Category: Financing

Housing Market Update: Typical Buyer’s Monthly Payment Up 39%—The Biggest Annual Gain on Record

Home sellers and buyers are retreating at similar rates, resulting in a housing market that remains very competitive even as it slows.

The typical homebuyer’s monthly mortgage payment shot up 39%, the largest year-over-year gain on record as the average 30-year-fixed rate hovered at a 12-year high of 5.1%. Redfin’s data on homebuyer mortgage payments is based on asking-price data going back to 2015.

“Rising mortgage rates are taking a bite out of pending sales as both buyers and sellers take a step back from the turbulent market,” said Redfin Chief Economist Daryl Fairweather. “It seems as though the ratio of buyers to sellers remains mostly the same, which is why we have yet to see a substantial drop in bidding wars or the share of homes selling quickly. It’s still early days though when it comes to 5% mortgage rates. The number of buyers willing to pay such high mortgage payments could evaporate by late summer.”

Pending home sales posted their largest year-over-year decrease since mid-February and mortgage purchase applications fell 17%. On the supply side, new listings fell 4% and the share of listings with price drops rose to its highest level since November.

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Commercial/Multifamily Lending to Hold Steady in 2022 Amidst Higher Rates and Economic Uncertainty

Total commercial and multifamily mortgage borrowing and lending is expected to hold steady at a projected $895 billion of total lending in 2022, roughly in line with 2021 totals ($891 billion). This is according to an updated forecast released today by the Mortgage Bankers Association (MBA).

Multifamily lending alone (which is also included in the total figures above) is expected to fall to $418 billion in 2022 – down 11 percent from last year’s estimated record of $470 billion. MBA anticipates borrowing and lending to grow in 2023, with almost $950 billion of total commercial real estate lending, and $442 billion in multifamily lending.

“The economic and interest rate outlook has shifted since MBA’s last updated commercial real estate finance (CREF) forecast in February,” said Jamie Woodwell, MBA’s Vice President for Commercial Real Estate Research. “The rapid rise in interest rates is expected to take some wind out of the sails of new lending activity, but healthy property fundamentals and strong property values should support the markets and keep commercial real estate mortgage demand at strong levels. Borrowing and lending should still match last year’s record levels.”

Woodwell continued, “Multifamily lending is expected to remain robust during the rest of 2022 but is now expected to fall short of 2021’s record-high volumes.”

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BLACK KNIGHT’S FEBRUARY 2022 MORTGAGE MONITOR

Despite Rising Interest Rates, Annual Home Price Growth Hits All-Time High of 19.6% in February, Driving Affordability to Lowest Level in 15 Years

  • According to the Black Knight HPI, home prices rose 1.84% in February – nearly four times the 25-year average for the month – and the 14th month of the pandemic to see greater than 1% monthly growth
  • The average home has now increased in value by more than 34% since February 2020, with appreciation continuing to reaccelerate after a brief slowdown last fall
  • Each of the 100 largest U.S. markets experienced double-digit annual home price growth in February 2022, with three-quarters of those markets seeing continued acceleration of appreciation
  • Home price growth is reaccelerating even as interest rates continue to climb, with rates rising nearly one-third of a percent in February and more than 1.25% since the start of the year through late March
  • As a result, affordability is now at its lowest point on record outside of 2004-2007, with the monthly principal and interest (P&I) payment for the average-priced home purchase up $329 (+24%) year-to-date
  • It now takes 29.1% of the median household income to make that P&I payment, up from 19.3% just 15 months ago and a full 4 percentage points more than the 1995-2003 long-term average
  • 82 of the 100 largest U.S. markets are now less affordable than their long-term benchmarks, up from six at the start of the pandemic
  • In recent years, a payment-to-income ratio above 21% has worked to cool the housing market, but record-low inventory continues to fuel growth even in the face of the tightest affordability in 15 years

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Freddie Mac Forecasts Continued Multifamily Growth in 2022

Loan originations could hit $500 million, according to the GSE’s forecast.

Freddie Mac’s latest multifamily market forecast is projecting continued growth for 2022, albeit at a much more moderate pace than in 2021.

