February 2014

TheMReport — News and strategies for the evolving mortgage marketplace.

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Th e M Rep o RT | 53 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ANALYTICS the latest Sellers Continue to Lose High Ground Redfin agents say home sellers need to check their expectations r eports from Redfin agents indicate the fourth quarter was a rough one for homeowners looking to sell. The tech-powered brokerage released its latest quarterly survey of agents in its 22 markets across the nation. The findings indicate a continued shift in market balance: The number of agents saying now is a good time to sell fell 7 per- centage points to 65 percent—the third drop in as many quarters— while the number saying now is a good time to buy edged up slightly to 56 percent. Asked about specific challenges, the majority of Redfin agents agreed that sellers are their own worst enemy right now. Sixty- three percent said the greatest problem sellers have is their unre- alistic expectations about the value of their own homes, an uptick from 62 percent in Q 3. The next biggest challenge was low inven- tory at 31 percent. Tight inventory was also a major source of frustration for buyers last quarter, with 87 percent of agents listing that as a common challenge. Next was the problem of elevated competition, though that share was down 14 points to 65 percent, reflecting the decline in bidding wars over the second half of the year. Facing these issues, 45 percent of Redfin agents said their buyers-to- be decided to put off their home search for the holidays. Those determined to stay in the game said they've had to make concessions on how much they're willing to pay and which features they want. With mortgage rates expected to climb to 5 percent or higher this year, Redfin also asked agents how high interest rates would have to go before the housing market really starts to suffer. The majority—39 percent—said 5.5 percent is the magic number. "If rates reach 5.5 percent, we'll start to lose entry-level buyers. The ripple effect will reach homes in almost every price point," said Redfin agent Jeff Bale, who oper- ates in Portland. Survey Shows Gap in Use of Online Tools Fannie Mae finds opportunities for companies to enhance their offerings. A recently released borrower survey on shopping habits shows increasing reliance on online tools when mortgage shopping, though many still find the learning curve too steep. Fannie Mae's Economic & Strategic Research Group recently released the findings from its latest topic analysis. The data was taken from consumer survey results from throughout the second quarter of 2013. According to the group, the collected data show higher-income borrowers—those earning at least $100,000 per year—are more likely to use online applications to make their own mortgage calculations, while low earners—those making less than $50,000 annually—rely more on real estate agents, lenders, and advice from family and friends in making their borrowing decisions. In addition, when asked for suggestions in making the shopping process easier, high-income borrowers focused more on the technological side, with most saying they would like an improved way to compare multiple loan offers. On the other hand, low-income consumers were more likely to say they want easier-to-understand loan terms and costs. "Higher-income borrowers are using online shopping approaches about twice as frequently as lower- income borrowers, which aligns with a stronger focus on doing their own calculations and using tools," said Steve Deggendorf, director of business strategy for Fannie Mae's research group. However, Deggendorf noted, all income groups said they would like to make greater use of the Internet than they currently do, "indicating that online technology will likely play an increasingly larger role for all borrowers in the mortgage shopping process and presents opportunities for shopping enhancements." "Enhanced online tools could help consumers of all incomes to become better mortgage shoppers and achieve better outcomes by addressing the issues they think will make the process easier," he added. Home Prices See Meager Growth in October The month's indexes show different results. W hile the S&P Case-Shiller Home Price Indices for October showed a significant 13.6 percent year- over-year leap, other measures saw more subdued gains for the month. Lender Processing Services' (LPS) monthly Home Price Index—re- leased a day before the Case-Shiller figures—climbed to $232,000 in October, putting prices about 8.2 percent higher than they were at the start of 2013. Annually, LPS' index was up ap- proximately 8.8 percent, a minor increase compared to the annual improvement in the Case-Shiller index. Monthly, gains came to about 0.1 percent, also down relative to the Case-Shiller report. Of the largest state markets, all posted a monthly gain of less than 1 percentage point, with Rhode Island topping out at 0.8 percent. Following that were Massachusetts, Georgia, and New York, which all saw 0.7 percent price increases. The story was similar for price de- clines, with Oklahoma reporting the greatest monthly depreciation at -0.4 percent and New Mexico, Tennessee, and Washington all reporting -0.3 percent price changes.

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