Why are Home Prices in the Midwest Booming?

Home prices across the U.S. rose 6.96% in 2019, the largest annual increase in more than a decade, according to Radian Home Price Index (HPI) data. The 6.96% annual gain from December 2018 to December 2019, was down slightly from the year-over-year increase of 7.98% reported at the end of the Q3 2019.

Nationally, 2019 will be remembered for having the 5th strongest rate of home price appreciation recorded over the last two decades. The years from 2002-2005 recorded the four strongest annual rates. Practically speaking, it shouldn’t be a surprise that areas hardest hit during the Great Recession could appreciate faster than other, less impacted markets. In the years since their recession troughs, home prices have risen nationally with the West having notably accelerated ahead of the rest of the country.

Most recently, however, the Midwest has emerged as one of the fastest appreciating housing markets in the country, reversing years of lagging growth, even after bottoming. Data from the Radian HPI has shown the Midwest pulling ahead of the pack for the first time following the Great Recession. In fact, of the six major geographic regions tracked by Radian HPI, the Midwest ranked first for housing price growth between 2018 and 2020, with an 8.6% year-on-year gain in 2019.

A deeper analysis of the Radian HPI data shows that four states, in particular, helped propel the Midwest region forward. Over the last couple of years, home price appreciation has generally been strong across Midwest states, however, home prices in Michigan, Minnesota, Wisconsin, and Ohio all grew at faster rates in comparison to other states in the region.

Another interesting observation was that the appreciation rates of smaller Midwestern homes grew faster than in other parts of the country. Since 2018, smaller (two- and three-bedroom) homes in the Midwest appreciated at a faster rate than similar-sized homes in other regions, after previously appreciating more slowly. When comparing regions by square footage, Midwestern homes under 1,500-square-feet and between 1,500 and 2,500-square-feet ranked highest for fastest growth from 2018-2020, compared to third and fourth place when looking at the same square footage across the last decade. In contrast, the Northeast ranks last regardless of home sizes, a trend that has only gotten worse in the last decade.

Days on the market (DOM), another insightful metric of housing market strength, shows sales quickening in the Midwest. Shorter DOM reflects a more active market, or one in more demand. In 2016, only one Midwestern state, Nebraska, was in the top five nationally for shortest DOM compared to four of the top six—Indiana, Ohio, Michigan, Nebraska—in the first quarter of 2020. In fact, only three Midwestern states—Nebraska, Michigan, Kansas—were in the top 15 nationally shortest DOM in 2016 compared with six today—Indiana, Ohio, Michigan, Nebraska, Minnesota, and Missouri. Those Midwestern states have an average DOM that is as much as 25% faster to sell than the national average.

What’s driving the growth in the Midwestern states?

While millennials are commonly considered to be an important factor in the growth of the Midwest market, they alone do not explain why home prices are rising so quickly. We do know that Michigan, Ohio, and Illinois have three of the largest populations of millennials in the Midwest. While some of the larger cities in the aforementioned states are home to large numbers of millennials, some also have more millennials living at home.

Urban renewal is another possibility. Many Midwestern cities have enjoyed elevated levels of gentrification and renewal. However, it is not clear that even urban renewal in cities like Detroit, while a welcome and long-overdue development, accounts for the broad outsized growth, as opposed to benefits in highly focused areas.

One thing that we believe could be ruled out as a deterrent for buyers—extreme weather events, like the historic floods that have impacted large parts of this region over the last few years. According to a recent survey, only 23% of respondents in the Midwest said that natural disasters seriously impact their real estate decisions, the lowest share of any geographic area surveyed.

Possibly one of the largest reasons for growth, according to the Radian HPI, and much of the reason for the region’s bolstering appeal, is the relative affordability of the Midwestern markets combined with solid employment numbers. For example, according to the 2018 United States Census data, Minnesota enjoyed a median household income of only $5,000 less than that of California, however, the median home price in California is more than $250,000 higher. Both Ohio and Indiana have median household incomes higher than those found in Florida, however, the Midwestern states enjoy more than $100,000 lower median home prices than the sunshine state. The results of this are seen across many individual cities in these states.

