Category Archives: Real Estate

Refinance as mortgage rates in America

While homeowners surged into the market, increasing refinance originations, potential homebuyers held back in the third quarter, according to the Q3 2016 U.S. Residential Property Loan Origination Report by ATTOM Data Solutions, a fused property database.

Overall, over 1.9 million loans were originated in the U.S. in the third quarter of 2016. That’s down 2% from the second quarter, but up almost 1% from last year. The total dollar volume of loan originations increased 8% from last year to over $502 billion due to higher average loan amounts.

The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80% of the U.S. population.

“The nominal increase in overall originations compared to a year ago masks divergent refinance and purchase loan origination trends during the quarter,” said Daren Blomquist, ATTOM Data Solutions senior vice president. “Refinance originations increased 16% compared to a year ago while purchase originations were down 11% and Home Equity Lines of Credit originations were down 6%.”

“Uncertainty surrounding the outcome of the presidential election may have kept some would-be homebuyers on the sidelines while the prospect of rising interest rates following the election may have prompted many homeowners to refinance to lock in low interest rates,” Blomquist said.

In the third quarter, 876,633 refinances loans were originated. That is an increase of 7% from the second quarter, and 16% from last year. Refinance originations made up 45.7% of total originations during the third quarter, up from 42.1% last quarter and 39.5% last year.

Many homeowners are rushing to refinance their homes before interest rates increase. While rates are currently still at historical lows, the 30-year mortgage rate recently hit its highest point since July 2015.

On the other hand, purchase originations totaled 743,880 during the third quarter. This is down 8% from last quarter and 11% from last year. This is the first decrease after nine months of consecutive annual increases in purchase originations. Purchase originations totaled 38.8% of all originations, down from 41.4% last quarter and 43.8% last year.

In fact, according to a new report from Kroll Bond Rating Agency, 2016 will likely be the peak year for mortgage originations for “years to come,” as a fall in origination volume will occur in 2017 and beyond.

The real impact of interest rate for home

As recent reports from Freddie Mac show, mortgage interest rates rose sharply after the election, recently climbing back above 4% for the first time since 2015.

While still low by historic standards, interest rates are still roughly 50-basis points higher now than they were before Donald Trump won the election, and a new report from Black Knight Financial Services shows the real impact of that increase on borrowers and potential borrowers.

The bottom line, according to Black Knight’s report, is that housing is less affordable right now than it was before the election.

In fact, home affordability is now at its lowest point since June 2010.

Per Black Knight’s report, the post-election interest rate bump means that the average home price is $16,400 more expensive for the buyer than it was before the election.

That equates to borrowers being on the hook for $60 more per month in principal and interest in order to purchase the median home. That figures rises to $72 per month for borrowers putting 3.5% down on their home.

According to Black Knight’s report, it now requires 21.6% of median income to purchase the median priced home nationwide, which is still low by historical standards, but the highest it’s been since June 2010.

For reference, interest rates in June 2010 were 4.75%, but home prices were about 20% lower than they are now.

So the interest rate increase impacts potential borrowers and could inhibit home sales some moving forward.

But the impact isn’t felt by new buyers only.

According to Black Knight’s report, the number of potential refinance candidates fell by more than 50% over the last few weeks.

As a result of the increase rate bump, roughly 4.3 million borrowers were removed from the pool of potential refinance candidates.

That leaves 4 million borrowers in the total refinanceable population, which matches a 24-month low.

Black Knight notes that borrowers are still leaving $1 billion in potential savings on the table on a monthly basis, but that’s less than half the $2.1 billion that borrowers could have saved on a monthly basis if they refinanced before the election.

“The results of the U.S. presidential election triggered a treasury bond selloff, resulting in a corresponding rise in both 10-year Treasury and 30-year mortgage interest rates,” said Black Knight Data & Analytics Executive Vice President Ben Graboske.

“As mortgage rates jumped 49 basis points in the weeks following the election, we saw the population of refinanceable borrowers cut by more than half,” Graboske continued.

Increase despite tight labor force

The economy is generally considered at full employment with the unemployment rate hits 4.7%, Steve Rick, CUNA Mutual Group chief economist, told HousingWire.

“Overall it’s a pretty a solid report,” Rick said. “What’s surprising is the unemployment rate, that was a big drop.”

The drop, as it turns out, brings the unemployment rate to its lowest point since August 2007.

“The November jobs report shows an economy running largely at full steam, with the unemployment rate – already low – falling to its lowest level since August 2007,” Zillow Chief Economist Svenja Gudell said. “Given this strength, if there were any lingering doubts that Federal Reserve officials would opt to raise rates at this month’s board meeting, today’s report should toss them out the window.”

