Housing Report Roundup

Welcome to the Friday Housing Report Roundup. In today’s edition:

Ellie Mae: Refis Rebound Amid Record-Low Interest Rates

Ellie Mae, Pleasanton, Calif., issued its monthly Origination Insight Report, noting refinances rebounded slightly in August, representing the majority of closed loans at 56 percent. The percentage of purchases dipped to 44 percent in August, down from 46 percent the month prior.

This comes as the 30-year rate on all loans fell to 3.09 percent, the lowest rate since Ellie Mae began tracking this data and down from 3.24 percent the month prior. Time to close all loans increased to 49 days in August, up from 47 days the month prior. Time to close for purchase loans increased to 45 days in August, up from 44 days in July and time to close for refinances increased to 51 days in August, up from 50 the month prior.

The report said FICO scores continued to increase to 2020 highs, rising to 752 for all loans, up from 750 the month prior. Closing rates increased slightly to 77.2 in August, up from 77.1 percent in July.

Ellie Mae CEO Joe Tyrrell said not only do low interest rates enable homebuyers to get more home for their dollar, it allows new homebuyers who might be waiting for a good deal to enter the market. “As lenders continue to manage high volumes, technology is bridging the gap to add efficiency to manual workflows behind the scenes while freeing up workforces to provide the human interaction that homebuyers demand,” he said.

ACES: Critical Defect Rate Hits 3-Year Low

ACES Risk Management, Denver, issued its quarterly ACES Mortgage QC Trends Report, noting the overall critical defect rate of 1.56% matched the lowest rate in three years;

Other report findings:

  • Defects attributed to the credit and income categories rebounded after climbing higher in Q4 2019;
  • Increases in the share of refinances (5%) and conventional loans (2%) contributed to the improvement in the overall defect rate; and
  • Early Payment Defaults are on the rise.

“The combination of falling interest rates, employment numbers not yet impacted by COVID-19 and steady property appreciation all contributed to increases in the share of both refinances and conventional loans, which in turn drove the continued decrease in the overall critical defect rate observed in Q1 2020,” said ACES Executive Vice President Nick Volpe. “However, the last few weeks of the quarter encompassed the beginning of the COVID-19 pandemic, and given the economic impact of the pandemic on consumers, the number of early payment defaults increased, as one would expect.”

Volpe said early Q2 data shows the number of EPDs reviewed by lenders through ACES is 75% higher than the average monthly rate of EPD reviews for 2019. “Because an EPD review is triggered only when borrowers fall three or more payments behind, this indicates the industry is still in the early stages of the problem, and there is a high likelihood that the number of EPDs will continue to increase,” he said.

“Amid the chaos and uncertainty driven by COVID-19, data provides a clear path forward for lenders,” said ACES CEO Trevor Gauthier. “While the industry’s focus has been on managing the near-historic volumes, Q1 loan defect data also indicates that lenders must also turn their attention to the growing problem of EPDs, as this represents a significant operation and financial risk to their organizations.”

ATTOM: 2Q Home Flipping Declines, But Profits Rebound

ATTOM Data Solutions, Irvine, Calif., released its second-quarter U.S. Home Flipping Report, showing 53,621 single-family homes and condominiums in the United States flipped in the second quarter. Those transactions represented 6.7 percent of all home sales in the second quarter, or one in 15 transactions down from 7.5 percent of all home sales in the nation during the prior quarter, but up from 6.1 percent, or one in 17 sales, a year ago.

The report noted, however, while the home-flipping rate dropped, both profits and profit margins rose. The gross profit on the typical home flip nationwide increased in the second quarter to $67,902, from $63,000 in the first quarter and from $61,900 a year ago.

The increase pushed profit margins up, with the typical gross flipping profit of $67,902 in the second quarter translating into a 41.3 percent return on investment compared to the original acquisition price. The gross flipping ROI was up from 38.9 percent in the first quarter and 40.4 percent a year earlier. The improvement in the typical ROI marked the first quarterly increase since third quarter 2018 and the first year-over-year gain since fourth quarter 2017.

“Home flipping was a study in contrasts in the second quarter of 2020, as the flipping rate went one way and profits went the other,” said Todd Teta, chief product officer with ATTOM Data Solutions. “Far fewer house hunters were out in the market looking for homes, which probably cut into the pool of potential buyers that investors could tap. But at the same time, home flippers who were able to close deals did better than they had done in a year and a half. That likely flowed in large part from extremely low interest rates that enticed buyers who remained employed and were willing to house-hunt within social distancing requirements.”

