Housing Market Roundup, Dec. 24, 2020
It’s almost the end of a year many of us would like to forget—unless, of course, we’re a mortgage banker. Here’s a summary of a plethora of reports that crossed the MBA NewsLink desk in the past few days:
Wolters Kluwer Annual Indicator Survey: ‘Significant Risk, Compliance Concerns’ for Lenders
Wolters Kluwer, Minneapolis, said regulatory compliance and risk concerns remain high in a number of key areas for U.S. banks and credit unions, according to the results of its 2020 Regulatory & Risk Management Indicator survey.
This year’s survey generated a Main Indicator Score of 103, an eight-point increase over the 2019 score. This was influenced by concerns about managing regulatory change, mortgage-related regulations, and CARES Act requirements.
The COVID-19 pandemic weighed heavily on respondents’ minds: 86 percent view the pandemic as a significant or moderate factor in their organizations’ enterprise risk planning. Other areas of high concern include loan default risk (85 percent), business resilience and adaptability (79 percent) and recession fears (78 percent).
“Relatively high levels of concern remain across a range of areas, reinforcing the fact that regulatory compliance and risk management issues continue to significantly challenge financial institutions,” said Timothy R. Burniston, Senior Advisor for Regulatory Strategy with Wolters Kluwer Compliance Solutions. “That said, respondents expressed their highest levels of confidence in the past four years regarding their organizations’ ability to manage risk across all business lines.”
First American: Will Record Equity Levels Prevent Foreclosure Tsunami?
First American Financial Corp., Santa Ana, Calif., said despite a record-setting spike in unemployment at the outset of the pandemic, foreclosure activity in 2020 has plunged to a record low, thanks in part to fiscal stimulus and foreclosure moratorium.
However, First American Deputy Chief Economist Odeta Kushi said many homeowners are indicating that they are uncertain about their ability to make their mortgage payments, “Many are concerned that we may see a foreclosure tsunami in the months ahead, but there are good reasons this may not happen,” she said.
Kushi nationally, homeowner equity has increased to a three-decade high, which signals the housing market is in a better position to weather foreclosure risk than it was prior to the Great Recession. Of the 15 markets reported in the U.S. Census Bureau Pulse Survey, homeowner equity is greater today in 14 out of 15 markets compared with the second quarter of 2009, which was the trough of the Great Recession.
“Today’s housing market is fundamentally different from the one preceding the Great Recession,” Kushi said. “The housing market’s fundamentals – historically low rates, strong demographically driven demand and limited supply – are strong and anticipated to remain as such into 2021. In addition to existing homeowner equity, house price appreciation driven by an undersupply of housing inventory relative to demand continues to push equity levels up across the country.”
FHFA House Price Index Up 1.5% in October; 10.2% from Year Ago
House prices rose nationwide in October, up 1.5 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index. House prices rose 10.2 percent year over year.
For the nine census divisions, seasonally adjusted monthly house price changes from September to October ranged from +0.9 percent in the West North Central and East South Central divisions to +2.1 percent in the New England division. The 12-month changes ranged from +8.4 percent in the West South Central division to +12.5 percent in the Mountain and New England divisions.
“U.S. house prices rose for the fifth straight month since states re-opened their local economies,” said Lynn Fisher, FHFA Deputy Director of the Division of Research and Statistics. “Extremely low mortgage rates and a limited supply of homes for sale continue to propel price gains.”
Luxury Home Sales Surge a Record 61%, Quadrupling Pre-Pandemic Growth
Redfin, Seattle, said luxury home sales surged 60.7% year over year during the three months ending Nov. 30, the biggest jump since at least 2013. That nearly quadrupled the growth seen during the three months ending Feb. 29, before the coronavirus was declared a pandemic. It also far outpaced the 14.8% increase in sales of mid-priced homes and the 6.8% uptick in sales of affordable homes.
“Low- and middle-income Americans aren’t out of the woods when it comes to this recession,” said Redfin Chief Economist Daryl Fairweather. “Affluent Americans are out of the woods, and they’re at their beach houses sipping margaritas. When times are tough, banks are most likely to dole out home loans to the people who need them the least.”
