Housing Finance Market Roundup

Here’s a summary of recent reports about the housing market and real estate finance:

Zillow: High-End Listings Surging After Sharp Spring Tumble

Zillow Inc., Seattle, said in a sharp reversal from spring, new listings of high-end homes surged in June to near-normal levels, while a drought of more affordable inventory continues.

The report said in June, new listings of the most expensive homes fell by just 9% from a year ago — a huge recovery from May, when those listings were down more than 50% year over year. New listings for the most affordable homes remain depressed, still down 29% from a year ago and only three percentage points up from this May. The spike in new listings of high-end homes helped cause the median list price to jump nearly 3% from May to June.

Zillow said buyer demand has continued to be strong, with home values holding steady and homes being snatched off the market even more quickly than last year.

“Millions of Americans who lost jobs or income are only able to stay in their homes right now thanks to extraordinary forbearance programs, which means they likely have to pause their plans to trade up or move to a new city,” said Zillow economist Jeff Tucker. “But for wealthier homeowners whose employment has remained stable and are looking to trade up, now may be an opportune time to sell and lock in a record-low mortgage rate on their dream home.”

Veros: Housing Market Still Resilient Despite Global Pandemic

Veros Real Estate Solutions, Burlingame, Calif, released its Q2 2020 house price predictions for the next 12 months, noting the housing market is resilient despite the global pandemic.

The VeroFORECAST said the nation’s largest 100 housing markets should increase on average 3.5% through the second quarter of 2021, which is in line with previous projections indicating positive average home price appreciation, despite economic uncertainty and unemployment, particularly in the leisure, hospitality and tourism industries, as a result of the global COVID-19 pandemic.

“During the second quarter, in the wake of pandemic induced stay-at-home orders and business shutdowns across the country, it was made clear that home was the only safe place to be,” said Darius Bozorgi, CEO of Veros Real Estate Solutions. “Government programs, such as forbearance, are providing more options for homeowners to stay in their home despite record unemployment and economic uncertainties and we remain cautiously optimistic about the future state of housing.”

Veros said the 10 lowest-performing markets are dominated by cities in Connecticut, Texas and Illinois. Chicago, anticipated to be the worst-performing market, is expected to be nearly flat over the next 12-months.

Fannie Mae: Housing Confidence Gaining Steam After Nearing Survey Low

The Fannie Mae Home Purchase Sentiment Index increased by nine points in June to 76.5, building further on the prior month’s advance after approaching a survey low in April.

Four of the six HPSI components increased month over month, with consumers reporting a significantly more positive view of homebuying and home-selling conditions, as well as greater optimism regarding home price appreciation. Year over year, the HPSI is down by 15 points.

“A second month of improvement in June allowed the HPSI to regain some of the sharp losses in optimism observed in March and April,” said Doug Duncan, Senior Vice President and Chief Economist. “Homeowners seem to have taken note of the resulting lack of housing supply, with an increased share saying it’s a good time to sell a home. However, this activity may cool again in the coming months, depending on the extent to which it can be attributed to consumers having chosen to delay or to accelerate homebuying plans due to the pandemic.”

 Survey respondents’ persistent, substantially elevated concerns about job security in the face of record unemployment remains a key takeaway, particularly among renters and homeowners with a mortgage. We believe the continuing uncertainty regarding the coronavirus’ containment suggests an uneven and potentially volatile course toward economic recovery.”

The percentage of respondents who say it is a good time to buy a home increased from 52% to 61%, while the percentage who say it is a bad time to buy decreased from 39% to 27%. As a result, the net share of Americans who say it is a good time to buy increased 21 percentage points. Meanwhile, the percentage of respondents who say it is a good time to sell a home increased from 32% to 41%, while the percentage who say it’s a bad time to sell decreased from 62% to 48%. As a result, the net share of those who say it is a good time to sell increased 23 percentage points.

Redfin: Milwaukee, San Francisco, Detroit Most Likely Where Black Homebuyers Denied a Home Loan

Redfin, Seattle, said its analysis of Home Mortgage Disclosure Act data found 15.9% of Black Americans who apply for mortgages are rejected nationwide, compared to just 7% of white Americans.

The gap is widest in Milwaukee, San Francisco, Detroit, Chicago and St. Louis, where denial rates for Black homebuyers are more than 10 percentage points higher than they are for white homebuyers. In Milwaukee and San Francisco, specifically, Black loan seekers are more than three times as likely to be denied a mortgage.

Redfin said Americans today are half as likely to be denied a mortgage loan as they were in the wake of the 2008 financial crisis. The share of total applicants who faced rejection dropped to 8.9% in 2019 from 18% in 2008, according to the latest annual figures just released by the Consumer Financial Protection Bureau. Still, Black loan seekers are more frequently denied due to debt and low credit scores. These two factors are more likely to be roadblocks for Black mortgage applicants due to decades of wealth inequality, as well as bias among lenders.