Genworth: Sharp Slodown in First-Time Homebuyer Market

Genworth Mortgage Insurance, Richmond, Va., released its quarterly First-Time Homebuyer Market Report (https://miblog.genworth.com/first-time-homebuyer-market-report/), noting first-time homebuyer activity decreased largely due to economic shutdown, but remained the most active segment in the housing market during the second quarter.

Key findings:

o          539,000 single-family homes were purchased by first-time homebuyers in the second quarter, down 4.6% from a year ago.

o          First-time homebuyers decreased by 18 percent from the previous quarter to a seasonally adjusted annual rate of 1.86 million in Q2, the slowest pace since 2016.

o          First-time homebuyers represented 40 percent of single-family home sale and 57 percent of all purchase mortgages.

o          Slower pace in first-time homebuyer activity still yielded just more than 1 million Americans becoming first-time homebuyers in the first half of 2020, four percent higher than a year ago.

o          First-time homebuyers out-performed repeat buyers in Q2; repeat buyer market decreased by 19 percent from a year ago to 793,000 units.

o          Lower rates helped to ease housing affordability. Mortgage rates for first-time homebuyers fell to 3.36% in June, the lowest point since 2012, reducing the monthly principal and interest cost by two percent from Q1.

o          Overall, 449,000 first-time homebuyers used some form of low-down payment mortgage products to finance their home purchase in Q2, or a record 83 percent of all first-time homebuyers

o          PMI: Low-down payment conventional mortgages, enabled by the private mortgage insurance industry, helped 207,000 first-time homebuyers in Q2; PMI financed 38 percent of first-time homebuyers, up from 30 percent in the first quarter, and a record for the industry

o          The FHA market financed 30 percent of first-time homebuyers, down from 35 percent in the first quarter.

o          Nationally, the number of rate locks by first-time homebuyers increased by 55 percent between April and June; No states reported negative growth during this period.  

o          New York, Pennsylvania, New Jersey and Michigan saw recoveries in first-time homebuyer rate locks of over 100 percent between April and June.

o          35 states and Puerto Rico reported fewer first-time homebuyers compared to the same period a year ago, but 15 states and the District of Columbia reported more first-time homebuyers.

“The COVID-19 pandemic pushed the U.S. economy into the sharpest recession on record in March. ,” said Tian Liu, Genworth Chief Economist. “The housing market also began correcting in April, resulting in an 18 percent decrease in the number of first-time homebuyers in the second quarter compared to the first quarter.  A quick rebound in May moderated the market decline.”

Redfin: Black Homebuyers Face Disproportionate Lack of Home Inventory, Mobility During Pandemic

Black homebuyers, who are less likely than their white counterparts to have jobs that can be done remotely, face steeper home price increases as white homebuyers move to more affordable suburbs, said Redfin, Seattle.

Redfin reported prices in neighborhoods where Black people bought homes in 2019 were up 7% in July, higher than the 6% price increase in neighborhoods where white people purchased homes last year. The pace of price growth remained unchanged from pre-pandemic rates in February in both groups of neighborhoods.

For this analysis, Redfin used data on home sales during the pandemic looking separately at Census tracts where Black people bought homes in 2019 and neighborhoods where white people bought homes in 2019, according to the Home Mortgage Disclosure Act data. Neighborhoods where Black people bought homes and neighborhoods where white people bought homes are not mutually exclusive.

In the months since the pandemic spread across the U.S. (May to July) home sales fell 15% from last year in neighborhoods where Black people bought homes. Meanwhile, home sales fell 13% in neighborhoods where white people bought homes. Before the pandemic in February, sales were up in both types of neighborhoods, but were growing twice as fast in neighborhoods where white people bought (8%) as in neighborhoods where Black people bought (4%).

“There may also be an increase in gentrification of neighborhoods where Black people bought homes,” said Redfin chief economist Daryl Fairweather, who authored the report. “Black people have struggled more than white people to make mortgage and rent payments during the pandemic. Investors may see that as an opportunity to buy up affordable homes and apartments and renovate them to appeal to wealthier buyers and renters, further reducing the number of affordable homes available to Black people.”