The 49 most populous U.S. metropolitan areas all experienced at least double-digit growth in luxury-home sales during the three months ending Nov. 30. The biggest jump was in Newark, N.J., where sales of luxury homes skyrocketed 101.6% year over year. It was followed by West Palm Beach, Fla., up 97.1%, and San Antonio, Texas, up 82.4%.
November ‘Best Month’ to Buy a Home in 2020
The median monthly mortgage payment was $1,094 in November, the lowest of the year, thanks to historically low rates, according to an analysis by Redfin, Seattle. This was down from a peak of $1,163 in February, the month before the coronavirus was declared a pandemic.
The median list price nationwide was $336,000 in November, the highest median price on record, but that was offset by an average mortgage rate of 2.77%, the lowest on record. Both sides of the equation were fueled by the pandemic: Prices were driven up by remote work and Americans’ desire to move to more spacious homes, while low mortgage rates are in part a consequence of the Federal Reserve’s response to a struggling economy.
“It’s easy to forget that the price is just one part of the equation of how much house a buyer can afford,” said Redfin chief economist Daryl Fairweather. “The relationship between historically low mortgage rates and surging home prices has been fascinating to watch this year. We’ve seen mortgage rates drive unforeseen levels of homebuyer demand, which has pushed prices up by upwards of 15% in recent weeks. The good news for those buyers who are persevering through a dearth of homes for sale and fierce bidding wars is that once you do land a home, today’s sub-3% mortgage rates are largely cancelling out the high prices.”
Grocery Store Wars: Why You Should Live Near Trader Joe’s
ATTOM Data Solutions, Irvine, Calif., released its annual Grocery Store Wars analysis shows how living near a Trader Joe’s, a Whole Foods or an ALDI might affect a home’s value – as a homebuyer based on home price appreciation and home equity, or as an investor looking for the best home flipping returns and home seller ROI.
ATTOM analyzed U.S. zip codes with at least one Whole Foods store, one Trader Joe’s store and one ALDI store. The average home value for houses near a Trader Joe’s was $644,558; near Whole Foods, $532,224; and near ALDI, $250,850.
Average Home Equity also corresponded, ATTOM found: near Trader Joe’s, 37% ($255,066); near Whole Food, 33% ($191,380); and near ALDI, 26% ($71,204). However, for investors, houses near ALDI showed the greatest five-year home price appreciation (41%), followed by Trader Joe’s (35%) and Whole Foods (33%).
iBuyer Home Purchases Down Nearly 80% Year Over Year In 3Q
The nation’s top iBuyers purchased only 1,800 homes in the third quarter, according to the latest analysis on the iBuying market by Redfin, Seattle. The leading iBuying companies purchased just 0.2% of homes that sold across the 418 U.S. metros tracked in the analysis, that’s down nearly 80% from a year earlier, as iBuyers slowly ramped up business following a temporary shutdown at the start of the coronavirus pandemic. Purchases did increase from the second quarter, when iBuyers bought 800 homes.
The slowdown in iBuying comes as the rest of the real-estate market is red hot, with home prices rising 15% nationally and pending sales up twice as much. “The hotter the market, the less attractive it is for home sellers to let an iBuying company take a cut of the sale,” said Redfin Lead Economist Taylor Marr. “With home prices and demand surging, many sellers figure they can sell their home quickly without having to give away any of their profits.”
Zillow: Stronger Housing Market Across the Board in 2021
Zillow, Seattle, said for-sale housing market showed incredible strength in 2020, and predicts 2021 will be even stronger, with demand expected to surge in the cities as economies reopen.
Zillow forecasts annual home sales growth will be the highest in nearly 40 years as life and financial certainty brings more sellers into the market to meet the heavy demand and technology allows for faster connections with interested buyers. Home prices, mortgage rates and rents will rise, bringing affordability challenges that must be faced.
