Housing Market Roundup June 7, 2022

Here’s a summary of recent housing reports that have come across the MBA NewsLink desk:

Zillow: Half of Americans Cry at Least Once While Buying Home

A new Zillow survey shows 50% of home buyers say the process left them in tears, with Gen Zers and millennials — many of whom are first-time home buyers – far more likely to cry at least once during their home-buying journey. More than 65% of Gen Z buyers and 61% of millennial buyers cried at least once when going through the process of purchasing their home.

According to the survey, nearly 30% of recent buyers said they lost to an all-cash buyer at least once.

“Buying a home is not like buying any other asset; it’s deeply personal and it’s emotional,” said Zillow home trends analyst Amanda Pendleton. “When you make an offer on a home, you have likely envisioned your life there. If you lose out on that home to a stronger offer, it can feel like losing a future you have already started planning. These survey results find, even when they are ultimately successful, a large share of buyers in today’s competitive market experience heartache and stress.”

Nearly 90% of recent buyers Zillow surveyed said at least one aspect of the home-buying process was stressful.

MCT: May Lock Volumes down 11%

MCTlive!, San Diego, said its May Lock Volume Indices, which include an adjustment for the Memorial Day holiday, show that that total mortgage rate locks by dollar volume decreased 10.6 percent in May, and total lock volume is down 29.5 percent from a year ago as purchases now make up most of the volume.

The report said rapid rises in rates have kept would-be borrowers on the sidelines in 2022, with declines in all three lock categories. Purchase locks are now on the decline, down 1.78 percent month-over-month and 10.1 percent from a year ago. The increase in mortgage rates is also evident as refinance volume continues to fall. Rate/term refinances are down 29.6 percent and cash out refinances are down 9.0 percent month-over-month. From one year ago, cash out refinance volume is down 57.5 percent, while rate/term refinance volume has dropped 90.0 percent.

“Given rate/term refinance volume was already down 88 percent year-over-year in the April MCTlive! Lock Volume Indices, this month’s drop does not change the total much,” the report said. “Loan sizes were up 8.3 percent over the past year, with the average loan amount increasing from $291k to $315k.

VantageScore: Investors in ABS, MBS Cite Demand for Greater Competition, Inclusion, Transparency from Credit Scoring Models

A study commissioned by VantageScore Solutions LLC, Stamford, Conn., and conducted by FTI Consulting Inc. found institutional investors with exposure to asset -backed securities and residential mortgage-backed securities (RMBS) are supportive of competitive credit scoring methodologies and desire more transparency and inclusivity among credit scoring models used to underwrite the loans that collateralize the securities they purchase. 

Specifically, the survey, which included qualitative and quantitative research representing the views of a sum aggregate of $47 trillion in assets under management, showed investors want alternative scoring models–93% of investors are open to considering alternatives to conventional scoring methodologies – with a similar level of support from those who focus on ABS and RMBS specifically (91%).

Other findings:

–Investors Demand Financially Inclusive Credit Scoring – 85% of investors noted the importance of the development of models that are more inclusive and incorporate methodologies that will enable the inclusion of the majority of the underserved communities across the United States;

–More Transparency is Key– 58% agree greater transparency around how credit scores are calculated would be helpful; 

–ESG Is Critical- Investors believe Environmental Social Governance (ESG) already plays an important role in investor decisioning with 76% expecting this phenomenon to continue in the future. 

“Investors want credit scores to keep pace with demographic shifts and advances in technology and data innovation – without lowering risk standards,” said Silvio Tavares, President & CEO of VantageScore. “There is clearly demand to move away from the status quo with an emphasis on increased inclusivity and transparency.”

Redfin: Homebuyers Regain Some Control as Supply Grows, Demand Pulls Back

Redfin, Seattle, said May marked a turning point in the pandemic housing frenzy, as buyers regained some control over the market. However, this limited sense of control comes at a great cost, as 5% mortgage rates and record-high prices have edged many buyers out of the market.

The report said a growing share of sellers are recognizing the new limits to their power. More than one in five dropped their price, the highest rate since October 2019.

“The sudden surge in mortgage rates led to a sudden and significant cooldown in the housing market in May,” said Redfin Economics Research Lead Chen Zhao. “However, mortgage rates are now stabilizing and homes remain in short supply, so while we do expect home-price growth rates to decline, we don’t expect prices to fall much at the national level. For homebuyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up.”

The seasonally-adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—fell by 9% year over year during the week ending May 29, marking the seventh consecutive decline.

The report also noted new listings of homes for sale were flat from a year earlier. Active listings (the number of homes listed for sale at any point during the period) fell 10% year over year—the smallest decline since April 2020. Fifty-four percent of homes that went under contract had an accepted offer within the first two weeks on the market, up from 53% a year earlier; 39% of homes that went under contract had an accepted offer within one week of hitting the market, flat compared to a year earlier.

Redfin said homes that sold were on the market for a record-low median of 15 days, down from 19 days a year earlier. A record 57% of homes sold above list price, up from 51% a year earlier.