The 2022 Multifamily Outlook report noted that demand for existing multifamily properties will remain strong, following the second and third quarters of 2021 that saw the highest levels of demand ever recorded. Alongside growing demand, Freddie Mac’s report also said there were more permits and construction starts recently, adding that community completions should also remain high.

According to property data and analytics company REIS, rent growth for 2021 is expected to be near a record-breaking 10 percent, with the vacancy rate falling to 4.8 percent. For 2022, Freddie Mac is projecting the vacancy rate to remain flat at 4.8 percent, while rent growth will be seen in all 74 U.S. markets that the organization covers.

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BLACK KNIGHT’S OCTOBER 2021 MORTGAGE MONITOR

Tappable Equity Surges $254 Billion in Q3 to All-Time High of $9.4 Trillion as Cash-Out Refinance Borrowers Pull Largest Quarterly Volume of Equity in 14 Years

  • Tappable equity – the amount available for homeowners to access while retaining at least 20% equity in their homes – has risen by 32% over the past year, an increase of $2.3 trillion since Q3 2020
  • Skyrocketing home values over the past 18 months have increased the average mortgage holder’s equity stake by $53,000, for an average of just under $178,000 in available equity per homeowner
  • Rising equity stakes have pushed the average homeowner’s combined mortgage debt down to just 45.2% of their home’s value, the lowest average combined loan-to-value (CLTV) ratio on record
  • While the rate of home price growth is slowing – decelerating in each of the past three months – appreciation remains robust, with supply shortages putting continued upward pressure on prices
  • The recent improvement in for-sale inventory has begun to stall out, with inventory shortages holding firm in each of the past three months
  • With home prices still climbing alongside rising interest rates, the monthly principal and interest payment required to purchase the average-priced home has increased by 24% since the start of the year
  • It now takes 22.4% of the median household income to make the average monthly mortgage payment, up from 18.1% at the beginning of 2021 and the most since late 2018 when 30-year rates were near 5%

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Mortgage Applications Increase in Latest MBA Weekly Survey

CONTACT
Adam DeSanctis
[email protected]
(202) 557-2727

WASHINGTON, D.C. (November 10, 2021) – Mortgage applications increased 5.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 5, 2021.

The Market Composite Index, a measure of mortgage loan application volume, increased 5.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 5 percent compared with the previous week. The Refinance Index increased 7 percent from the previous week and was 28 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 0.1 percent compared with the previous week and was 4 percent lower than the same week one year ago.

“Mortgage rates moved lower for the second week in a row for all loan types. The 30-year fixed rate decreased to 3.16 percent and has declined 14 basis points over the past two weeks. Although overall activity remains close to January 2020 lows, homeowners acted on the decrease in rates. Refinance activity was up 7 percent overall, with gains in both conventional and government refinances. Additionally, the average loan balance for a refinance application was the highest in a month,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase applications were also strong last week, increasing just under 3 percent and down only 4 percent from last year’s pace. The dip in rates might have helped to bring some buyers back into the market, but housing inventory is still extremely low and price growth remains elevated.”

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Commercial/Multifamily Borrowing Jumped 119 Percent in the Third Quarter of 2021

CONTACT
Adam DeSanctis
[email protected]
(202) 557-2727

WASHINGTON, D.C. (November 4, 2021) – Commercial and multifamily mortgage loan originations were 119 percent higher in the third quarter of 2021 compared to a year ago and increased 19 percent from the second quarter of 2021, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

“Overall commercial real estate borrowing and lending are running at high levels, but there continues to be an important differentiation by property type,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Borrowing hit an all-time quarterly high during the third quarter, driven by strong or improving market fundamentals, higher property values, low interest rates, and solid mortgage performance. Borrowing and lending backed by industrial and multifamily properties are each running at a record annual pace. And while year-to-date office and retail lending are each up significantly from last year, both remain below 2019 levels.”

Woodwell continued, “Among capital sources, nearly every major group – including CMBS, banks, life companies and investor-driven lenders – is lending well above 2020 levels, with life companies and investor-driven lenders also exceeding their 2019 year-to-date volumes. The one exception is the GSEs (Fannie Mae and Freddie Mac), whose conservator limited their loan purchase volumes this year.

