Housing Market Roundup Nov. 23, 2022
We’ve had a flurry of reports ahead of the Thanksgiving holidays; here’s a quick summary of what’s happening:
FHA Rescinds Mandatory Use Date for FHA Catalyst Electronic Appraisal Delivery Module
The Federal Housing Administration on Tuesday published Mortgagee Letter (ML) 2022-19, Rescinding the Mandatory Use Date for the Federal Housing Administration Catalyst: Electronic Appraisal Delivery Module.
This ML rescinds the mandatory use date for mortgagees to submit appraisals for single-family Title II forward and reverse mortgage endorsements through the FHA Catalyst: EAD Module. FHA is also discontinuing the onboarding of new mortgagees and all activities related to integrating with FHA Catalyst: EAD Module.
FHA emphasized modernization of its information technology remains a top priority, and is dedicated to delivering technology that best meets its business needs and the needs of program participants. To further this objective, FHA indicated in its September 15 FHA INFO 2022-81 that it was reassessing aspects of the development and implementation of the EAD Module on the FHA Catalyst platform.
“After thoroughly evaluating the current structure and capabilities of the module, FHA determined that the most effective technology solution for electronic appraisal submission is one that maintains an industry-aligned external EAD portal that interfaces with the FHA Catalyst platform for data storage, dissemination and analysis,” FHA said.
After October 14, 2023, the FHA Catalyst: EAD Module will no longer be available for appraisal submissions, and all appraisals must be submitted through FHA’s non-Catalyst, legacy EAD portal.
Redfin: Investor Home Purchases Fell 30% in 3rd Quarter
Investor home purchases fell 30.2% year over year nationwide in the third quarter, reported Redfin, Seattle, the largest decline since the Great Recession aside from second quarter 2020, when investor activity plummeted due to the onset of the pandemic. It outpaced a 27.4% drop in overall home purchases nationwide.
Investor purchases slumped 26.1% on a quarter-over-quarter basis, the largest quarterly decline on record with the exception of the start of the pandemic. That compares to a 17.4% quarterly drop in overall home purchases.
Investors lost market share for the second quarter in a row as they pumped the brakes on purchases. They bought 65,000 homes in the metros tracked by Redfin in the third quarter, or 17.5% of all homes that were purchased. That’s down from 19.5% in the second quarter and 18.2% a year earlier, but still up slightly from roughly 15% before the pandemic.
In dollar terms, investors bought $42.4 billion worth of homes in the third quarter, down 26.3% from $57.6 billion one year earlier and down 30.5% from $61 billion one quarter earlier. The typical home that investors purchased cost $451,975, up 6.4% from one year earlier but down 4.3% from one quarter earlier.
“It’s unlikely that investors will return to the market in a big way anytime soon. Home prices would need to fall significantly for that to happen,” said Redfin Senior Economist Sheharyar Bokhari. “This means that regular buyers who are still in the market are no longer facing fierce competition from hordes of cash-rich investors like they were last year.”
CoreLogic: September Mortgage Delinquencies Remain Near Historic Low
CoreLogic, Irvine, Calif., released its monthly Loan Performance Insights Report for September, showing 2.8% of all mortgages in the U.S. (1.4 million loans) were in some stage of delinquency (30 days or more past due, including those in foreclosure), representing a 1.1 percentage point decrease compared to 3.9% in September 2021.
Early-Stage Delinquencies (30 to 59 days past due) rose to 1.2%, up from 1.1% in September 2021. Adverse Delinquency (60 to 89 days past due) rose to 0.4%, up from 0.3% a year ago. Serious Delinquencies (90 days or more past due, including loans in foreclosure), fell to: 1.2%, down from 2.4% in September 2021 and a high of 4.3% in August 2020.
“All stages of delinquency remained low in September,” said Molly Boesel, principal economist with CoreLogic. “Early-stage, overall and serious delinquencies were either at or below their pre-pandemic rates. Low unemployment, which has also returned to the level seen before the COVID-19 outbreak, is contributing to strong mortgage performance. However, if the U.S. enters a recession, increases in delinquency rates can be expected.”
The report said states with the largest declines were Louisiana (down 2.9 percentage points); as well as Hawaii, Nevada and New Jersey (all 1.8 percentage points). The remaining states, including the District of Columbia, registered annual delinquency rate drops between 1.7 percentage points and 0.3 percentage points.
All but one U.S. metro area posted at least a small annual decrease in overall delinquency rates, with only the Decatur, Ill., metro registering a 0.2 percentage point gain since September 2021. All U.S. metro areas posted at least a small annual decrease in serious delinquency rates, with Odessa, Texas (down 4.1 percentage points), Laredo, Texas (down 3.2 percentage points) and Midland, Texas (down 2.9 percentage points) posting the largest decreases.
ATTOM: How Grocery Store Locations Impact U.S. Housing Market
ATTOM, Irvine, Calif., released its 2022 Grocery Store Wars analysis, which shows how living near a Trader Joe’s, a Whole Foods or an ALDI might affect a home’s value – as a homebuyer based on home price appreciation and home equity, or as an investor looking for the best home flipping returns and home seller ROI.
For this analysis, ATTOM looked at current average home values, 5-year home price appreciation for YTD 2022 vs. YTD 2017, current average home equity, home seller profits, and home flipping rates in U.S. zip codes with a least one Whole Foods store, one Trader Joe’s store and one ALDI store. (See full methodology enclosed below.)
The analysis found while homes near a Trader Joe’s realized an average five-year home price appreciation of 49 percent, and homes near a Whole Foods saw an average appreciation of 45 percent, ALDI had a slight advantage at 58 percent.
However, not only does Trader Joe’s lead the pack for homeowners with an average home value at $987,923, but it also takes the lead in home equity with homeowners earning an average of 50 percent ($520,842) equity, compared to Whole Foods at 45 percent ($433,311) and ALDI at 38 percent ($132,643). The average value for homes near a Whole Foods is $891,416, and $321,116 for homes near an ALDI.
Additionally, the report found properties near an ALDI are ripe for investors, with an average gross flipping ROI of 54 percent, compared to properties near a Whole Foods which had an average gross flipping ROI of 28 percent and Trader Joe’s at 25 percent.
Properties near an ALDI have an average home seller ROI of 61 percent, while properties near a Trader Joe’s sit at 58 percent, and 51 percent for properties near a Whole Foods.
Black Knight: Prepayment Activity Hits Record Low; Mortgage Delinquencies Up 4.5%
Black Knight, Jacksonville, Fla., issued its monthly First Look Mortgage Monitor, showing mortgage prepayments fell 16.5% to a single-month mortality rate of 0.48%, well below the previous record of 0.55% and the lowest recorded since at least 2000 when Black Knight began reporting the metric.
The national delinquency rate rose 4.5% in October to 2.91% – up 12 basis points since September – driven by a sharp 9.4% rise in 30-day delinquencies. Florida led the jump in new early delinquencies (+19,000) – with the state delinquency rate rising 53 basis points to 3.42% — giving an initial indication of Hurricane Ian impact.
Loans 60 days past due ticked up 2.9% nationally, while those 90 or more days delinquent saw continued – if modest – improvement, inching down another 1.5% in October. The 19,600 foreclosure starts represented a 7% increase that partly reversed September’s decline, but are still 55% below pre-pandemic levels.
The report said foreclosure starts were initiated on 4% of existing serious delinquencies in October, up slightly from September but still less than half the rate seen in the years leading up to the pandemic. Active foreclosure inventory held steady as volumes have remained subdued in 2022 due to still historically low foreclosure start levels.