Columbus, Ohio, has a strong job market with a broad base of financial and non-financial corporate employers and has enjoyed healthy growth, while limited on-market supply has pushed up housing prices in recent years. However, the city’s low cost of living helps attract and keep residents.

Milwaukee has also benefited from low inventory and increased demand. Milwaukee millennials are competing to buy in the city’s neighborhoods and are being joined by empty-nesters seeking to downsize in nice, walkable areas. Even with this renewed interest in Milwaukee, homes are still more affordable there than in many other parts of the country.

Grand Rapids Michigan, is the second-largest city in Michigan and its metro area is one of the fastest-growing, according to data from the Census Bureau. The metro has a large millennial population, which indicates a substantial number of potential first-time homebuyers, a diverse economy including health care, information technology, automotive, aviation, consumer goods, and manufacturing industries, among others.

As reviewed, there is an interplay of factors driving the strong growth in Midwestern home prices with changing household demographics, income growth and affordability all playing some role.

Analyzing real estate markets with enough granularity to gain real insights has historically been difficult. But new analytical tools such as the Radian HPI have made it easier to see what’s actually happening on a regional, state, metropolitan and even zip code level. And those tool’s ability to segment markets into finite attributes like bedroom counts or square footage reveal some very promising trends that were previously obscured.

Source: MReport 3/19/2020 Author: Steve Gaenzler

Fannie Mae, Freddie Mac, HUD suspending all foreclosures and evictions

Cities and states across the country are already suspending evictions and foreclosures in response to the spread of the coronavirus, but the federal government is taking the biggest step so far to keep people in their homes.

President Donald Trump announced Wednesday that the Department of Housing and Urban Development is suspending all foreclosures and evictions until the end of April.

HUD later announced its official policy, stating that the Federal Housing Administration is enacting an “immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages” for the next 60 days.

That matches the policy announced Wednesday by the Federal Housing Finance Agency.

The FHFA announced Wednesday that it is directing Fannie Mae and Freddie Mac to suspend foreclosures and evictions for “at least 60 days.”

That would mean the moratorium lasts through mid-May, at least.

According to the FHFA, the foreclosure and eviction suspension applies to homeowners whose single-family mortgage is backed by either Fannie Mae or Freddie Mac.

“This foreclosure and eviction suspension allows homeowners with an Enterprise-backed mortgage to stay in their homes during this national emergency,” FHFA Director Mark Calabria said in a statement.

Given that Fannie and Freddie are the largest mortgage financers in the country, the move is a sizable one.

“As a reminder, borrowers affected by the coronavirus who are having difficulty paying their mortgage should reach out to their mortgage servicers as soon as possible,” Calabria added.

“The Enterprises are working with mortgage servicers to ensure that borrowers facing hardship because of the coronavirus can get assistance.”

The FHA foreclosure moratorium applies to homeowners that have an FHA-insured Title II Single Family forward and Home Equity Conversion mortgage.

“Today’s actions will allow households who have an FHA-insured mortgage to meet the challenges of COVID-19 without fear of losing their homes, and help steady market concerns,” HUD Secretary Ben Carson said.

“The health and safety of the American people is of the utmost importance to the Department, and the halting of all foreclosure actions and evictions for the next 60 days will provide homeowners with some peace of mind during these trying times.”

The HUD announcement directs mortgage servicers to

“halt all new foreclosure actions and suspend all foreclosure actions currently in process; and cease all evictions of persons from FHA-insured single-family properties.”

Earlier this month, the FHFA and HUD reminded mortgage servicers of their options for borrowers affected by the COVID-19 outbreak.

Included among those options is payment forbearance, which would allow affected borrowers to suspend their mortgage payment for up to 12 months due to hardship caused by the coronavirus.

The FHA also stated that it is encouraging servicers to “offer its suite of loss mitigation options to distressed borrowers – including those that could be impacted by the Coronavirus – to help prevent them from going into foreclosure.”

