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LLOYD MARTIN PLC
9316-A Old Keene Mill Road
Burke, Virginia 22015-4285
703-584-7744
(F) 703-584-7746
lmartin@pwtitle.com
[A Virginia Professional Limited Liability Company]

    August 6, 2020

    All-time lows: The average U.S. rate for a 30-year fixed mortgage is 2.88% this week and the
    average 15-year rate is 2.44%

    By Kathleen Howley, Housing Wire -- Average U.S. mortgage rates for a 30-year fixed mortgage fell to an all-time low of 2.88% this
    week, the eighth time in 2020 the weekly rate has set a record in a Freddie Mac series that goes back almost five decades.

    It fell from 2.99% last week, Freddie Mac said in a report on Thursday. The average 15-year rate fell to 2.44%, the lowest in almost
    30 years of data, according to the mortgage financier.

    The low rates help to support real estate demand by making it possible for more buyers to qualify for loans, because cheaper
    financing lowers monthly mortgage bills which are compared to income to qualify applicants. Low rates also support price growth
    because buyers typically qualify for bigger mortgages.

    “Mortgage rates hit another all-time low, giving potential buyers more purchasing power and strengthening demand,” said Sam
    Khater, Freddie Mac’s chief economist.

    The problem facing buyers isn’t the rates, Khater said. It’s the dearth of homes for sale that has plagued the housing market long
    before coronavirus.

    In June, the inventory of homes on the market fell to a four-month supply, meaning that’s how long it would take to sell off existing
    stock if nothing else came on, according to the National Association of Realtors. A year ago, the number was 4.3 months.

    “We expect rates to stay low and continue to propel the purchase market forward,” Khater said. “However, the main barrier to rising
    demand remains the lack of inventory, especially for entry-level homes.”

    Mortgage rates began tumbling in March after the Federal Reserve made a pledge to buy mortgage-backed securities and
    Treasuries to support demand in the bond market, which is where most U.S. home loans are sold.

    July 2, 2020

    Mortgage rates fall to new all-time low this week

    The average rate for a 30-year fixed mortgage was 3.07%, down from 3.13% last week, Freddie Mac says

    By Kathleen Howley, Housing Wire -- Mortgage rates dropped to a new all-time low in the U.S. this week as a resurgence of COVID-
    19 infections caused investors to pile into the bond markets.

    The average rate for a 30-year fixed mortgage was 3.07%, the lowest in a data series that goes back to 1971, and down from 3.13%
    last week, Freddie Mac said on Thursday. The average 15-year rate fell to a seven-year low of 2.56%, according to the mortgage
    financier.

    Bond yields, used as a benchmark by mortgage investors, have fallen to near-record lows over the last week on news of a
    resurgence in COVID-19 infections, erasing hopes for a V-shaped recovery that would have the economy rebounding quickly from
    the virus-induced recession. States including Texas, California and New York have either paused reopening plans or reversed course
    to stem the spread of COVID-19.

    “The spread of the virus is worsening in almost every state,” Goldman Sachs economists said on Tuesday. “Over half of the US has
    now reversed or placed reopening on hold.”

    The number of confirmed new COVID-19 cases in the U.S. reached a record 52,789 on Wednesday, the day after White House
    pandemic advisor Anthony Fauci, told Congress the nation could soon see more than 100,000 a day.

    “I can’t make an accurate prediction, but it is going to be very disturbing, I will guarantee you that, because when you have an
    outbreak in one part of the country, even though in other parts of the country they are doing well, they are vulnerable,” Fauci told the
    Senate Committee on Health, Education, Labor, and Pensions on Tuesday.

    Concern about a resurgence in COVID-19 infections have spooked financial markets and sent investors to seek the perceived safety
    of the bond markets. Market watchers call that dynamic a “flight to safety.”

    Almost all U.S. mortgages are packaged into fixed assets and sold to investors, who are the ones which ultimately set mortgage rates
    by deciding what returns they are willing to accept, known as “yields.”

