TheMReport

38 | 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 ORIGINATION Coming to an End The extended period of low mortgage rates is drawing to a close, but it's left its mark on the housing market. A ccording to a new report by Urban Institute, 91 percent of mortgages as of September had average rates below 5 percent. By comparison, there were al- most no mortgages with rates that low in 2001 and less than a quarter of U.S. mortgages had rates that low in 2010. But while that's been good for consumers, Urban Institute reports that it's been less of a positive for the GSEs. "One consequence of the in- crease in mortgage rates is that the pool of borrowers who are able to save money by refinancing their mortgages has shrunk substan- tially," the report states. "We have seen this in recent months, as the refinance share for all three agen- cies has plummeted." According to the report, all three agencies were at or near their lowest point for refis in recent history in August. The refinance share for all three agencies grew slightly in September, but refinance was much lower than it was a year prior. September shares finished at 32 for Fannie Mae, 26.5 for Freddie Mac, and 21 for Ginnie Mae. "This also has implications for the options homeowners have for extracting equity from their homes," the report states. Typically, these include cash-out refinances and home-equity lines of credit, or HELOCs. According to the institute, the cash-out refinance share of conven- tional refinance mortgages rose to 77 percent in Q2. That's the highest level since the third quarter of 2008 when the share was 78 percent. "In 2008, however, the cash- out spike was due to borrowers overleveraging their homes," the report states. Today's numbers are attributable to the reduction in rate refinances. The effects on loan originations have been slight. According to the report, first lien originations totaled $820 billion in Q2, which was down only a bit from Q2 of 2017. That's mostly due to higher interest rates. The share of portfolio origina- tions was 32 percent in the first half of 2018, up from 30 percent in 2017, the report states. The GSE share was around 44 percent, down from 46 percent in 2017. The FHA/VA share was slightly down: 22 percent for the first half of this year, versus 23 percent in 2017. Origination of private-label securities was under just under 2 percent, which was higher than the 2017 share of 0.6 percent. Where to Buy a Home This Winter Things are beginning to cool off in some of the nation's hottest housing markets, earning them a spot on this Zillow list. F or a few years, housing markets have been defined by rising prices, competitive bidding wars, and tight inventory, but these trends are beginning to soften. In fact, a few of the nation's hottest housing markets are now listed as some of the "best places for buyers this winter," according to analysis from Zillow. The top five metros for buy- ers this winter, according to Zillow, are Orlando, Florida; Boston, Massachusetts; Seattle, Washington; Las Vegas, Nevada; and Charlotte, North Carolina. In determining the metros for its list, Zillow considered three significant factors: changes in the percentage of listings with price cuts, expected rent price apprecia- tion for the next year, and current affordability relative to the past in each market. Price cuts for listed homes gener- ally signify that the homes have been sitting on the market for some period without competitive bids. In other words, it means "more options for buyers, less competition for homes, and more room for buy- ers to negotiate," Zillow said. Some of the nation's hot- test housing markets are now experiencing significant jumps in the percentage of listings that un- dergo price cuts. Seattle tops this list with 11.6 percent of listings experiencing price cuts, followed by San Diego with 10 percent, and Las Vegas with 9.8 percent of listings with price cuts. Another market recently notori- ous for high prices that experienced a jump in listings with a price cut was San Jose, California, with price cuts on 8.8 percent of listings. At the top of the list of places to buy this winter, Orlando experienced price cuts on 6.8 percent of its listings. Projected rent change over the next year varied in the top five markets, with 1.4 percent growth expected in Orlando. Boston and Seattle are poised for 3.1 percent and 3.3 percent price growth over the next year, respectively. On the other hand, rental prices are expected to drop 0.1 percent in Las Vegas. Charlotte is expected to see rents rise 2.9 percent over the next year. For its third measure, Zillow assessed mortgage affordability by calculating the amount of monthly median household income spent on mortgage payments for median- priced homes in each market with a 20 percent down payment on a 30-year fixed-rate mortgage. All of the top five markets had an affordability percentage under 30 percent. In Orlando, 20.2 percent of a monthly median income would be spent on mortgage payments for a median-priced home. In Boston, that percentage is 25.8; in Seattle, 28.6 percent; in Las Vegas, 22.5 per- cent; and in Charlotte, 15.1 percent. The least affordable markets among those tracked by Zillow are San Jose, California; Los Angeles, California; and San Francisco, California. In each of these mar- kets, the median income spent on a mortgage payment for a median- priced home is approaching more than 45 percent. "The housing market always lets up a little in the fall, when the kids are back in school and the home shopping season wraps up for the holidays," said Aaron Terrazas, Senior Economist at Zillow. "But this fall and winter are shaping up to be more favorable for those buyers who have struggled to get into the housing market for several years amid red-hot competition."

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