MReport February 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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M R EP O RT | 33 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 ORIGINATION THE LATEST Single-Family Authorizations Post Annual Increase Good news for the ongoing inventory crunch? B uildFax's December 2019 Housing Health Report found single-family authorizations fell 2.61% from November to December 2019, but increased 4.82% year-over-year. The three month outlook from October to December also grew 5.77%. This is the consecutive month that the rolling three-month average is positive after showing declines most of 2019. "The U.S. is facing a housing shortage, in part due to the slowdown in housing construction last year. This has been felt in both large metros and smaller cities across the country," said Jonathan Kanare, Managing Director, BuildFax. "Now, even though the economy is showing strong growth and mortgage rates remain low, those who want to buy a new home are experiencing challenges with increased competition on a tight housing supply." Also seeing increase was the existing housing activity, as volume rose 9.47% and spending grew 16.26% year-over-year. Remodel volume and spending—a section of maintenance that includes renovations, additions, and alterations—increased by 5.08% and 10.85%, respectively. "These notable increases may be a result of homeowners feeling locked into their existing property. With interest rates low and the economy seeing strong growth, homeowners are facing increased competition in the housing market, especially as the housing stock dwindles. Consequently, instead of making a new home purchase, homeowners could be investing more in their existing property," the report states. One of the items that characterized the housing market over the past year was the slowdown in housing activity, which only saw an uptick over the final months of the year. Additionally, BuildFax states people may feel "locked into their existing home" due to increased competition for housing. Just 10.1% of people in the U.S moved to a new home between 2017 and 2018—one of the greatest decades in mobility since 2008. Mobility fell to 9.8% as 2019 came to a close—the lowest reading since the metric was first tracked in 1947. Studying the Availability of Mortgage Credit Index falls by 3.5% in December The Mortgage Credit Availability Index (MCAI) fell by 3.5% in December, according to the Mortgage Bankers Association. The Conventional MCAI dropped 1.4%, while the Government MCAI de- creased by 6.1%. Of all the component indices, the Jumbo MCAI fell by 1.3% and the Conforming MCAI declined by 1.6%. "Credit availability fell in Decem- ber after three months of expansion, driven by drops in both conventional and government supply," said Joel Kan, MBA's AVP of Economic and Industry Forecasting. "Perhaps most noteworthy was a 6 percent drop in government credit supply because of changes to the Veterans Administra- tion (VA) loan program, which elimi- nated loan limits for certain borrowers as of January 1, 2020. "This likely prompted many investors to remove VA programs in high-cost counties from their offer- ings. There was also a reduction in a streamline refinance programs, as slightly higher rates slowed the refi- nance market at the end of 2019." A study of weekly mortgage ap- plications by the MBA for the week ending January 3 revealed that the share of mortgage applications fell 1.5% from the number of submissions counted just two weeks prior. These statistics were measured by the Market Composite Index, which accounts for all mortgage loan ap- plication volume. MBA SVP and Chief Economist Mike Fratantoni suggested tensions in the Middle East contributed to the drop in applications. "Mortgage rates dropped last week, as investors sought safety in U.S. Treasury securities as a result of the events in the Middle East, with the 30-year fixed mortgage rate declining to its lowest level (3.91%) since early October," he said. Freddie Mac's latest Primary Mort- gage Market Survey found that the 30-year fixed-rate mortgage fell to 3.64% from the prior week's 3.72%. "Mortgage rates fell to the lowest level in thirteen weeks, as investors sought the quality and safety of the U.S. Treasury fixed income markets. The drop in mortgage rates, combined with the strong labor market, should propel a continued rise in homebuyer demand," said Sam Khater, Freddie Mac's Chief Economist.

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