A weekend topic starting with a press release. “ATTOM released its third-quarter 2021 U.S. Residential Property Mortgage Origination Report, which shows that 3.59 million mortgages secured by residential property (1 to 4 units) were originated in the third quarter of 2021 in the United States. It marked the first time in more than two years that total lending decreased in two consecutive quarters. More notably, it was the first time in any year since at least 2000 that lending activity declined in both the second and third quarters, which usually are peak buying seasons.”
“The continued dip in total loan activity during the third quarter represented a growing sign that the nation’s appetite for new home loans is easing – and that the nation’s decade-long housing market boom could even be cooling off. The latest trends have reversed patterns seen from early 2019 through early 2021, when total lending activity nearly tripled amid various forces that pushed a frenzy of refinancing and purchasing.”
The Dallas Morning News. “Here’s another sign that the housing market is slowing: The number of new home loans in Dallas-Fort Worth and nationwide is dropping. In the D-FW area, the number of home loans taken out in the third quarter was down more than 25% from a year ago. Home lending activity fell in the third quarter in more than 85% of the U.S. metro areas Attom Data surveys. The number of home loans fell in all of Texas’ major markets. Austin had the largest decline from a year ago, with the number of new mortgages falling by more than 30% in the third quarter. Houston mortgage activity was down 21%, and in San Antonio there were about 10% fewer home loans made than in third-quarter 2020.”
The Orlando Business Journal in Florida. “There were 31,757 mortgage loans originated for homes in metro Orlando last quarter, down 33% from the year before and down 4.5% from the second quarter, according to a Dec. 2 report by Attom Data Solutions. It was the first time since fourth-quarter 2019 that Orlando’s mortgage lending activity decreased quarter-over-quarter.”
From WFSU. “According to William O’Dell, director of the University of Florida’s Shimberg Center for Housing Studies, many Florida homes are selling for the same price they were before the Great Recession. O’Dell said in Florida, median single family home sales prices peaked in 2006. ‘At approximately $337,000. These numbers are adjusted for inflation. And then, of course, with the great recession, prices bottomed out by 2011 and then began this rise again through the remainder of this past decade,’ O’Dell told lawmakers.”
“O’Dell said in 2020, the statewide median for single family home sales prices was just over $300,000. He said Florida’s beginning to approach its 2006 peak. And he said in the panhandle and portions of North Florida, the median for single family home sales are now at those 2006 prices.”
From Bisnow Boston in Massachusetts. “Boston’s office market stands among the nation’s most resilient in th past year, despite metrics suggesting visitor traffic is down more than 50% over pre-pandemic volume in the city’s downtown. ‘People see Boston as really a safe haven,’ Newmark Executive Managing Director David Douvadjian said. ‘It’s really a developers market because there’s so much money out there right now.’”
“Douvadjian said, half-jokingly, Boston firms don’t know what recourse loans are anymore. ‘It’s so competitive, I hear it all the time,’ he said. ‘Hey Dave, we can’t lend in your market. I’m not going to waste my time because you’re going to beat my deal by 50 basis points.’ And we’re seeing it more and more.’”
From Multi-Housing News. “Multifamily lending is forecast to reach about $421 billion in 2022, up from the record $409 billion projected for 2021 and a 13 percent increase from 2020, according to MBA. ‘When you look at how you’d expect to see 2022 versus 2021, I think there’s still plenty of room to run in the market,’ said Brian Hirsh, vice president of Mesa West Capital Partners. ‘There’s a lot of equity out there that’s yet to be deployed.’”
The Escape Home. “Redfin CEO Glenn Kelman reminds us, ‘the second-home market depends more on the stock market than on interest rates, but rates usually affect the stock market. Rates are going up. Some buying is fueled by investors, but these folks are borrowing money too. An era of very low rates made it easy to cash-flow a house.’”
From Axios on Colorado. “The median price investors paid for a Denver home was $508,700, per Redfin. Troy Miller, executive director of the Investment Community of the Rockies, told the Denver Post, ‘Activity is very high because institutional buyers are chasing yield and are borrowing at close to nothing.’ He estimates that between five and seven institutional buyers are currently active in the Mile High City.”
From CBS News. “Boise is having its biggest gold rush since the 1860s. It’s called real estate, and the Idaho city now has the least affordable housing market in the U.S., according to one study. The issue is home prices in Boise dwarf residents’ incomes. A Boise Regional Realtors study found that the city’s median home price was almost $535,000 — 10 times higher than the city’s median income.”
The Idaho Press. “Idaho’s current median home price is $446,000, Zions Bank Chief Economist Robert Spendlove told the Associated Taxpayers of Idaho annual conference. ‘I know that this level of housing price appreciation is unsustainable,’ Spendlove said. ‘It is, like, literally mathematically impossible for us to continue to have this level of housing price appreciation.’ He said he’d like to see that 38% go back down to something like 5%. ‘My fear, of course, is that we see what we saw in 2009, where that big jump turns into big drops in housing prices.”