While the racial mortgage gap has been narrowing over the years, Black Americans are still denied home loans at a higher rate than white Americans in every one of the 50 most populous U.S. metros.

The analysis noted while debt is the number-one explanation lenders provide when denying applicants across races, Black homebuyers are more frequently turned down for this reason, according to the CFPB. Of Black mortgage applicants who are refused home loans, 32.5% are turned away because of their debt-to-income ratios versus 27.9% of white applicants.

Genworth: First-Time Homebuyer Faces Disruptions from Coronavirus

– Genworth Mortgage Insurance, Richmond, said he first-time homebuyer market faced significant dislocation in April as a result of COVID-19. The number of rate locks by potential first-time homebuyers decreased by 27% in April from March as the spread of COVID-19 reduced traffic by potential homebuyers and listings.

The company’s quarterly report said states heavily impacted by COVID-19, including New York, Pennsylvania and Michigan, saw decreases of more than 50% in April. The dislocation was even greater for the repeat buyers’ market. The repeat buyers’ market fell by 34%, in part because repeat buyers faced greater hurdles in selling their existing homes.

Genworth said the COVID-19 pandemic has resulted in tighter credit availability in the housing market, that led to a sharp contraction in first-time homebuyers with riskier credit profiles or relying on mortgages not backed by Fannie Mae and Freddie Mac. The number of first-time homebuyers taking out FHA loans decreased by 36% in April, and the market for jumbo loans decreased by 50%. The number of first-time homebuyers using other products have seen smaller declines in April. For example, the number of first-time homebuyers using mortgage insurance decreased only by 18% in April, and those using VA loans decreased by 23%.

Genworth Chief Economist Tian Liu did note as the economy re-opened in May, the first-time homebuyer market rebounded by 27%. The repeat buyers’ market rebounded by 37% in May as existing homeowners came back to the market. The number of first-time homebuyers rebounded across all mortgage products, with jumbo loan borrowers up 41%, FHA loan borrowers up 29% and low down payment conventional loan borrowers up 24%.

“The COVID-19 pandemic pushed the U.S. economy into the sharpest recession on record in March,” Liu said. “The housing market corrected in April, with first-time homebuyer activities down almost 30% in just one month. However, what followed was a quick rebound in May of almost the same magnitude. This is not what we typically see in a normal recession.”

Computershare: Despite Forbearance, ¼ of Borrowers Making Mortgage Payments

Despite the pandemic, a quarter or more of borrowers in forbearance have continued to make monthly mortgage payments, according to data from Computershare Loan Services, New York.

Computershare said 27% of its borrowers in forbearance had made mortgage payments in June and 25% in May, with 27% doing so in April and 39% in March. “It’s likely that some borrowers requested forbearance in anticipation of financial difficulties which did not materialize or were not as demanding as they expected, meaning that they were in a better position to make a payment,” said Tom Millon, CEO, Computershare Loan Services in the US.

Computershare said that although the ongoing pandemic is making predictions about market changes more difficult, it expects the proportion of borrowers in forbearance that continue to make mortgage payments to decrease further this summer before levelling off later in the year.

Redfin: Record 27% of Homebuyers Look to Relocate as Pandemic Accelerates Trend Toward Affordable, Less Dense Areas

Redfin, Seattle, said a record 27.0% of home searchers looked to move to another metro area in April and May, marking a new high in the share of Redfin.com users searching for homes outside their area, up from 25.2% in the second quarter of 2019 and 26.0% in the first quarter of this year.

The increase in Redfin.com users searching for out-of-town homes may be partly due to the coronavirus pandemic, as more people consider moving to suburbs and smaller towns with less crowding and more room to work from home. Overall, searches for homes in small towns are surging on the Redfin.com website: Pageviews of homes in towns with fewer than 50,000 residents were up 87% year over year in May, more than triple the 22% year-over-year increase in pageviews of homes in cities with more than 1 million residents.

“While there has been a huge increase in the number of people looking online at homes in small towns, the long-term impact of the pandemic on people actually moving from one part of the country to another remains to be seen,” said Redfin economist Taylor Marr. “People are starting to take the plunge and move away from big, expensive cities, though most of them were probably already considering a lifestyle change. The pandemic and the work-from-home opportunities that come with it is accelerating migration patterns that were already in place toward relatively affordable parts of the country. But for many people, the lure of large homes in wide open spaces will be a passing dream fueled by coronavirus-induced isolation. ”

New York, San Francisco and Los Angeles had the biggest net outflow of Redfin.com users in April and May. San Francisco, Washington, D.C., Chicago, Seattle, Denver and Boston have all seen small (less than 2 percentage points) increases in the share of people looking to move away since last year.