The report said higher price growth and deeper sales decline in neighborhoods where Black people bought homes has likely been due to bigger declines in homes being listed for sale, with new listings down 19% year over year in July, compared to a 12% drop in neighborhoods where white people bought homes. Both types of neighborhoods were experiencing declines in new listings in February, before the pandemic began, down 9% year over year in neighborhoods where Black people bought homes and down 6% year over year where white people bought.

The report can be accessed at https://www.redfin.com/blog/black-homebuyers-more-impacted-by-housing-shortage-rising-prices/.  

Pew: Majority of Young Adults Live with Parents for 1st Time Since Great Depression

The Pew Charitable Trusts said the coronavirus outbreak has pushed millions of Americans, especially young adults, to move in with family members. The share of 18- to 29-year-olds living with their parents has become a majority since U.S. coronavirus cases began spreading early this year, surpassing the previous peak during the Great Depression era.

The report (https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-of-young-adults-in-the-u-s-live-with-their-parents-for-the-first-time-since-the-great-depression/), authored by Richard Fry, Jeffrey S. Passel and D’Vera Cohn, said in July, 52% of young adults resided with one or both of their parents, up from 47% in February. The number living with parents grew to 26.6 million, an increase of 2.6 million from February. The number and share of young adults living with their parents grew across the board for all major racial and ethnic groups, men and women and metropolitan and rural residents, as well as in all four main census regions. Growth was sharpest for the youngest adults (ages 18 to 24) and for White young adults.

The report said young adults have been particularly hard hit by this year’s pandemic and economic downturn, and have been more likely to move than other age groups, according to a Pew Research Center survey. One-in-ten young adults (9%) say they relocated temporarily or permanently due to the coronavirus outbreak, and about the same share (10%) had somebody move into their household. Among all adults who moved due to the pandemic, 23% said the most important reason was because their college campus had closed, and 18% said it was due to job loss or other financial reasons.

Radian: Pandemic No Deterrence to Home Price Growth

Radian, Philadelphia, said home prices across the United States continued to climb in August, rising at an annualized 8.6 percent from the prior month, the second highest month-over-month rate of 2020, according to its Home Price Index released today by Red Bell Real Estate LLC.

The Radian HPI has risen at an annualized rate of 6.9 percent over the past six months (February to August), which was slightly higher than the increase of 6.3 percent recorded during the six-month period ending in July. These annualized increases represent the continuation of the general upward trend in home price gains

“Concerns of broad-based home price collapse as a result of COVID-19 have been overshadowed by the realities of changing borrower demands for housing, temporary government intervention, low mortgage rates and a substantial shortage of supply, resulting in strong appreciation in most parts of the country,” said Steve Gaenzler, Radian SVP of Data and Analytics. “Six months into the official U.S. pandemic, the median estimated home prices have actually risen more than 3.4 percent, or 6.9 percent when annualized, providing a completely unexpected boon for homeowners.”

Nationally, the median estimated price for single-family and condominium homes rose to $260,062. Since the onset of the U.S. pandemic six months ago, homes across the U.S. rose 6.9 percent, a slight decrease from the 7.4 percent rise in the prior six-month period ending in March.

Redfin: August Home Prices Up 11%

Redfin, Seattle, said the national median home price rose 11.0% year over year to $328,400 in August—the largest annual increase since February 2014.

As has been the case for most of the summer, low mortgage rates drove homebuyer demand, but the supply of homes for sale has fallen to another new low.

“The supply of homes is tighter than ever and home prices are growing at the fastest rate in years. Why isn’t this historic seller’s market holding back buyers?” said Redfin lead economist Taylor Marr. “Homeowners are just now deciding to sell; they were just a little late to the game. These new listings have supplied buyers with homes to purchase. High prices almost always eventually draw sellers to market and with record low rates, trading out your home for a new mortgage can be more attractive than refinancing.”

Median prices increased in every single one of the 85 largest metro areas Redfin tracks. nly two of the 85 largest metros tracked by Redfin posted a year-over-year increase in the count of seasonally adjusted active listings of homes for sale: San Francisco (75%) and New York City (10%). The sudden expansion of work-from-home policies due to the pandemic has led many people to flee these cities, two of the country’s most expensive housing markets.

To report can be accessed at https://www.redfin.com/blog/housing-market-news-august-2020.