MReport September 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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M R EP O RT | 45 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 Affordability Gap Has Some Rethinking Homeownership America's affordability gaps keep expanding, leaving American urban shoppers wondering whether buying in their dream city is best. A recently released report shows America's affordability gaps keep expanding, leaving American urban shoppers wondering whether buying in their dream city is best. A recent posting from the experts at points to the predicament currently being caused by skyrocketing home prices in certain cities, leading many buyers to even wonder if it is worth the expenditure. As home prices keep rising and the affordability gaps keep widening, the American housing market is leaving many more at a loss at to what to do. To offer an example of the aver- age costs in certain cities, a typical home in the popular Californian metro of San Francisco currently lists on the market for upwards of $1.3 million (and this is for a basic home that may even need some TLC). Should buyers be hoping for a more upscale abode, prices only soar from there. While this California enclave is admittedly one of the nation's steepest markets, where buyers most feel the pinch when hoping to purchase, home prices in other pockets of America have also risen to the point where purchas- ers are feeling the pinch. Such cit- ies include popular urban locales like Boston, Denver, and Seattle, among others. In contrast, some metros, including large cities like Cincinnati, Cleveland, Detroit, and St. Louis, are still considered quite affordable. For example, in these areas, buyers can still manage to find a home selling for under $200,000. As the affordability gap widens, showcasing this obvious schism, would-be buyers are forced to decide between abandoning their dreams of living in the primo cities where the cost of living is as high as the plethora of high- paying jobs or living in a lesser- desired area where they won't be jumping in over their head with a backbreaking mortgage payment to look forward to each month. To make this decision even more difficult is the fact that the most costly markets have offered homeowners the incentive of robust appreciation. Whereas in the more affordable markets, appreciation in home value is negligible at best. Residential Refinance Rates Rose 100% in a Year While refinancing soared, purchase mortgage activity plummeted, making up just above one-quarter of all home loans during Q2. A ccording to results posted from the most recent ATTOM Data Solutions second-quar- ter 2020 U.S. Residential Property Mortgage Origination Report, residential refinance mortgages are more popular than ever. Data shows that residential mortgages made up nearly 75% of all home loans during Q2 2020. Specific statistics showed that refinance mortgages secured by residential properties (1 to 4 units) totaled 1.69 million across the nation. This number shows a dra- matic rise of nearly 50% from the first quarter and more than a 100% rise from this same time last year. It also marks the highest level of residential refinance mortgages in seven years. The fact that current interest rates are now at a record-breaking low (right at 3% for a 30-year fixed-rate loan), refinance mort- gages during Q2 2020 represented roughly $513 billion in total dollar volume. This statistic also showed an uptick from this same time a year ago (by 130%), bringing the number to its greatest height in more than 16 years. The total number of home loans during this second quarter rose to 2.72 million, representing an 11-year high. These home loans, according to experts, were driven greatly by refinance loans. The percentage of homeowners rolling over old mort- gages into new ones was revealed to represent 62% of total lending activity during Q2 2020, rising from the previous quarter's 54.5% showing and last year's second quarter percentage (39.6%). In direct contrast to these soar- ing statistics in the refinancing realm, purchase mortgage activity plummeted, making up just above one-quarter (28.8%) of all home loans during Q2 2020. Also experiencing a dip was home equity lending (HELOCs), which lowered to a making up a mere 9.2%, marking the lowest numbers in the past seven years. Experts point to possible—and probable—reasons as to why such low numbers occurred as being the direct repercussions of the current COVID-19 crisis. As the coronavirus pandemic continued to wreak havoc across the United States, consumer spending was among the casualties. As such, the housing market suffered as many would-be buyers held back from jumping into the fray due to social distancing recommenda- tions and myriad other pandemic- related reasonings.

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