Arnie Aurellano