Housing Market Roundup, July 6 2022
Here is a summary of recent housing, market and economic reports that have come across the MBA NewsLink desk:
ATTOM: New Jersey, Illinois, California Have Highest Concentration of ‘Vulnerable’ Housing Markets
ATTOM, Irvine, Calif., released a Special Housing Risk Report spotlighting county-level housing markets around the United States that are more or less vulnerable to declines, based on home affordability, unemployment and other measures in the first quarter of 2022.
The report shows New Jersey, Illinois and inland California had the highest concentrations of the most at-risk markets in the first quarter – with the biggest clusters in the New York City and Chicago areas. Most southern states were less exposed.
The first-quarter patterns – based on home affordability, underwater mortgages, foreclosures and unemployment – found New Jersey, Illinois and California had 34 of the 50 counties most vulnerable to the potential declines. The 50 most at-risk included eight counties in the Chicago metropolitan area, six near New York City and 10 sprinkled throughout northern, central and southern California.
Elsewhere, the rest of the top 50 counties were scattered mainly along the East Coast and in the Midwest. They included three each in the Cleveland and Philadelphia metropolitan areas, plus two of Delaware’s three counties. At the other end of the risk spectrum, the South had the highest concentration of markets considered least vulnerable to falling housing markets.
“While the housing market has been exceptionally strong over the past few years, that doesn’t mean there aren’t areas of potential vulnerability if economic conditions continue to weaken,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “Housing markets with poor affordability and relatively high rates of unemployment, underwater loans, and foreclosure activity could be at risk if we enter a recession or even face a more modest downturn.”
Veros: Automated Valuation Models Can Help Identify Home Appraisal Bias in Minority Communities
Veros Real Estate Solutions, Santa Ana, Calif., released a study that said automated valuation models, or AVMs, can be the solution needed to identify potential racial bias in home appraisals.
Through an analysis of 50 Chicago ZIP codes, Veros sought to determine whether there is any evidence of bias in its AVM in minority communities. Specifically, the study assessed whether the percentage of undervalued properties was related to the ZIP code’s racial composition. Chicago was selected because its ethnically diverse population spans the full spectrum of racial composition.
“The proportion of properties that are undervalued by 15% or more is not correlated with the proportion of Black, Hispanic, Asian, or White populations,” said Eric Fox, Veros Real Estate Solutions Chief Economist. “This is crucial because it addresses concerns about under-valuations of minority-owned properties.”
The study suggests professional-grade AVMs can be leveraged to provide an independent valuation that could be used to help flag any potential instances of bias.
RE/MAX: May Home Sales Down Year Over Year as Inventory Grows
RE/MAX, Denver, said although May is one of the most active months of the year for home sales, closings in May were 8.5% lower than a year ago, according to its National Housing Report. They did, however, climb 5.8% over April. That month-over-month increase was half of the average gain in May during the pre-pandemic years of 2015-2019.
After a long decline, inventory grew for the second consecutive month, making May the first month of 2022 to top inventory levels compared to one year ago. May ended with 16.3% more homes for sale than in April, and 2.2% more than May 2021. Months’ Supply of Inventory increased from 0.8 in April to 0.9 in May. A year ago, Months’ Supply of Inventory was 1.0.
The Median Sales Price of $430,000 grew 1.2% over April’s $425,000 and was 13.2% higher than the $380,000 recorded in May 2021. The average Close-to-List Price Ratio in May was 103%, meaning that homes sold for 3% more than the asking price. That compared to nearly 104% last month and 102% in May 2021.
Homes spent an average of 23 days on the market in May. They sold three days faster than in April, and two days faster than a year ago.
“A decline in home sales isn’t entirely unexpected given the higher mortgage rate environment, but the gains in inventory are welcome news for buyers who are now starting to see a few more listings come onto the market during their home search,” said Nick Bailey, President and CEO. “Options in multi and single-family housing are there that weren’t available just a few short months ago. Affordability remains a concern, but homebuyers are regaining some control which has been long overdue.”
CFPB Moves to Reduce Junk Fees Charged by Debt Collectors
The Consumer Financial Protection Bureau issued an advisory opinion affirming that federal law often prohibits debt collectors from charging “pay-to-pay” fees.
These charges, commonly described by debt collectors as “convenience fees,” are imposed on consumers who want to make a payment in a particular way, such as online or by phone.
“Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan,” said CFPB Director Rohit Chopra. “Today’s advisory opinion shows that these fees are often illegal, and provides a roadmap on the fees that a debt collector can lawfully collect.”
The advisory opinion interprets the language in Section 808 of the Fair Debt Collection Practices Act, which prohibits debt collectors from collecting any amount that is not expressly authorized by the underlying agreement or permitted by law. The FDCPA was passed in 1977 in response to widespread abuses in the debt collection industry, which Congress acknowledged was not subject to appropriate regulation under existing laws at the time. In 2010, the Consumer Financial Protection Act transferred primary responsibility for the FDCPA, including issuing regulations and ensuring compliance, to the CFPB.
The advisory opinion covers the following on debt collection practices:
• Identifies scope of illegal fees: The collection of any fee is prohibited unless the fee amount is in the consumer’s contract or affirmatively permitted by law.
• Affirms that silence in the law is not an authorization: A debt collector may only collect a fee when it is authorized by the agreement creating the debt or is “permitted by law.” Where no law expressly authorizes a fee, it is not “permitted by law,” even if no law expressly prohibits it.
• Clarifies role of payment processors: Debt collectors violate the FDCPA when using payment processors who charge unauthorized fees at a minimum if the debt collector receives a kickback from the payment processor.
The Advisory Opinion can be accessed here.
First American: Home Affordability Falls to Lowest Level Since 2007
First American Financial Corp., Santa Ana, Calif., released its monthly Real House Price Index, showing real home prices increased at the fastest pace in the series’ history.
The report said real house prices increased 11.4 percent between March and April, and by 45.6 percent from a year ago. Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased by 8.7 percent between March and April and by 16.7 percent year over year. Meanwhile, median household income has increased 5.0 percent since April 2021 and 71.3 percent since January 2000.
The report said real house prices are 24.3 percent more expensive than in January 2000. While unadjusted house prices are now 52.9 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 12.3 percent below their 2006 housing boom peak.
Mark Fleming, chief economist with First American, said the rapid annual decline in affordability was driven by two factors: a 21.2 percent annual increase in nominal house prices and a 1.9 percentage point increase in the average 30-year, fixed mortgage rate compared with one year ago.
“For home buyers, there are few options to mitigate the loss of affordability caused by the increase in mortgage rates and home prices,” Fleming said.
States with the greatest year-over-year increase in the RHPI were Florida (+64.1), South Carolina (+60.5 percent), Arizona (+54.1 percent), Georgia (+52.8) and Connecticut (+51.5 percent). Among the 50 metros tracked by First American, markets with the greatest year-over-year increase in the RHPI were Charlotte, N.C. (+62.5), Tampa, Fla. (+59.6 percent), Raleigh, N.C. (+59.6 percent), Orlando (+56.2 percent) and Phoenix (+56.1 percent).