The use of mortgage financing in the housing market jumped sharply in the month of August, but the use of FHA financing declined, suggesting the government program is losing favor and private lenders are gaining market share.
“Conventional mortgages are making a comeback while FHA mortgages are not,” commented Thomas Popik, research director for Campbell Surveys. “Reasons for the growth in conventional mortgages include low rates, increased underwriting of high LTV mortgages by private mortgage insurers, and a price structure including insurance premiums that is cheaper than the FHA alternative.”
Mortgages were used to finance 68.9 percent of home purchase transactions in August, up from 67.5 percent in July. Significantly, not all mortgage financing products saw the same gains in market share. FHA-financed transactions rose only slightly from 25.5 percent in July to 25.9 percent in August. Back in January, FHA transactions accounted for 27.3 percent of all home purchase transactions.
Ellie Mae reported last week that the FHA share of mortgage originations has declined from 25 percent in May to 21 percent in August. During the same period, conventional mortgages increased their sales from 65 to 70 percent of all new mortgages. Purchase mortgages increased from 44 to 47 percent.
Real estate agents responding to the latest HousingPulse survey indicated mortgage availability has improved over the summer months, especially for homebuyers with less than 20 percent cash down payments. “Mortgages for homebuyers with less than 20 percent down were available more than in previous months,” commented an agent from California. “Contrary to media reports, there is no shortage of mortgage money available for buyers with down payments less than 20 percent,” reported an agent in Texas.
Real estate agents also commented on historically low interest rates. “Amazing rates – less expensive to pay mortgage per month than to rent. Unbelievable opportunity and buyers know it,” exclaimed an agent in California. “The money is almost free, with 3.785 percent being about average for a 30 year fixed-rate mortgage with 3.5 percent down,” contributed an agent in Washington State.
The National Association of REALTORS® is continuing its battle for greater access to credit. Last week NAR’s president Moe Veissi urged Fed Chairman Ben Bernanke to weigh in on three key rule proposals—the Qualified Mortgage (QM), the Qualified Residential Mortgage (QRM), and the Basel III capital standards—that Veissi said are both putting a chill on lending and have the potential tighten credit further. All three individually and certainly together have the potential to tighten credit.
For more information, visit http://www.realestateeconomywatch.com
Updates from September, 2012
Print This Post
WASHINGTON (September 17, 2012) – New survey findings, combined with an analysis of historic credit scores and loan performance, show home sales could be notably higher by returning to reasonably safe and sound lending standards, which also would create new jobs, according to the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said there would be enormous benefits to the U.S. economy if mortgage lending conditions return to normal. “Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” he said. “The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.” Print This Post
by Dean Hartman on May 24, 2012
I’ve been told that 29% of all contracts signed never make it to the closing table- that nearly 3 in 10 transactions where a buyer and seller have come to terms (no easy feat in this market) fall apart. In a more normal market, I would say 90% of deals close. So, I figured if I could point out some of the reasons deals are crumbling, maybe those putting them together could prevent some of the challenges.
1. Short Sales – In theory, they sound terrific because the buyer can low-ball an offer. They get little resistance from the seller (because the seller isn’t getting any money out of the deal anyway). However, the existing lender isn’t just accepting any offer. Appraisals are done and scrutinized. Lenders are not agreeing to deep discounts. Additionally, the lenders are still, in many cases, taking months to make decisions and many buyers are losing patience and withdrawing offers (and finding another house). Print This Post
by The KCM Crew on May 16, 2012
Many of our readers have asked whether or not we believe the Mortgage Forgiveness Debt Relief Act of 2007will be extended past its current expiration scheduled for the end of the year. As a reminder, the legislation ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven.
The reason this act is important in today’s housing market is that, without the act, debt is reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. If the legislation is not extended, then it would require homeowners to complete a short sale or modification prior to year’s end in order to avoid a tax consequence. Print This Post
by The KCM Crew on May 7, 2012
We believe that short sales will be a major part of the real estate market in 2012. That is why we have dedicated this entire week to posts exclusively on this subject. We hope that by the end of the week you have a better handle on the need for short sales and a better understanding of the process. – the KCM Crew
It seems that the banks have finally realized that a short sale is a better option than foreclosure for them, the homeowner and the neighborhood. It is for this reason we believe that 2012 will come to be known as the year of the short sale. CNN Money reported on this exact point:
“We believe 2012 could be a record year for short sales,” said Daren Blomquist, vice president at RealtyTrac.
Banks are showing signs of being more open and willing to approve the deals — even if it means accepting less money. The average sales price for a short sale was $174,120 in January, down 4% from December and 10% year-over-year. Print This Post
In the first quarter of 2012, 79 percent of homeowners who refinanced their first-lien home mortgage either maintained about the same loan amount or lowered their principal balance by paying-in additional money at the closing table. Of these borrowers, 58 percent maintained about the same loan amount, and 21 percent of refinancing homeowners reduced their principal balance; the share of borrowers that kept about the same loan amount was the highest in the 26-year history of the analysis.
“Cash-out” borrowers, those that increased their loan balance by at least five percent, represented 21 percent of all refinance loans; the weighted average cash-out share during the 1985 to 2008 period was 50 percent. (More …)