“2020 has been a remarkably strong year for the housing market, with sales on pace to grow 6% from 2019 despite essentially pressing ‘pause’ for a few weeks in the heart of the spring shopping season,” the report said. “Zillow expects that mark will be shattered next year, forecasting 21.9% annual growth for a total of 6.9 million homes sold. That would be the biggest annual sales growth since 1983.”
Austin Attracting Twice As Many Out-of-Town Homebuyers As Last Year
Redfin, Seattle, said 29.4% of Redfin.com users nationwide looked to move to another metro area in October and November, up from 25.4% a year before, marking the highest share of users looking to move to a new metro since Redfin started tracking migration in the beginning of 2017.
More people are moving to Sacramento, Las Vegas, Phoenix, Austin and Atlanta than last year, partly because of remote work. That’s especially true in Austin. In October and November, net inflow to the Austin metro area was double the same time last year.
“There has been a massive influx of buyers coming to Austin this year, mostly people who work in tech or other industries that allow them to work remotely,” said local Redfin agent Andrew Vallejo. “About 80% of my buyers are from the East Coast or the West Coast, specifically from the Bay Area. The number of people moving in from California picked up even more after the election, and a lot of people have newfound confidence in the Austin housing market because of the upcoming Tesla factory.”
Black Knight: Mortgage Delinquencies Improving
Black Knight, Jacksonville, Fla., released its First Look Mortgage Monitor, reporting mortgage delinquencies improved slightly in November, despite seasonal headwinds, falling 1.76% from October, with 56,000 fewer past due mortgages than last month. This marks the sixth straight month of improvement.
But while early-stage delinquencies (30 days past due) have fallen below their pre-pandemic norms, Black Knight reported 1.8 million excess serious delinquencies (90+ days past-due) than prior to the pandemic. Overall, the national delinquency rate is now down 1.5 percentage points from its peak of 7.8% in May but remains 93% above pre-pandemic levels.
Meanwhile, prepayments fell 11% from October’s 16-year high; Black Knight noted with interest rates at record lows and refinance incentive at a record high, prepay activity is likely to remain elevated in the coming months.
Share of All-Cash Home Purchases Lowest in 13 Years
Nationwide, 24.3% of homes sold so far this year were bought with cash, down from 25.3% in 2019 and the smallest share since 2007, said Redfin, Seattle.
“With interest payments lower than ever before, many homebuyers would prefer taking out a home loan and putting their cash somewhere else, like the stock market, emergency savings accounts or home renovations,” said Redfin chief economist Daryl Fairweather. “Many of the buyers who are using all cash this year are probably trying to beat out other offers in a situation with multiple offers.”
In Nassau County on Long Island, 48.9% of homes sold this year were all-cash purchases, a higher share than any other major metro area, followed by six Florida metros: North Port (41%), West Palm Beach (40.3%), Cape Coral (39.8%), Fort Lauderdale (33.4%), Miami (30.8%) and Tampa (30.1%). Oakland had the smallest share of all-cash purchases, 13.1%.
Home Value Growth Breaks Records as Rents Stabilize
Zillow, Seattle, said rent appreciation began to recover in November after a long slide that began in February, and home value growth soared to new heights, according to its latest Real Estate Market Report.
Zillow reported the typical U.S. rose by 1.1% year over year in November to $1,734, after sliding from 3.9% growth in February to just 0.7% growth in October. Among the 100 largest U.S. markets, monthly rent growth was highest in Stamford, Connecticut (3.1%), Providence, R.I. (2.3%), and Ogden, Utah (2.1%).
“With a vaccine on the horizon and Gen Z continuing to graduate from college, we expect the cloud of uncertainty surrounding the pandemic to lift and demand for rental units to surge in 2021,” said Zillow senior economist Chris Glynn. “Though the coming rebound in the rental market is good news for some, it will certainly put millions of renters who were hit hard by pandemic-related income loss in an even more tenuous position, and further government intervention will likely be needed to avoid a painful wave of evictions.”
Zillow said home values across the U.S. rose 7.5% since last year to $263,351. The largest annual increases by metro are in San Jose at 14.2%, Phoenix at 14.1% and Seattle at 13.2%.