Here is where some of the more significant increases occurred:

Professional and business services: increased 63,000

Health care: increased 28,000

Construction: increased 19,000

Employment in other major industries, including mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality and government, changed little over the month.

On average in 2016, employment growth averaged 181,000 per month, compared with an average monthly increase of 229,000 in 2015.

“Employers are getting their labor force geared up for 2017,” Rick said. “The demand for labor is there, but there’s not enough skilled people to fill those jobs. When you have an employment rate at 4.6% it’s really hard to find the right person to fill that position.”

And it could get even tighter if President-elect Donald Trump focusses on infrastructure during his administration, Rick said. An already tight construction labor market could become even tighter as the government takes workers from private home builders.

This could in turn cause wages to go up, and inflation to increase. If that happens, the Federal Reserve could become less conservative about raising interest rates.

“I’m actually thinking they’re going to raise rates three more times in 2017,” Rick said.

But not all experts agree that the jobs report was solid. One expert explains that the report wasn’t great, but that it was good enough for a December rate hike.

“Today’s November jobs report can be summed up as: not bad, but not great,” said Lawrence Yun, National Association of Realtors chief economist. “The good news is that 178,000 new job additions are positive enough for the Federal Reserve to raise the fed funds rate by a quarter point in a few weeks. It’s likely there will be two to three more rate hikes in 2017.”

Another expert, Curt Long, the National Association of Federal Credit Unions chief economist, pointed out that labor force participation and wage growth both declined.

“Still, the report provided no impediments for a rate hike from the Fed later this month, and a quarter-point increase is now a certainty,” Long said.

In fact, Fannie Mae chief economist Doug Duncan said that this decrease in labor force participation is the reason for the drop in unemployment rate, and is not exactly a positive sign.

“Today’s Labor Department employment report was unremarkable, suggesting a small Federal Reserve rate hike will occur – as the market expected – in December,” Duncan said. “Some attention will be paid to the drop in the unemployment rate to 4.6%, but that is driven by the combination of jobs added and a decline in workforce participation, the latter of which was disappointing.”

HUD transition team of Loans VP

The Trump transition team ordered all lobbyists removed from its ranks two weeks ago to follow through on campaign pledges made by Mr. Trump to “drain the swamp” in Washington.

However, Quickens claims that Krause’s new role in the transition team didn’t pose any conflict of interests with the lender. In fact, the company’s CEO said Krause is a perfect fit for Trump’s team if he is looking to drain the swamp, according to the article.

From the article:

“It makes total sense you’d have someone like that. You’re finding people that actually understand housing,” said Bill Emerson, Quicken’s chief executive. “When you think about draining the swamp, this goes right in line with that.”

While Trump is getting his HUD transition team in place, the department’s secretary has yet to be officially named. Sources told HousingWire retired brain surgeon and former GOP candidate Ben Carson will accept the role, however he has yet to do so.

Sources confirmed he would make the announcement at the beginning of this week, but so far it has been silent. Perhaps he was waiting for the HUD transition team to be in place before announcing his acceptance?

Whatever the reason for Carson’s delay, companies are already urging the next HUD secretary, without regard to who it is, to bring change to affordable housing.

“During his acceptance speech, President-Elect Trump said that a top priority for his administration will be to invest in America’s infrastructure and inner cities as part of a ‘project of national growth and renewal,’” Terri Ludwig, Enterprise Community Partners president and CEO told HousingWire. “Investments in quality, affordable housing must be a part of that agenda.”

“Today more than one in four families who rent their homes – 11.4 million households in total – are ‘housing insecure,’ spending at least half of their monthly income on housing,” Ludwig said. “This unprecedented affordable housing crisis not only damages the health and economic prospects of millions of people in America, it’s also a drag on our country’s economic growth.”

“We urge the nominee, the new administration and Congress to take bold steps to address this worsening crisis,” she said.

Home leader Ben Carson lists Florida

Ben Carson just announced that he accepted the role of HUD Secretary and is already making moves in his own personal housing situation.

According to an article in Variety, he listed his home in West Palm Beach, Florida for $1.2 million. If he sells his home at that amount, he would turn a nice profit, given Carson originally purchased the home three years ago for $775,000.

The home, which is located in an upscale guard-gated golf community, has 5 bedrooms and 4.5 bathrooms.

