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- Thanks a Million: Housing Gap 2.0
Thanks a Million: Housing Gap 2.0
By Jeff Walton & Kelly Guest
Kelly Guest
August 19, 2024
August 19, 2024
Ah…a million dollars. The Barenaked Ladies immortalized the fantasy of amassing that coveted amount of cash in their 1988 song, "If I Had a Million Dollars," in which the first item they sing about buying is a house. Well, good luck: Redfin reported last week that "nearly one in 10 (8.5%) U.S. homes are worth $1M or more - the highest share of all time." That’s up from 7.6% a year ago and more than double than the pre-pandemic era. And, if you know the way to San Jose, you better have a big wallet: NAR says the median price in that market is a whopping $2,008,000.
"Millions" and "affordability" don't usually go together - especially in the housing arena. Historically, "housing gap" has described racial discrepancies; but "Housing Gap 2.0" began as a fissure in March 2022, when mortgage interest rates began their ascension that peaked in October 2023 at 7.79%. Even with the giddiness surrounding predicted Fed rate cuts next month, Freddie Mac's latest weekly average showed 6.49% for a 30-year FRM, and economist Lawrence Yun warns that "a super-sized budget deficit could limit the decline in mortgage rates." Meanwhile, sales in the overall housing market were down in Q2, Redfin reports investor purchases were up 3.4% during that time, and 69% of investor buys were single-family homes to accommodate increasing rental demand. Couple that with NAR's Q224 home price analysis that shows the U.S. median home price has grown to $422,100, and you've got a new, growing gap driven by means, income levels and the people who got in while they could.
CHATTER
DON'T GET TOO HIGH ON CPI: The Consumer Price Index for All Urban Consumers increased 0.2% on a seasonally adjusted basis, after declining 0.1% in June. Over the last 12 months, the all items index increased 2.9% before seasonal adjustment. NAR's Chief Econ Lawrence Yun warns about the deficit, saying "More government borrowing means less mortgage money to lend. The new normal for mortgage rates will be around 6% and definitely not to 4% as was before COVID," in his post-release statement.
THEY CALL IT PARTNERSHIP: Planet Home Lending "has acquired certain assets of retail lender Axia Home Loans." Planet's announcement goes on to say that "The move to Planet provides Axia's sales professionals with funding for continued volume growth [ ]." HW reports Axia is also winding down its wholesale business.
CHASE RUNS AHEAD: Mortgage earnings were down 3.6% in Q2 for commercial banks, but IMF reports that 17 of 26 publicly traded companies saw earnings declines, according to an analysis from sister pub Mortgage Trends. Chase had a 62.1% increase in originations in Q2 and $620M in mortgage fees and income for the first half of the year. Combined mortgage earnings from the 26 banks were a combined $1.24B.
MULTI-FAMILY LENDING DROPPED 49% Y-O-Y IN 2023 - MBA: Lenders provided $246.2 billion in multifamily lending last year. The top multifamily lenders in 2023 by dollar volume were Berkadia, Walker & Dunlop, JP Morgan Chase & Company, CBRE, and Greystone.
UBS is selling Credit Suisse's U.S. mortgage servicing biz to a "consortium."
HW'S LOGAN MOHTASHAMI says housing comeback will fend off recession.
MOVING & SHAKING
SCOTIABANK raids JP Morgan Chase to start capital markets biz in Houston. The 7 defectors are Thanh Roettele, Brice Simpson, Francis Lim, Kevin Wooten, Lindsay Schelstrate, Russell Allen and Daisy Michalson.
FOLLOWED A COLLEAGUE: Glenn McGillivray joined Rocket Mortgage (led by his former Intuit colleague Varun Krishna) as their new Chief People & Places Officer.
FAIRWAY INDEPENDENT MORTGAGE named Haley Parker Chief Marketing and Business Development Officer, and Brittny Hovland SVP of Operational Support.
CLIMBING AT ANGEL OAK: Tom Hutchens rises from EVP to President, and slid John Jeanmonod into his old position from regional VP. Two others - Alysse Prosnick and Travis LaLonde - have been promoted to EVP roles.
INGENIUS INSIGHT: NAR-LY ON MULTIPLE FRONTS
BACKSTABBING OR STABBING BACK? Michigan real estate brokers are suing NAR alleging anti-trust violations, claiming "compulsory membership" in NAR, their state association and local board also results in “economic coercion, unfair restraint on trade and conspiracy.” To put a fine point on the costs of these multiple memberships, one Minnesota Realtor who wishes not to be named showed us what she paid in dues for 2024: $156 for NAR, $209 for her state association, $200 for the local board, and $141/quarter for MLS access. The agent went on to say, "A lot of money goes for paychecks at these associations that are set up to for the supposed benefit of people who have to create their own paychecks."
This latest legal scrum comes as NAR interim CEO Nykia Wright blasts an email to members touting extensive media efforts, including 920 media interviews, op-eds and articles in national and 39 regional/local media markets explaining how the practice changes will benefit agents and consumers alike. And because all that messaging is expensive, NAR TAKES A PAGE FROM THE TAX MAN'S PLAYBOOK WITH 2025 "SPECIAL ASSESSMENT" FOR MEMBERS: The special assessment for the consumer advertising campaign (formerly known as Public Awareness Campaign) is $45 for 2025.
