TheMReport — News and strategies for the evolving mortgage marketplace.
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52 | 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 The Cheapest States for Mortgage Where can homebuyers find the lowest monthly mortgage payments? Hint: don't go west. C ould where you live cost you more money? Howmuch.net listed the best, and worst states, to get a mortgage and found West Virginia to have the low- est monthly mortgage payment. The report states that the aver- age monthly mortgage payment in the Mountain State is $362, with $52,783 of lifetime interest. West Virginia was followed by Oklahoma with an average mort- gage payment of $463, Arkansas ($474), Mississippi ($476), and Alabama ($493). Hawaii was reported to have the highest average mortgage pay- ment at $2,293. Homeowners in the District of Columbia pay an average of $2,104, California had an average mortgage payment of $2,043, followed by Massachusetts with an average payment of $1,522, and Washington with an average of $1,450 per month. The report found that demand and population density of an area can determine the average price of a home, which can cause monthly payments to rise or fall. Homes in the midwest cost less to purchase, and states impacted by the Great Recession still have higher home prices in comparison to those that weren't as heavily affected. Supporting this report, the National Association of Realtors (NAR) released a study that revealed the average price for single-family homes in metros increased annually in 91% of the markets in Q2 2019. The average price of single-family home during the period was $276,600, an an- nual increase of 4.3%. Metros that saw a decline in single-family pricing included San Jose-Sunnyvale-Santa Clara (-5.3%), San Francisco-Oakland-Hayward (-1.9%), and Honolulu (-1.2%). Boise City-Nampa, Idaho; Abilene, Texas; Columbia, Missouri; Burlington-South Burlington, Vermont; and Atlantic City- Hammonton, New Jersey, all saw double-digit decreases. "New home construction is greatly needed, however home construction fell in the first half of the year," Lawrence Yun, Chief Economist at NAR said. "This leads to continuing tight inventory conditions, especially at more af- fordable price points. Home prices are mildly reaccelerating as a result." Stoking Demand? Here's how mortgage rates and payments are impacting housing market trends. H omeowners are paying less for their mortgage than they were last year, according to a CoreLogic analysis. The analysis compared current home price growth and mortgage rates to the same period last year. It revealed that monthly mortgage payments last year were rising much faster than home prices. "The most extreme example is November 2018, when the U.S. median sale price was up 4% year-over-year but the principal- and-interest payment on that median-priced home was up 17% because mortgage rates had shot up a percentage point from a year earlier," Andrew LePage, Professional, Research Analyst, Office of the Chief Economist, CoreLogic wrote in a blog. However, the drop in mortgage rates since April 2019 has resulted in a 1% year-over-year drop in a typical mortgage payment. This, despite a gain of 3.3% in the me- dian sale price, the analysis found. The trend could also spur sales, the CoreLogic analysis revealed. In fact, falling mortgage payments are also likely to spur home sales. While CoreLogic's Home Price Index (HPI), suggests home prices could average 5.2% by April 2020, the analysis revealed that the typical mortgage payment each month could decline by 1.6%. This includes annual declines averaging 3.6% during the last eight months of this year. But will this trend last? The analysis further revealed that while median sale prices would rise 3.1% by April 2020, the typical monthly mortgage payment would rise from $883 in April 2019 to $901 by April 2020, a 2.1% year- over-year gain. In nominal terms, the year-over-year increase in April 2020 would be 4.8%. "When adjusted for inflation the typical mortgage payment puts homebuyers' current costs in the proper historical context," LePage said. "While the real typical mortgage payment has trended higher in recent years, in April 2019 it remained 31.3% below the all-time peak of $1,285 in June 2006." The analysis revealed that both, mortgage rates as well as home prices in April 2019 were lower than the peak in June 2006. While the average mortgage rate back in June 2006 was about 6.7%, compared with about 4.1% in April 2019, the median sale price in June 2006 was $248,894, com- pared with $227,238 in April. Giving the definition of a "typi- cal mortgage payment," LePage said that it is a mortgage-rate-ad- justed monthly payment based on each month's U.S. median home sale price. Additionally, a typical mortgage payment also helped to measure the impact of inflation, mortgage rates, and home prices on affordability over time. "When adjusted for inflation the typical mortgage payment puts homebuyers' current costs in the proper historical context." — Andrew LePage, Professional, Research Analyst, Office of the Chief Economist, CoreLogic