ORIGINATIONS INCREASE 119 PERCENT IN THE THIRD QUARTER OF 2021

All property types showed an increase in the third quarter in commercial/multifamily lending volumes when compared to the third quarter of 2020. The third quarter saw an 866 percent year-over-year increase in the dollar volume of loans for hotel properties, a 317 percent increase for retail properties, a 156 percent increase for industrial properties, a 105 percent increase for multifamily properties, a 102 percent increase for office properties, and a 45 percent increase for health care property loan originations.

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Black Knight’s September 2021 Mortgage Monitor

8.8 Million Rate/Term Refinances Over Last 18 Months Have Delivered $14 Billion in Monthly Savings to Homeowners; Refi Incentive Reduced but Still Historically Strong

  • Recent rate increases have eliminated refinance incentive for 3.4 million mortgage-holders, but the population of 11.5 million remaining high-quality candidates is still larger than at any time prior to 2020
  • In the 18 months since the start of the pandemic, homeowners have reduced their mortgage payments by more than $1.3 billion per month through rate/term refinances, realizing $14 billion in savings to date
  • By the end of 2022, those borrowers will have realized nearly $35 billion in aggregate savings, with the potential for nearly $16 billion per year in continuing, ongoing economic stimulus
  • Another 5.5 million homeowners took advantage of low rates and record home price growth to tap available equity via cash-outs, which – as rates rise – now make up the majority of refinance activity
  • While homeowners with sub-3% first-lien rates hold just over a quarter of the $9.1 trillion in currently available tappable equity, more than half of that total is held by those with rates of 3.5% or higher
  • Likewise, 71% of tappable equity is held by borrowers with credit scores of 760 or higher, creating opportunities for lower-risk cash-out lending products
  • Almost all recent cash-outs have also resulted in rate reductions, but when 30-year rates hovered near 5% in late 2018, more than 70% of cash-out borrowers accepted rate increases to access their equity

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Black Knight’s First Look at September 2021 Mortgage Data

Foreclosure Starts Reverse Course in September, Pulling Back Despite Moratoria Expiration; Delinquency Rate Falls Below 4% for First Time Since Start of Pandemic

  • The national delinquency rate fell to 3.91% in September – the first time it’s been below 4% in 18 months – marking a 2.3% decline from August and 41.3% from the same time last year
  • What would have been stronger improvement was partially offset by delinquencies rising by 7,800 in FEMA-declared disaster areas in hurricane-impacted Louisiana and by 11,000 in the state as a whole
  • Foreclosure starts also dipped in September after seeing a noticeable rise in August in the wake of the federal foreclosure moratoria expiration
  • September’s 3,900 foreclosure starts was the third lowest monthly total on record and within 6% of the record low set back in April of this year
  • Likewise, the number of active foreclosures fell in September as well, hitting yet another all-time low
  • With nearly 400,000 mortgage holders having exited forbearance plans in just the first two weeks of October alone, it will be essential to track foreclosure metrics closely in the coming months
  • Some 1.2 million homeowners remain 90 or more days past due on their mortgages but are not yet in foreclosure, including those who are still in active forbearance plans

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Share of Mortgage Loans in Forbearance Decreases to 2.62 Percent

CONTACT
Adam DeSanctis
[email protected]
(202) 557-2727

WASHINGTON, D.C. (October 11, 2021) – The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 27 basis points from 2.89% of servicers’ portfolio volume in the prior week to 2.62% as of October 3, 2021. According to MBA’s estimate, 1.3 million homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 17 basis points to 1.21%. Ginnie Mae loans in forbearance decreased 41 basis points to 2.94%, and the forbearance share for portfolio loans and private-label securities (PLS) declined 35 basis points to 6.42%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 37 basis points relative to the prior week to 2.82%, and the percentage of loans in forbearance for depository servicers decreased 24 basis points to 2.69%.

“Many borrowers reached the expiration of their forbearance term as we entered October. The pace of exits climbed to the fastest pace in over a year, and the share of loans in forbearance declined at the fastest rate since last October, dropping by 27 basis points. The decline was the largest for Ginnie Mae and portfolio/PLS loans,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Payment performance has remained steady for those who have exited forbearance into a workout since 2020, with more than 85% of those borrowers current as of October. It also continues to be striking that so many homeowners in forbearance have continued to make their payments. Almost 16 percent of borrowers in forbearance as of October 3rd were current.”

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