    “The concern about a coronavirus resurgence did take the wind out of the sale of equities and money did flow into bonds in the last
    few days,” said Keith Gumbinger, a vice president at HSH.com. “That pressured bond yields down a little bit – they didn’t plummet, but
    they fell enough to have the rate measured in the Freddie Mac series set a new record low.”



    May 29, 2020

    Will Housing Lead Post-Pandemic Recovery?

    By Mike Albanese, DS News (Daily Dose) - Unlike the role it played in the Great Recession that started in 2008, the housing
    industry may help lead us out of today’s pandemic-induced economic recession, according to Daniel McCue, Senior Research
    Associate at Harvard University’s Joint Center for Housing Studies.

    While housing was more of a barrier than a balm in the last economic recovery, it is more typical for the housing industry to serve as
    a source of strength during an economic recovery. In fact, this has been the case in nearly every recession over the past five
    decades, according to McCue.

    In most economic recessions, declining interest rates lead to homebuying and homebuilding, which then lead to spending on
    consumer goods.

    In a typical year, residential construction makes up 4% of GDP. However, construction contributed an average of 18% growth in the
    gross domestic product (GDP) in each year following a recession from 1970 until the Great Recession.

    After the Great Recession, home construction made up more than its typical share, rising 2 percentage points.

    One of the main points of difference between the housing market leading into the Great Recession and the market heading into today’
    s economic downturn is that the housing market prior to 2008 had a “substantial overhang of distressed and foreclosed properties,”
    which “needed to be absorbed before housing construction could be a driver of recovery,” McCue said.

    The housing market early this year, however, had tight supply and low vacancies. Vacancy rates and for-sale inventory rates lower
    than they had been in years.

    The total housing vacancy rate is 11.4%—2.4 percentage points lower than in 2007.

    The share of vacant homes for sale is 58% lower than in 2007 and the share of vacant rental properties available is 21% lower.

    “Hopefully, what these vacancy numbers do suggest is that, in terms of supply, housing construction is not likely to be a barrier to
    recovery and instead may once again be a source of strength that helps the economy turn around once the worst is over,” McCue
    said.

    Two unknowns, however, are the short-term outlook for residential construction and the future of mortgage loan delinquencies. In
    many places, non-essential residential construction was halted as a result of the COVID-19 pandemic, which could tighten supply
    even further. Some restrictions are already being lifted, it remains to be seen how many restrictions persist or whether some will have
    to be reinstated.

    Delinquency rates picked up during Q1 2020. April witnessed mortgage delinquencies experience their largest monthly increase in
    history. However, many of these mortgages are in forbearance plans with their lenders.

    May 1, 2020

    Mortgage applications fall due to credit crunch

    By Candyd Mendoza, Mortgage Professional America Magazine -- Mortgage applications are down from last week, but an increase
    in purchase application activity might be hinting at an upturn in the spring homebuying season that was delayed by the coronavirus
    outbreak.

    The Mortgage Banker Association's Market Composite Index showed a 3.3% seasonally adjusted drop in mortgage loan application
    volume. On an unadjusted basis, mortgage applications were 2% lower than the previous week.

    However, despite tighter credit availability, the seasonally adjusted purchase index rose 12% week over week and was up 13% on an
    unadjusted basis. The refinance index, on the other hand, fell 7% from a week ago and was 218% higher than the same week a year
    ago.

    "The 10 largest states had increases in purchase activity, which is potentially a sign of the start of an upturn in the pandemic-delayed
    spring homebuying season, as coronavirus lockdown restrictions slowly ease in various markets," said Joel Kan, associate vice
    president of economic and industry forecasting at MBA. "California and Washington continued to show increases in purchase activity,
    with New York seeing a significant gain after declines in five of the last six weeks."

    The refinance share of total applications fell from 75.4% to 71.6%, while the adjustable-rate mortgage share of activity rose to 2.9%.

    The FHA share represented 11.5%, up from 10.3% the week prior. The VA share of total applications declined to 13.3% from 13.8%
    last week. The USDA share of total applications inched up to 0.5% from 0.4%.