According to the FHA, those options include “short and long-term forbearance options, mortgage modifications, and other mortgage payment relief options available based on the borrower’s individual circumstances.”

Trump made the initial announcement on HUD’s policy during a Wednesday press conference discussing the growing impact of COVID-19.

“The Department of Housing and Urban Development is providing immediate relief to renters and homeowners by suspending all foreclosures and evictions until the end of April,” Trump said.

“So, we’re working very closely with Dr. Ben Carson and everybody from HUD.”

Source: Housing Wire 3/18/2020 Author: Ben Lane

COVID-19 Update: HUD Suspends Face-to-Face Requirements

Early Saturday morning, the U.S. Department of Housing and Urban Development (HUD) issued a partial waiver of 24 CFR 203.604, a servicing policy requiring mortgagees to establish in-person contact with borrowers during early default intervention. This suspension was issued in response to public concerns over the spread of COVID-19.

In the partial waiver, which was signed late Friday evening, The Hon. Brian D. Montgomery, Assistant Secretary for Housing - Federal Housing Commissioner states that the policy "is not practical given the public health recommendations being disseminated by local, state, and federal government agencies to limit contact between individuals, in order to contain the spread of the COVID-19 virus."

In place of the face-to-face requirement, the partial waiver outlines that mortgagees must establish contact via alternate methods, such as phone interviews, email, or video conferencing technology such as skype. This partial waiver is limited to a 12-month period and does not apply to face-to-face requirements in place for the Section 248 insurance program.

Montgomery goes on to write that without this measure there would be a risk of "non-compliance by mortgagees as well as borrowers that could hinder the servicing of FHA-insured loans."

HUD also affirmed uninterrupted operations for its partners, stating, "the Federal Housing Administration (FHA) wants to assure its mortgagees and other interested stakeholders of its continued business operations in this evolving environment. Should FHA Single Family be required to close some or all its offices, our business operations will continue as usual; however, with some possible delays."

To address additional concerns stemming from COVID-19, the office released a "COVID-19 Questions and Answers" document. In it, FHA outlines loss-mitigation options available to borrowers who may be negatively impacted by the coronavirus, stating:

As with any other event that negatively impacts a borrower’s ability to pay their monthly mortgage payment, FHA’s suite of loss mitigation options provides solutions that mortgagees should offer to distressed borrowers–including those that could be impacted by the Coronavirus–to help prevent them from going into foreclosure. An example of one of these options is our Special Forbearance for unemployed borrowers. The SFB-Unemployment Option is a Home Retention Option available when one or more of the Borrowers has become unemployed and this loss of employment has negatively affected the Borrower’s ability to continue to make their monthly Mortgage Payment.

In a statement earlier this week, Federal Housing Finance Agency (FHFA) Director Mark Calabria also addressed how the FHFA, as well as Fannie Mae and Freddie Mac, are focusing their response by providing guidance to servicers.

“To meet the needs of borrowers who may be impacted by the coronavirus, last week Fannie Mae and Freddie Mac reminded mortgage servicers that hardship forbearance is an option for borrowers who are unable to make their monthly mortgage payment,” Calabria said.

In addition, industry groups are coming together to support homeowners who may impact impacted by COVID-19. On Friday, DS News reported that under the direction of the National Mortgage Servicing Association (NMSA), leaders from across the mortgage industry are joining forces to create the COVID-19 Mortgage Industry Task Force (ITF) to coordinate on processes, procedures, and policies related to the crisis.

More than 25 mortgage banks and nonbank servicers, legal professionals, and service providers will take part in the coalition.

"The speed of response from the industry has been unparalleled," said Ed Delgado, President and CEO of Five Star Global.

"We will continue to work with industry groups such as the Mortgage Bankers Association to focus on practical solutions for both the near-term and long-term impacts of COVID-19, in order to assist homeowners and to ensure the stability of the American housing market.”

Source: MReport 3/14/2020 Author: Rachel Williams