AND SPEAKING OF SUING…HW's Brooklee Han digs into the potentially ugly situations that may arise under the commission suit settlement practice changes, whether agents who do the work and get paid less or not at all would or should sue buyers, and other potential fallout. A striking statement in Han's piece comes from NextHome CEO James Dwiggins, who feels, "If using an agent, buyers should only purchase homes where they could also afford to pay their agent out of pocket if necessary." Riiiiiiiiiiight.
FROM ESSENTIAL TO OPTIONAL? Founded in Chicago, NAR has been the big dog since 1908. But now, the American Real Estate Association has popped up as an alternative to the embattled National Association of Realtors, offering $20 annual dues and what they're billing as the "National Listing Service" (NLS).
MARKET/INDUSTRY
NORMALIZING BIG NUMBERS: NAR NOTES FIRST MEDIAN HOME PRICE OVER $2M
The National Association of Realtors released Q224 home price info:
The national median single-family existing-home price grew 4.9% to $422,100
Single-family existing-home sales prices rose in 89% of measured metro areas – 199 of 223 – in the second quarter, down from 93% in the previous quarter.
Twenty-nine markets (13%) experienced double-digit annual price appreciation (down from 30% in the prior quarter).
San Jose won the top title, with the median home price rising to $2,000,008 in that market.
The monthly mortgage payment on a typical, existing single-family home with a 20% down payment was $2,262 – up 10.3% from one year ago.
HOMES VS. HOMES NOT: REDFIN SAYS INVESTORS GOBBLING UP PROPERTY
The Seattle-based brokerage's Q224 investor purchase analysis says that while overall home purchases were down 1.9% in Q2, investor purchases were up 3.4%.
Investors bought 1 of every 6 U.S. homes that sold—purchasing $43 billion worth of properties—and 1 of every 4 low-priced homes that sold.
Single-family homes were the most popular property type among investors, making up 69% of their purchases.
The changes in purchase activity of investors ramping up, and average consumers slowing down - combined with the fact that the U.S. Homeownership Rate stalled y-o-y in Q2 - points to a widening gap between the investor class, current homeowners and renters.
Redfin Senior Economist Sheharyar Bokhari sums it up: “One reason real estate investors are coming out of hibernation is to take advantage of robust demand from renters. Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans, which is fueling demand for rentals. Investors, many of whom can afford to pay in cash to avoid the sting of high mortgage rates, are cashing in on that demand.”
"FRUSTRATION EVIDENT" - FANNIE'S JULY HPSI
Consumers are less than enthusiastic in Fannie Mae's latest Home Purchase Sentiment Index:
17% of consumers indicated that it’s a good time to buy a home, down from 19% in June,
the share believing it’s a good time to sell decreased from 66% to 65%.
"While we’re seeing signs that affordability may be improving in certain parts of the country as supply slowly comes online, household incomes remain stretched relative to would-be mortgage or rent payments, and our latest survey once again reflects real consumer frustration with the housing market," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
BUILDERS BUMMING: NAHB/WF AUGUST BUILDER SENTIMENT INDEX
The HMI index fell two points to 44 in August, and the gauge charting traffic of prospective buyers also declined by two points to 25. The component measuring sales expectations in the next six months increased one point to 49.
Any number over 50 indicates that more builders view conditions as good than poor.
“The only sustainable way to effectively tame high housing costs is to implement policies that allow builders to construct more attainable, affordable housing.” - NAHB Chairman Carl Harris
SELLER FINANCING UNDER SCRUTINY: CFPB issues advisory opinion and a research report on contracts-for-deed, perhaps otherwise known as land contracts, installment land contracts or a few other labels. From the release: "The advisory opinion affirms that federal home lending rules and laws cover contracts for deed and provide key consumer protections." The bureau is targeting "predatory lenders [who] use contracts for deed to target low-income borrowers, and set them up to fail so the sellers can kick them out and repeat the process with a new family."
MORTGAGES MEET ECONOMY: MBA’S NATIONAL DELINQUENCY SURVEY
The delinquency rate for mortgage loans on 1-4 residential units increased to a seasonally adjusted rate of 3.97% of all loans outstanding at the end of Q224
The delinquency rate was up 3 basis points from Q124 and up 60 basis points from one year ago.
The percentage of loans on which foreclosure actions were started in Q2 fell by 1 basis point to 0.13%
“Mortgage delinquencies increased across all product types compared to this time last year. While delinquencies are still low by historical standards, the recent increase corresponds with a rising unemployment rate, which has historically been closely correlated with mortgage performance.” - Marina Walsh, CMB, MBA’s Vice President of Industry Analysis.
ATTOM DATA’S ANALYSIS: JULY '24 FORECLOSURE REPORT…shows there were a total of 31,929 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 15% from a month ago and up slightly by .2% from a year ago.
MORTGAGE APPLICATIONS INCREASED 16.8 PERCENT FROM ONE WEEK EARLIER: MBA Weekly Survey for the week ending 8-9-24.
The Market Composite Index increased 16.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15% compared with the previous week.
The Refinance Index increased 35% from the previous week and was 118% higher than the same week one year ago.
The seasonally adjusted Purchase Index increased 3% from one week earlier. The unadjusted Purchase Index increased 2% compared with the previous week and was 8 percent lower than the same week one year ago.
“Rates on both 30- and 15-year fixed rate mortgages decreased for the second consecutive week, and combined with the previous week’s rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance.” - Joel Kan, MBA’s VP Deputy Chief Economist.