    "Contributing to the uptick in purchase applications was that mortgage rates fell to another record low in MBA's survey, with the 30-
    year fixed-rate decreasing to 3.43%," Kan said. "However, refinance activity declined 7%, as rates for refinances likely remained
    higher than those for purchase loans. Lenders are still working through pipelines at capacity, and observed changes in credit
    availability for refinance loans have also, in turn, impacted rates."


    April 17, 2020

    Homebuyers still shopping despite coronavirus-fueled pessimism

    Despite numerous challenges, buyers are still house hunting and lenders are still originating purchase
    loans

    By Phil Hall, Housing Wire -- If recent polls are any indication, the coronavirus pandemic has pushed consumer confidence into a
    free-fall.

    Consider these examples: The Fannie Mae Home Purchase Sentiment Index fell 11.7 points to 80.8 in March, its lowest reading since
    December 2016. The University of Michigan’s consumer sentiment index fell from 101 in February to 89.1 in March to 71 in April – the
    latter decline marked its most severe plunge in 11 years. The Conference Board’s consumer confidence index tumbled from 132.6 in
    February to 120 in March, its greatest decline since 2011.

    And early indications suggest this lack of confidence has seeped into housing. On April 16, the National Association of Realtors
    released a poll that found 90% of member respondents citing decreased homebuyer interest at this time, with 44% reporting buyer
    interest fell off by more than 50% in their market.

    “If you see our latest weekly mortgage application survey, we’ve had four weeks of declines year-over-year,” said Joel Kan, Mortgage
    Bankers Association’s associate vice president of economic and industry forecasting. “And we’re down 35% on purchase activities.
    That’s a pretty telling sign of what to expect for the next few months in the housing market.”

    To be certain, the statistical picture of today’s economic environment is grim. But will this new wave of consumer pessimism damage
    the housing market for the remainder of 2020? Some housing industry experts question doom-and-gloom forecasts, pointing to
    ongoing activity in the mortgage space.
           

    April 10, 2020

    Here’s why you shouldn’t worry about the miserable inflation report

    While the CPI gauge tumbled on the collapse in oil prices, the core index was stable

    By Kathleen Howley, Housing Wire --  An inflation report on Friday showed a slowdown in consumer price growth that in normal
    times would spark concern about the possibility of deflation, a scenario that would further imperil the U.S. economy as it grapples with
    the worst pandemic in more than a century.

    But, of course, these aren’t normal times. Here’s why most economists aren’t adding deflation to their worry list:

    The consumer price index fell 0.4% from the prior month, the largest monthly decline since January 2015, and rose 1.5% from a year
    earlier, the slowest annual pace since 2016, according to the Bureau of Labor Statistics. It was led by a collapse in oil prices
    stemming from a global drop in demand as nations battled the spread of COVID-19, along with some moves in early March by
    Russian President Vladimir Putin to disrupt oil markets.

    Another reason the index was down was falling hotel prices – no one needs an explanation of why those room costs tumbled.

    The data widely known among economists as the Federal Reserve’s preferred gauge of inflation showed a different story. The core
    index, which excludes volatile energy and food prices, was down 0.1% from the prior month – the first drop since 2010 – and up 2.1%
    from a year earlier.

    That annual core index number is near – and even slightly above – the Fed’s 2% inflation target rate it believes will keep the economy
    stable.

    “This is our first glimpse of how prices are faring in the social-distancing environment,” Wells Fargo economists said in a report. “At a
    high level, many of the underlying price components have behaved as expected.”

    The inflation numbers also reflect data-gathering issues stemming from the stay-at-home orders issued by state governors and the
    subsequent closure of stores, the Wells Fargo economists said. The BLS suspended in-person data collection, which is how about
    65% of the price numbers are gathered, on March 16.

    Some of the numbers in the report are imputed, meaning they’re based on educated guesses.

    Store closures “meant some prices were temporarily unavailable or imputed by the BLS,” the Wells Fargo report said. “As shutdowns
    continue into the second week of April, data collection will continue to be at risk until social-distancing measures are lifted.”

