TheMReport — News and strategies for the evolving mortgage marketplace.
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the latest ANALYTICS Or ig i nat ion Recovery Finally Showing Signs of Sustainability Investor drop-off, seller enthusiasm has created conditions for the market to find solid footing. a na ly t ic s Credit Availability Tightens as QM Date Nears se c on da r y m a r k e t over the next year," Diggle said. "The upshot is that the pace of house price gains will slow." With early signs already showing price growth "losing a bit of steam"—including a decline in asking prices in July (as measured by Trulia)—Capital Economics stands by its forecast of an 8 percent increase in house prices over 2013 followed by 4 percent gains in subsequent years. Meanwhile, even as prices continue to rise, the company's preferred metrics show housing remains on the cheap side, with the National Association of Realtors' Affordability Index suggesting the median household has 178 percent of the income required to buy a median-priced home. "Of course, should supply conditions not loosen to the extent that we are expecting, double-digit price gains could continue," Diggle admitted. "But even then, we think it might take 2.5 years before housing becomes overvalued." s e r v ic i ng M arket indicators continue to point to an imminent slowdown in home price gains—further allaying fears of another housing bubble in the making, Capital Economic says. In the firm's latest edition of US Housing Market Analyst, property economic Paul Diggle notes investor activity has fallen off nearly one-fifth over the last four months, with investor sales dropping from 23 percent to 18 percent as the inventory of heavily discounted distressed homes declines. On the other hand, the ongoing rise in prices has encouraged more sellers to enter the market, bringing new listings up faster than home sales and resulting in a 10 percent inventory improvement since the start of 2013. "With sellers motivated by the earlier rise in house prices, we expect the loosening in supply conditions to go much further Lending slowed a bit in Q3 as the industry adjusts in anticipation of the CFPB's QM rules. L ending tightened a bit in August as the mortgage market began making adjustments in preparation of the Consumer Financial Protection Bureau's (CFPB) qualified mortgage (QM) requirements set to go in effect January 2014. The Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index (MCAI) decreased 0.7 percent monthover-month in August to a reading of 111.5—the first drop following four straight months of gains. The index was benchmarked at 100 in March 2012. According to Mike Fratantoni, VP of research and economics for the association, August's decline was driven by decreases in availability of loans that have interest-only features and of loans with terms exceeding 30 years—two features that don't fit into the QM rule. "As these loan features are outside of the qualified mortgage (QM) definition, these changes may reflect the beginning of QM implementation, and the fact that Fannie Mae and Freddie Mac are limited to acquiring loans that meet the QM definition," Fratantoni said. At the same time, "[s]hifting borrower eligibility requirements on jumbo loan programs led to offsetting increases and decreases to the MCAI," MBA noted. The M Report | 51