Housing Market Roundup: Dec. 21, 2021
So many reports, so little time. Here’s a roundup of recent housing market reports that came across the MBA NewsLink desk:
California Sees Sharp Decline in Emigration
Research by the nonpartisan California Policy Lab, Berkeley, Calif., found the number of people moving to California from other US states has dropped 38% since the start of the COVID-19 pandemic. Meanwhile, the number of Californians leaving to other states has increased by 12%, which is in-line with exit trends before the pandemic. Taken together, these two trends mean that population loss due to domestic migration has more than doubled since the beginning of the pandemic.
“The public’s attention has been focused on the so-called “CalExodus” phenomenon, but the reality is that the dramatic drop in “CalEntrances” since the pandemic began has been a bigger driver of recent population changes in the state,” said report co-author Natalie Holmes, a Research Fellow at the California Policy Lab and a Ph.D. student at the Goldman School of Public Policy at UC Berkeley.
“Domestic entrances are down across the state, but the Bay Area has seen the biggest drop. By the end of September 2021, there were 45% fewer people moving into the Bay Area from other US states as compared to the beginning of 2020,” said report co-author Evan White, Executive Director of the California Policy Lab’s UC Berkeley site. “San Francisco, San Mateo, and Santa Clara counties have all lost population to migration for the first time since at least 2016 because of these new patterns.”
Exits out of California increased during the pandemic in eight of nine economic regions, with a 21% increase in the Bay Area as compared to 1% increase in the Northern California region. The authors also found that by the end of September, Californians were less likely to move than before the pandemic. However, the share of movers who left California increased from 16.3% in 2016 to 20.3% at the end of September 2021. In the first quarter, 60,000 more people left for another state than moved in and by the third quarter, that number had more than doubled, with 150,000 net exits.
Fiserv: Digital Wallet Use Surging, Fintechs Key to Consumer Financial Experience
Fiserv, Brookfield, Wis., said with consumers leveraging digital tools more than ever, fintechs have become integral to the consumer financial experience.
The latest Fiserv Expectations & Experiences consumer trends survey found fintechs are playing a key part in enabling money management, often filling a need for specific capabilities such as checking credit scores and buying cryptocurrency.
“Consumers are steadily integrating third-party apps into their financial experience, a trend driven by tech-savvy millennial and Gen Z users,” said Sunil Sachdev, head of Fintech at Fiserv. “People have high expectations for their digital experiences, wanting innovative and intuitive solutions. With consumer demands shifting, more financial institutions are bringing fintechs into the fold and partnering with them to deliver the services customers want through their trusted banking relationship.”
A notable survey finding indicates that digital wallets have made their way to the mainstream. Nearly seven in ten surveyed consumers (68%) state they have used a digital wallet in the past 12 months, compared to 58% in 2020 and 51% in 2019. Among respondents, 46% have used a digital wallet from a fintech.
Redfin: Home Prices Near Record High
Redfin, Seattle, said median home sale price rose 14% year over year to $359,750, just shy of its record high. At the same time, the number of homes for sale fell to a record low during the four-week period ending December 12.
The report said homebuying demand continued to outpace supply; the average home sold for more than its list price for the 39th straight week. Other housing market measures followed typical seasonal trends, slowing down as winter approaches. The median sale price in recent periods revised down slightly as more sales from those periods were recorded.
“Homebuyers are being hit particularly hard by this wave of inflation,” said Redfin Chief Economist Daryl Fairweather. “People who set out to buy a home in 2020 but delayed their plans or lost out in bidding wars may now find themselves priced out of homeownership. Right now the only thing likely to slow the rate of home-price growth is a mortgage-rate hike, which would be something of a Pyrrhic victory for homebuyers.”
TransUnion Forecast: Originations to Non-Prime Borrowers Will Continue to Rise for Many Credit Products in 2022
TransUnion, Chicago, said continued expansion of lending, including to non-prime consumers, is expected in 2022 with origination levels reaching or surpassing pre-pandemic levels.
The company’s Financial Services 2022 Consumer Credit Forecast said for auto loans and personal loans, consumers who are generally higher risk are accounting for a growing share of origination volume, with the forecast providing insights that explain why such broader lending will benefit the overall consumer credit market.
With consumer spending expected to increase in 2022, the forecast projects this may lead to a continued rebound in the consumer lending market, especially as consumers resume seeking unsecured personal loans to consolidate growing card balances. Personal loan originations are expected to grow 11% among non-prime consumers in 2022 and 14% with prime and above consumers. This annual growth is driven by significant YOY growth in Q1 (Q1 2021 originations had not yet recovered) and more modest growth through the rest of the year. Delinquencies are expected to increase slightly throughout 2022.
The forecast said the home price appreciation that occurred in 2021 has positioned homeowners to have increased equity in their homes with the median available home equity per consumer at $123,747 as of Q3 2021. This home equity is expected to significantly exceed the balances of non-mortgage debt which is at $10,151 per consumer.
Joe Mellman, TransUnion Senior Vice President and Mortgage Business Leader, said this offers homeowners a means of reducing outstanding non-mortgage debt through a home equity line of credit or tapping into their home equity. The home price index is projected to grow throughout next year and by Q4 2022, the median available home equity per consumer is expected to reach as much as $129,528 – a 5% YOY increase. Despite the increase of refinances in 2021 due to low interest rates, more than 20 million consumers are still expected to benefit from a Rate and Term refinance in the new year.