The Turlock Journal in California. “The lull is thanks to rising interest rates and increased inventory, says Turlock real estate agent Michael Rocha of Atlantic Realty, as well as ‘burnt-out’ buyers who are waiting for the competition to pass in order to purchase a home. ‘It’s good that we’re starting to see home prices start to become a little more stagnant because it’s a sign of a healthy market,’ Rocha said. ‘And we were in a very unhealthy market for two years.’”
The Tribune News. “As home prices continue their record-breaking climb, the Federal Housing Finance Agency said this week that loan limits for mortgages that can be bought by Fannie Mae and Freddie Mac in 2022 will rise by the largest percentage ever. For much of the United States, the divide between conforming loans and jumbo mortgages will be $647,200. That’s an 18% increase from this year’s limit of $548,250. In pricey housing markets — including much of California, all of New York City, the District of Columbia and the entire states of Alaska and Hawaii — the new limit is $970,800, up from $822,375 in 2021.”
From Mortgage Grader. “Let the good times roll. You now can buy a $1,021,895 home in Los Angeles and Orange counties with as little as 5% down and still get a loan backed by Fannie Mae or Freddie Mac. The Federal Housing Finance Agency announced Tuesday, Nov. 30, the 2022 loan limit for high-cost metro areas like L.A./O.C. will rise to $970,800, up from $822,375 in 2021. As Fannie’s and Freddie’s conservator and regulator, the agency sets the limits for loans qualifying for more favorable interest rates.”
“Can you say boom and bust? Home prices have been rising for almost 10 years. Then, that 95% leverage works against you. If the value of that same $1 million property were to fall 10%, you’d have negative equity, owning a $900,000 home with a $950,000 mortgage.”
“Back in 2000, Tom LaMalfa, President TSL Research & Consulting Co., was sounding the alarm bells to then-Fed Chair Alan Greenspan and plenty of others of an coming Fannie, Freddie crash. ‘We are in a similar situation as 2008. Nobody is expecting a decline in home prices,’ said LaMalfa. ‘There is no material change in underwriting with high loan-to-values, high debt ratios and minimal FICO scores.’”
“About 15% of the mortgage market before the housing crash of 2008 was called Alt-A or subprime, LaMalfa observed. Today, non-qualified mortgage or exotic mortgages are about 3% of the market. His point is F & F had the lion’s share of the mortgage market before the 2008 crash, and it still does today.”
“There are 55 million mortgages in the U.S. Of those, 75-80% are guaranteed by the U.S. government — either by F & F, the Federal Housing Administration, Veterans Affairs or the Department of Agriculture, according to Ed Pinto, senior fellow and director of the Housing Center at the American Enterprise Institute. Keep in mind VA and FHA mortgage limits will mimic those of Fan and Fred after Jan. 1.”
“When it comes to purchases, how much high leveraging is really happening, then and now? It’s eerily similar. Average down payments for Fannie and Freddie mortgages are lower this year than in 2007, the year the meltdown started, CoreLogic figure show. For example, F & F down payments for a U.S. home averaged 15% this year so far, compared with 17% just before the housing crash.”
The Associated Press. “There are further signs Australia’s heated housing market is beginning to cool with demand for mortgages, particularly from first time buyers, remaining in decline in October. The Commonwealth Bank’s head of Australian economics Gareth Aird is predicting interest rates will now be raised in November 2022, marking the first cash rate increase in 12 years. ‘The Australian housing market is in the twilight of an incredible boom that has been fuelled by record low mortgage rates,’ Mr Aird said.”
From DS News. “The CARES Act provided mortgage holders with several tools to help assist struggling homeowners and minimize that potential ‘wave of foreclosures,’ including forbearance programs and moratoria on both foreclosures and evictions. But Tim Rood, Head of Government and Industry Relations for SitusAMC, also noted that the servicing side of the industry benefitted enormously from the fact that the originations sector continued booming despite the health and economic crises the world was pushing through over the past 18 months.”
“‘It was the cash flow from the record origination volume and margins that largely underwrote the federal policies that allowed independent mortgage bankers to make the billions of dollars in servicing advances that they were required to make in support of the mortgage forbearance provisions and policies,’ Rood said.”
From Better Dwelling. “US real estate prices are looking frothy, according to central bank researchers. The US Federal Reserve (the Fed) recently updated its exuberance index for Q2 2021. The little-known index exists to identify housing bubbles early, to minimize damage. For the first time since 2007, that indicator is now warning that US real estate prices are in a bubble. The exuberance index read 2.8 in Q2 2021, more than double the 1.37 threshold needed to see bubbly.”
“By alerting policy makers early, they can act and contain the issue before it gets out of control. The current bubble will be the first time in history that the US has a system in place for an early warning. The question is, will they ignore the warning sign? Central banks have become increasingly political, dismissing even their own research. It wouldn’t be surprising to see them gloss over existing warning systems as they did with inflation. Though the ‘transitory’ narrative was retired shortly after they would have seen this data.”