This Week in Real Estate: June 25, 2018

According to reports released by the Census Bureau, HUD and Ellie Mae, single-family starts are up 9.8% through the first five months of 2018 compared to the same time period in 2017 and purchase loans now represent the largest share of loans since the recessionBelow are a few highlights from the third week of June that influence our business:

* Housing Starts Reach Post-Recession High in May as Permits Soften.Total housing starts increased in May with gains in both the single-family and multifamily sectors. Starts increased 5% month-over-month to a 1.35 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. This pace is a post-recession high. The rate of single-family starts was 3.9% higher in May, reaching a 936,000 annual rate. Recent growth trends for single-family starts match ongoing healthy levels of the NAHB/Wells Fargo Housing Market Index, now registering a score of 68. However, builders continue to report concerns about ongoing labor access issues and dramatic price increases for softwood lumber. Recent price increases for lumber are adding about $9,000 in price per newly-built single-family home. On a year-to-date basis, single-family starts are 9.8% higher as of May relative to the first five months of 2017, performing better than our forecast. However, single-family permits, a useful indicator of future construction activity, declined 2.2% in May. With respect to housing’s economic impact, 54% of homes under construction in May were multifamily (612,000). The current count of apartments under construction is roughly unchanged over the last year. In May, there were 515,000 single-family units under construction, a gain of more than 12% from this time in 2017.

* Mortgage Application Volume Second Highest of the YearMortgage interest rates waffled, moving in different directions depending on the product last week, but the volume of mortgage applications increased rather decisively.  The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, surged by 5.1 percent during the week ended June 15. It was the largest increase in total mortgage volume since the week ended January 5, 2018. On an unadjusted basis the volume was up 3 percent. Applications for both refinancing and home purchases increased compared to the week ended June 8. The Refinance Index gained 6 percent and the refinancing share of applications grew from 35.6 percent to 36.8 percent.  The seasonally adjusted Purchase Index increased by 4.0 percent from one week earlier and the unadjusted Purchase Index by 1.0 percent.  The latter was up 3.0 percent from the same week one year ago.

* Ellie Mae: Purchase Loan Share at Post-Recession Highs. Loans for home purchasing continue to dominate mortgage originations and Ellie Mae says they may now represent the largest share of loans since the recession.  The company’s May Origination Insight Report put the purchasing share at 70 percent, the largest percentage at least since they started tracking the figure in 2011.  Purchase loans made up had 66 percent of closed conventional loans, 75 percent of VA loans, and 80 percent of those backed by FHA. The 30-year interest rate for loans closed during the month was also the highest in Ellie Mae’s history, up 5 basis points from April to 4.84 percent. The distribution of loans across loan types was unchanged for conventional and FHA loans at 66 percent and 28 percent respectively while VA loans upped its  share from 9 to 10 percent.  The percentage of originations that were adjustable rate mortgages (ARMs) stayed at 6.6 percent for the second month, the highest since June 2014. Closing time for all loans held steady across the board at 41 days for the third month.  Refinance loans took an average of 37 days and purchase loans 43 days. Overall FICO scores increased slightly for the fourth consecutive month to 724. LTV remained at 79 and front and back DTI’s averaged 26/39.

Have a productive week!


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