“Following the surge of mortgage origination activity we saw in 2021 from both new home purchases as well as refinancing, homeowners will be well positioned going into 2022,” Mellman said. “Home prices are expected to continue their upward trajectory which will enable homeowners to build more equity. That helps open the door to forms of financing that allow homeowners to tap into that equity such as a HELOC and to reduce other outstanding debts.”
Zillow: Shifting Winds Set Stage for ‘Unseasonably Warm’ Winter Housing Market
Zillow, Seattle, said the usual spring thaw in the housing market appears to have come before winter even begins, with home value growth trending up in most large markets while inventory is trending down, suggesting a more competitive market is in the cards this winter.
The Zillow November Market Report said U.S. home values rose 1.2% from October and are now 19.3% higher than they were a year ago, a record high for any 12-month period this century. While monthly growth slowed nationally, it accelerated in 30 of the 50 largest metro areas. If this trend continues, the market cooling over the past few months may be short-lived, and this could be an unseasonably warm winter housing market.
“Home buyers angling for a bargain this winter are finding the shelves nearly bare, as inventory has shrunk even faster than in a typical November,” said Zillow senior economist Jeff Tucker. “Buyers will find some silver linings to this cloudy winter market, like fewer bidding wars and the typical home lingering longer on the market before the seller accepts an offer. But that’s small comfort to buyers after a year in which prices have risen by almost 20%.”
The report said a sharp dive in inventory is likely to ramp up competition and possibly push prices up further in coming months. Nationally, the number of for-sale listings is down 6.1% from October and 17.5% from an already low level a year ago. Compared to the pre-pandemic housing market in November 2019, there are 37.8% fewer homes on the market across the U.S. Inventory fell from October in all large metros for which data is available.
Redfin: Homebuyer Competition Drops to Lowest Level in Nearly a Year
Redfin, Seattle, said 59.5% of home offers written by Redfin agents in November faced competition, the lowest level in 11 months and down from a revised rate of 61.8% in October and a pandemic peak of 74.6% in April, but up slightly from 57.3% in November 2020.
The housing market remains hotter than normal due to record-low mortgage rates and an acute shortage of homes for sale, the report said. But homebuyer demand seems to be following a typical seasonal pattern by starting to slow as the year winds down, according to Redfin Chief Economist Daryl Fairweather.
“It’s typical for competition to ease in the winter months as more families take time off for the holidays,” Fairweather said. “While competition waned in November, it was still higher than a year earlier, which is a sign that demand will be strong in the new year.”
November Vacation-Home Demand Rose 83% Above Pre-Pandemic Levels
Redfin also reported demand for second homes rose by 83% in November from pre-pandemic levels, an uptick from October’s 72% increase but still slightly below January’s record 91%.
Demand for second homes surged as pandemic-related lockdowns and a new era of remote work made vacation destinations more desirable, with many wealthy Americans opting to exchange cramped city life for more space. But even as the overall housing market has begun its typical seasonal cooldown, demand is expected to remain above pre-pandemic levels.
“A combination of permanent remote-work policies and record-low mortgage rates is contributing to an uptick in demand, with buyers racing to snag vacation homes before interest rates increase further,” said Redfin Deputy Chief Economist Taylor Marr.
STRATMOR Group: Focus on Customer Experience to Grow in 2022
STRATMOR Group, Greenwood Village, Colo., said virtually every lender wants to grow in 2022, but only those who focus on the customer experience are likely to do so.
In the company’s December Insights Report, STRATMOR Customer Experience Director Michael Seminari and Senior Advisor Sue Woodard said a purchase market with rising mortgage interest rates and increasing regulatory compliance oversight, lenders that are intentional about their customer experience will grow faster, protect their margins and gain market share.
The article, “Mapping the Evolving Customer Journey,” noted multiple studies have shown that when it comes to gaining business, the customer’s experience outranks price and fees. In fact, a customer is four times more likely to leave and go to a competitor if a problem in the process is service-related versus price- or product-related.
“The truth is, every company already has a customer experience. It may not be intentional, and it may not be the one the company thinks it provides or wants to provide. Lenders who put their attention and their budget toward a better customer experience will be the ones that grow,” Woodard said.
The article said the key to a better experience lies primarily in the quality of the lender’s communication with the borrower. The problem is that lenders are still thinking about their interactions with borrowers in terms of their own workflows instead of the customer’s journey.
Wells Fargo Economics: Construction Spending Gaps Narrowing
Wells Fargo Economics, Charlotte, N.C., said the 2022 construction outlook appears to be “friendlier,” as non-residential activity gains momentum and builders overcome coronavirus-induced aftershocks.
“The divergence in residential and nonresidential construction over the past year and a half is owed largely to the pandemic’s aftershocks. Now, despite the near-term risks associated with the Omicron variant, the post-pandemic economic picture is becoming clearer and the gap appears to be narrowing,” said Wells Fargo Senior Economist Mark Vitner.
The report said pricing and availability of building materials stands to be somewhat friendlier in 2022. Supply constraints appear to be easing slightly, and, as the calendar moves into 2022, logistics networks presumably will be under far less stress from the onslaught of imports arising from the holiday season.
However, the reported shortages of workers are increasingly dire. “Labor shortfalls are widespread across the trades, but appear most acute for skilled positions,” the report said. “While unlikely to meaningfully abate, worker shortages should improve in 2022. The absence of fiscal support and rising wages across the construction industry should encourage some sidelined workers to return.”