From the article:

Doctor Carson and his wife, Candy, have already purchased their next home, a nearly 9,000-square-foot similarly ersatz mock-Med mansion in Palm Beach Gardens that they picked up for $4.375 million, and they continue to own a 47.75-acre spread in rural Upperco, Maryland, about 25 miles northwest of The Johns Hopkins Hospital in Baltimore where until his 2013 retirement Dr. Carson was the esteemed head of pediatric surgery, that was acquired, per property records, in September 2001 for $1.5 million.

CoreLogic forecasts that home prices will increase by 4.6% year-over-year, and by 0.2% by next month.

The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

“Home prices are continuing to soar across much of the U.S. led by major metro areas such as Boston, Los Angeles, Miami and Denver,” CoreLogic President and CEO Anand Nallathambi said.

“Prices are being fueled by a potent cocktail of high demand, low inventories and historically low interest rates,” Nallathambi said. “Looking forward to next year, nationwide home prices are expected to climb another 5% in many parts of the country to levels approaching the pre-recession peak.”

In fact, it seems the market already hit pre-recession levels and the Federal Housing Administration even increased conforming loan limits for 2017 due to these high home prices.

Upward climb in October of Home Price

Home prices continued their upward trend in October, and are forecasted to continue rising into next month and next year, according to the Home Price Index and HPI Forecast by CoreLogic, a property information, analytics and data-enabled solutions provider.

Home prices, including distressed sales, increased annually by 6.7% in October 2016, and increased 1.1% from September, according to the index.

CoreLogic forecasts that home prices will increase by 4.6% year-over-year, and by 0.2% by next month.

The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

“Home prices are continuing to soar across much of the U.S. led by major metro areas such as Boston, Los Angeles, Miami and Denver,” CoreLogic President and CEO Anand Nallathambi said.

“Prices are being fueled by a potent cocktail of high demand, low inventories and historically low interest rates,” Nallathambi said. “Looking forward to next year, nationwide home prices are expected to climb another 5% in many parts of the country to levels approaching the pre-recession peak.”

In fact, it seems the market already hit pre-recession levels and the Federal Housing Administration even increased conforming loan limits for 2017 due to these high home prices.

It was less than a month ago that a spokesman for retired neurosurgeon Ben Carson told reporters that the erstwhile GOP presidential candidate would not be serving the Trump administration in anything but an unofficial advisory capacity. “Dr. Carson feels he has no government experience,” Armstrong Williams said, “he’s never run a federal agency. The last thing he would want to do was take a position that could cripple the presidency.” On that basis alone, President-elect Donald Trump’s announcement Monday that Mr. Carson would be his choice to head the Department of Housing and Urban Development was baffling. Add the fact that Mr. Carson has no relevant expertise whatsoever (secretary of health and human services, the previous job for which the highly accomplished physician was mentioned, might have been a different story) and Mr. Trump’s pick goes well beyond baffling.

Step to attract international home buyers

As international buyers are increasing, they are also bringing new trends to the market. For example, the Chinese influence is affecting home values for street addresses that contain the Chinese lucky number – four.

Now, even the way homes are sold may need to change. Jack Ryan, founder of REX, an online brokerage, former partner at Goldman Sachs and a onetime opponent of President Barack Obama for the Illinois Senate seat, decided to do just that.

Home prices continue to increase, a trend that will continue into 2017, according to a new report from CoreLogic.

These increasing home prices are narrowing the scope of possible buyers on luxury homes, and increasing the possibility that it will be bought by an international buyer. That is exactly what Ryan realized when he decided to turn to virtual reality to sell a $57.5 million home in Malibu, California, according to an article by James Tarmy for Bloomberg.

From the article:

“For homes like this,” Ryan said, gesturing to the house’s fireplace, “there’s a 50 percent chance that the buyer is outside the U.S., in around 15 financial capitals—London, Shanghai, Paris, Beijing.”

To reach that elusive group of the super-rich, Ryan had to get creative, which is why he decided to pay a virtual reality company to map the house and create an interactive video.

Virtual reality allows viewers to see the home as though they were really there by looking through a view piece strapped onto their head. Several different agents have begun playing with virtual reality as a tool for selling homes or condos, but is it working?

From the article:

The video, he said, has been useful, though he considers VR one of several marketing tools. “I couldn’t give tangible results, like ‘five deals closed because we had VR,’” he [Adam Greene, vice president of residential development at Forest City Ratner] said. “I think it gives the whole experience of the sales center something a little bit different.” Indeed, multiple brokers all echoed the same point: VR is presently a tool that can get buyers excited, not an actual replacement for seeing the house in person.

Fargo as bank reportedly fails fair lending requirement

The dark clouds surrounding Wells Fargo are about to get a lot darker, as the bank, which is already in hot water over its recent fake account scandal, is reportedly falling short in its fair lending requirements and faces additional sanctions.

