MReport March 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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44 | TH E M R EP O RT 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 Name Your Price, Buyers Tell Homeowners The share of homes selling above list price has grown considerably since 2012. H ome sellers experienced a windfall in 2017 with buyers paying more than the list price on 24.1 per - cent of home sales during the year, according to a report by real estate website Zillow. Approximately one in four U.S. homes sold above the asking price as a combination of factors led to sellers netting an av - erage of additional $7,000 over their initial price over, the report found. The share of homes selling above list price has grown considerably since the beginning of the housing recovery in 2012 when slightly more than one in six home sales closed above asking price, according to the report This share of homes selling above their asking price has risen every year in the past three years. The typical price increase for homes that sold above the listed price was 3.1 percent in 2017. Low mortgage rates, limited sup - ply and high demand, demographic shifts, and a strong economy were some of the factors that led to this surge in prices, the report said. Additionally, a shortage of home inventory, especially at the entry level and a growing demographic of young first-time buyers looking to start families also helped fuel responsible this market. Cities where the lucrative tech market is booming were more likely than others to see this trend, according to the report. More than half the sellers in San Jose, California; San Francisco; Salt Lake City; Seattle; and Provo, Utah, sold their homes for more than their asking price. The report indicated that in each of these markets, sellers on aver - age made at least an additional $20,000 over their initial asking price. The largest difference in ask- ing price and what a house sold for was found in San Jose, where the average home sold above list netted sellers an additional $62,000. Getting a Mortgage Just Got Easier Driven by credit expansions within GSEs and government channels, mortgage credit availability is on the rise. M ortgage credit avail- ability rose slightly from 5.1 percent to 5.6 percent in the quarter, according to the Urban Institute's Housing Finance Policy Center's latest credit availability index (HCAI). This increase brought the index to the highest level since 2013 and was mainly driven by credit expansions within both the government sponsored enterprises (GSEs) and government channels, due to higher interest rates and lower refinance volumes. The HCAI measures the percentage of home loans that are likely to go unpaid for more than 90 days past their due date. A higher HCAI indicates that lenders are willing to tolerate de - faults and are taking more risks, making it easier for borrowers to get a loan. The report indicated that mortgage credit availability at both Fannie Mae and Freddie Mac was at the highest level since 2011, and its credit box for borrowers had expanded more effectively than the government channels. From Q2 2011 to Q 3 2017, the total risk taken by GSEs increased 86 percent from 1.4 percent to 2.5 percent. The government channel reached its highest level since 2012 after increasing for three consecu - tive quarters in 2017, the report said. In the first three quarters of 2017, the risk in government channel rose from 9.8 percent to 11.1 percent. The government channel includes the Federal Housing Administration, The U.S. Department of Veteran Affairs and the U.S. Department of Agriculture Rural Development programs. Portfolio and private-label se - curities channel continued to stay close to or at the record low for the amount of default risk taken. The channel took only 0.2 percent product risk in Q 3 2017 even as the total default risk taken by this market remained at a low of 2.2 percent in the third quarter of 2017. Even if the current default risk was doubled across all channels, it would still be within the precise standard of 12.5 percent from the 2001 to 2003 levels, the report said.

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