MReport October 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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58 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA 2020: A Year of Change for the Housing Market? With an eye on home prices, experts predict the market will continue to favor the seller until about 2020. H ome-price apprecia- tion is slowing down, but experts believe we won't see the housing market flip in favor of the buyer until around 2020, according to a Q 3 2018 Zillow Home Price Expectations Survey, conducted by Pulsenomics. The survey, which asked 100 real estate economists and experts for their predictions about the U.S. housing market, found that the declining inventory for 42 consecutive months, along with a faster annual home-value appreci - ation has created a seller's market over the last several years. However, with home price ap- preciation slowing and price cuts occuring in some areas, a buyer's market may occur within the next couple years. But even with slower appreciation, rates are still above the historic average, leading most survey respondents to agree that the market will flip to buyers in 2020 or later. A little less than half of respon - dents, 43 percent, believe 2020 is the year the housing market become a buyer's market, while many believe the Midwest will shift to a buyer's market even faster. Many believe the Midwest may flip in 2019, leaving the rest of the country to flip in 2020 or later. "For the past several years, home sellers held all the cards at the negotiating table, field - ing multiple offers, while buyers faced stiff competition and a fast-moving market," said Zillow Senior Economist Aaron Terrazas. "Conditions are starting to show signs of easing up, but the effects of years of limited construction still linger. Inventory is still falling on an annual basis, and home values are growing well above their historic pace. Although these trends are starting to lose their edge, it is far too soon to call it a buyers market." Home prices are expected to increase by 5.9 percent by the end of 2018, with many survey respon - dents increasing their predictions. "While ongoing supply con- straints are reinforcing the floor on home prices right now, the experts' forecasts still imply the joists will start to crack sometime next year, and result in sub-three percent annual home-value ap - preciation in 2020 and beyond," said Pulsenomics Founder Terry Loebs. "For the first time, a majority of the experts said that there is downside risk to their long-term outlook for home values nationally—and they outnumber experts who assigned upside risk to their forecasts by more than a three-to-one ratio." Mortgage Payment Increases Outpace Home Sale Prices Over the past year, mortgage rates have risen at a pace nearly twice that of home prices, according to a market study. H ome prices have been on the rise, but inter- est rates are rising even faster. Accord- ing to a report from CoreLogic, while the U.S. median sale price has risen by almost 7 percent over the past year, the principal- and-interest mortgage payment has risen by 14 percent, twice as fast as prices. More precisely, the U.S. median sales price of $226,674 in May 2018 rose by 6.7 percent, and the average mortgage payment rose 14.3 percent, due in part to a 0.6 percent rise in interest rates. Additionally, the CoreLogic Home Price Index Forecast predicts a five percent increase in home prices year-over-year in May 2019. Between May 2018 and May 2019, mortgage rates are predicted to rise by around 0.31 percent - age points, while the median sale price will rise 2.4 percent in real terms over that same period. This means that the inflation-adjusted typical monthly mortgage pay - ment would rise from $929 in May 2018 to $986 by May 2019. With mortgage payments expected to rise, home prices may not catch up, especially as, ac - cording to First American, home prices seem to be reaching a "tip- ping point." "We're seeing the first indica- tions that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline," said First American Chief Economist Mark Fleming. House-buying power has increased by around 55 percent since 2006, while prices are just 1.3 percent higher over the same period. Fleming suggested that the strong economy will prevent the tipping point from turning into a recession. "While ongoing supply constraints are reinforcing the floor on home prices right now, the experts' forecasts still imply the joists will start to crack sometime next year, and result in sub-three percent annual home-value appreciation in 2020 and beyond." —Terry Loebs, Founder, Pulsenomics

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