Over the last few months, Wells Fargo has been in the crosshairs of various regulators after the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the city and county of Los Angeles fined Wells Fargo $185 million because more than 5,000 of the bank’s former employees opened approximately 2 million fake accounts in order to get sales bonuses.

In the fallout from the fake account scandal, Wells Fargo CEO John Stumpf lost his job, the bank lost business from several states, and the OCC slapped additional sanctions on it, including forcing the bank to ask the OCC for approval if it wants to make a change to its board of directors or its senior executive officers.

Now, according to a new report from Reuters, Wells Fargo is about to be more hot water with the OCC for reportedly failing to meet its requirements under the Community Reinvestment Act.

Under the Community Reinvestment Act guidelines, banks are legally required to meet the credit needs of low- and moderate-income communities.

From Reuters:

Wells Fargo is due to be deemed a bank that “needs to improve” under the Community Reinvestment Act (CRA), a law meant promote fair lending.

The move is a two-notch downgrade from the “outstanding” tag Wells Fargo has held since 2008 and the change would give regulators a greater say on day-to-day matters like opening new branches.

The ruling from the Office of the Comptroller of the Currency, the main regulator for national banks, is due by early January, said the sources with knowledge of the plans.

The ruling would be significant, considering Wells Fargo’s status as one of the largest (if not the largest) mortgage lenders in the country.

Reuters cautions that Wells Fargo could win an appeal of the downgrade. According to the Reuters report, that decision is still pending.

Next HUD leader divides real estate industry

Some housing experts congratulated the new nominee, and took the opportunity to say what they think the new HUD secretary should focus on.

“CHLA congratulates Dr. Ben Carson on his nomination to be HUD Secretary,” said Scott Olson, Community Home Lenders Association executive director. “We urge him to focus on continuing the strong progress in FHA’s financial health, and on ending the overcharging of FHA premiums, by taking prompt steps to cut annual premiums and end the Life of Loan premium policy instituted three years ago.”

And they weren’t the only ones to step in with their congratulations for Carson.

“Realtors know that the incoming secretary of Housing and Urban Development has a big job ahead,” said William Brown, National Association of Realtors president. “Potential homebuyers face a range of hurdles, from rising prices to mortgage credit that’s burdened by fees and extra costs.”

“We congratulate Dr. Carson on accepting this important challenge and wish him the very best of luck in meeting the task ahead,” Brown said. “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

Even the Mortgage Bankers Association joined in with their congratulations.

“On behalf of the MBA I want to congratulate Dr. Ben Carson on being chosen to be nominated as the Secretary of HUD,” MBA President and CEO David Stevens said. “Housing is one of the largest contributors to the health and success of the overall economy, and as such we must continue to recognize its significance.”

“MBA looks forward to working with Dr. Carson in helping to build out a well-rounded team of housing experts, with a deep technical understanding of the issues, at HUD, FHA and Ginnie Mae,” Stevens said. “MBA wishes Dr. Carson and the rest of the administration success as they get ready to embark upon these next four years.”

But this positive response to the nomination was not unanimous. In fact, some housing experts were highly critical of the pick.

Housing supply in Northwest reaches all time low

Pending home sales hit an all-time high in the Northwest, but new listings took a plunge, according to the latest report from Northwest Multiple Listing Service.

The report, which covers 23 counties in and around Washington state, showed that new listings added during November dropped to an 11-month low. This could increase home prices as buyers fight over the dwindling inventory, which is now at an all-time low.

“Last year’s holiday season ended up being the best time to sell a home around King County as sellers took the winter months off, but buyers remained persistent,” said Robert Wasser, Northwest MLS director and Prospera Real Estate owner/broker. “The supply of homes for sale hit a post-recession low, and so far, this year is mirroring last winter’s trends.”

Inventory decreased by 13.2% in November, but pending home sales increased 94% in the Northwest. Prices increased by 11% compared to last year.

This left a housing supply of just 1.69 months, a new low. King Country showed the lowest level of supply at just 0.96 of a month.

Pending home sales totaled 8,217 for the month, compared to the 5,779 new listings.

The cause for the sudden surge could be the oncoming winter months, but there is also another factor causing borrowers to flood the market.

“November’s pending sales for the four-county area of King, Snohomish, Pierce and Kitsap were the highest since 2005,” said J. Lennox Scott, John L. Scott Real Estate chairman and CEO.

“There were 44% more pendings than new listings,” Scott said. “Every time interest rates increase 0.5% we see these surges because buyers become anxious about increasing rates – but on a historical basis rates are still amazing.”