MReport March 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 50 of 67

M R EP O RT | 49 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 O Buyers, Where Art Thou? Share of those seeking to purchase a home fell during Q4 2019. T he National Association of Home- builders (NAHB) reports just 43% of Americans were actively looking to buy a home during Q 4 2019—a stark decline from the prior years' 54%. Just 11% of Americans considered buying a home during the quarter. "This finding suggests that mortgage interest rates steadily below 4.0% in recent months have not motivated more prospec- tive buyers to get started trying to find a home to buy," the NAHB says. The share of buyers actively seeking a home fell from 46% in Q1 2019 to the reported rate of 43%. That share dipped as low as 41% during Q2 2019. Millennials are the generation seeking to buy homes the most, with 46% reportedly actively searching. They were followed by Gen X buyers (43%), Gen Z buyers (41%), and baby boomers (37%). The Northeast was home to the most active home seekers at 49%. Those seeking a home are needing to clear off their calendar, as the report states 60% of engaged buyers spent at least three months searching—and increase from the 58% last year. This is the fourth consecutive annual gain in the share of buyers who have spent more than three months looking to buy a home. Another issue for prospective buyers is price, as the NAHB also says that 44% of home searchers can't find a house they can afford. Of those surveyed who were having issues finding a home, 51% said they will keep looking for the "right" home in the same location, 39% will expand their search, 19% will accept a smaller or older home, and 16% might buy a more expensive home. The share of prospective buyers who will "give up" looking if they can't find a home after at least three months of searching rose 1 percentage point to 16% in Q 4 2019—the second highest reading since Q 3 2018. CoreLogic reported recently that home prices rose 4% annually in December 2019 and are expected to increase 5.2% over the next year. Price appreciation averaged 3.6% for 2019, which is a considerable drop from 2018's average of 5.8%. CoreLogic projects average growth for 2020 to be 4.6%. The Race Between Income and Housing Affordability Incomes have grown 28% since 2012, and home prices are up 46%. A rch MI concluded that housing isn't as expensive as previously thought, as the average household income has grown 28% since 2012 while the Federal Housing Agency reports home prices have risen 46% during the same time period. The percent of median income needed to afford an average monthly payment is nearly 10% lower in Q 3 2019 than it was during Q 4 2006—29% compared to 38%, respectively. The average from 1986 to 2004 was 34% and that average fell to 23% during Q 4 2012. According to the National Association of Realtors, the median-existing home price in U.S. is nearly $271,000. Using a 90% loan- to-value loan, the monthly mort- gage payment would be around $1,600—nearly 29% of the average household's $5,400 monthly income. This is better than the 34% average from 1987-2004. Monthly payments, however, would have been the same to buy a home in 2006 but affordability is better now because of higher income. California is home to the worst price bubble in the na- tion as it currently takes almost 50% of monthly income to af- ford a monthly payment on a median-priced home. This is a considerable drop from the nearly 80% ratio needed during Q 4 2006. Texas had one of the best pric- ing bubbles, as just more than 20% of income is needed to make a monthly payment on an average home during Q 3 2019. Analysis from MyMove found that while the average rate for a 30-year fixed-rate mortgage is near historic lows, the National Association of Realtors found home purchases fell 1.7% in 2019. One of the factors studied is the correlation between income and mortgage rates—more specifically the difference 1% can make. Working under the assumption a mortgage payment was $1,000 on a $360,000, a consumer would pay $33,233 in interest with a mortgage rate of 3.65%. The total amount of interest paid skyrock- ets to $101,936 if the mortgage rate grows by just 1% to 4.65%. The good news, the report found, is that the American consumer is making more money than ever before—$89,930. Home prices, however, are growing at a faster rate than income. MyMove reports that the aver- age sales price for a home last year was $377,500—growing by more than $100,000 since the start of the decade.

Articles in this issue

Archives of this issue

view archives of TheMReport - MReport March 2020