    So, until it’s safe for consumers to come out of their homes and retail businesses begin reopening, it’s better to focus on long-term
    trends, the economists said.

    “These data-collection difficulties may cause choppy data in coming months, making it increasingly important to focus on the trend,
    rather than the month-to-month movements in prices,” the Wells Fargo report said.

    April 2, 2020

    FHA rolls out new mortgage relief options amid coronavirus outbreak

    Implements CARES Act provisions for forbearance

    By Ben Lane, Housing Wire --  With a record number of people suddenly unemployed due to the impact of the coronavirus on the
    nation, the government is taking steps to allow some borrowers to pause their mortgage payments for six months or longer.

    The Department of Housing and Urban Development announced Thursday that the Federal Housing Administration is rolling out a
    “tailored set of mortgage payment relief options” for FHA mortgage borrowers who are being affected by the coronavirus.

    One of those payment relief options gives borrowers the ability to defer their mortgage payments for at least six months and as many
    as 12 months.

    “Effective immediately for borrowers with a financial hardship that makes them unable to pay their mortgage due to the COVID-19
    National Emergency, mortgage servicers must extend deferred or reduced mortgage payment options – called forbearance – for up
    to six months, and must provide an additional six months of forbearance if requested by the borrower,” HUD and the FHA said
    Thursday.

    The payment relief options are part of the Coronavirus Aid, Relief, and Economic Security Act, which President Donald Trump signed
    into law on March 27, 2020. The CARES Act dictates that borrowers with federally backed mortgages can receive as many as 12
    months of forbearance.

    According to the FHA, the forbearance option applies to any borrower who has an FHA loan and is experiencing a coronavirus-
    related hardship.

    The issue of forbearance is that typically when the forbearance period ends, the borrower is required to either pay the full amount of
    missed payments in one lump sum or work with their mortgage servicer on some kind of payment plan.

    In an effort to avoid any issues with the end of forbearance, the FHA is also rolling out a new program that will allow borrowers to hold
    off on paying the full amount of their forbearance period until their mortgage is paid off.

    “In addition to special COVID-19 forbearance, FHA also implemented today the COVID-19 National Emergency Partial Claim, an
    option to be used by servicers when the COVID-19 forbearance period ends,” the FHA said.

    “This partial claim will help eligible homeowners who have been granted special COVID-19 National Emergency forbearance to
    reinstate their loans by authorizing servicers to advance funds on behalf of homeowners,” the FHA said.

    The FHA said that through this option, borrowers are given an interest-free subordinate mortgage that they do not have to pay off
    until their first mortgage is paid off.

    Beyond those options, the FHA is also making changes to its reverse mortgage rules to allow HECM borrowers to delay making their
    payments as well.

    Specifically, the FHA instructed mortgage servicers to “delay submitting due and payable requests for home equity conversion
    mortgages by six months, with an additional six-month delay available with HUD approval.”

    HUD is also instructing mortgage servicers to “extend any flexibility they may have under the Fair Credit Reporting Act relative to
    negative credit reporting actions.”

    In a statement, HUD Secretary Ben Carson said that immediate help is now available to those who need it.

    “The last thing any of us wants is for Americans to lose their homes unnecessarily while we continue to fight this invisible enemy,”
    Carson said. “The FHA will continue to work with stakeholders to ensure that the loss mitigation options that are offered for both
    forward and reverse borrowers are appropriately tailored for the present situation.”

    HUD and the FHA noted that these options are reserved for those who are struggling from a coronavirus-related situation and
    encouraged those who can continue paying their mortgage to do so.

    “However, those who are experiencing financial hardship as a result of the COVID-19 National Emergency should immediately contact
    their mortgage servicer – the entity to which they make their monthly mortgage payments – to discuss forbearance or other options
    that may be available to them,” HUD and the FHA said. “Borrowers who are not experiencing an income reduction due to COVID-19
    are asked to avoid contacting their mortgage servicer about these options, as these questions will divert resources from serving
    those truly in need.”

    According to HUD and the FHA, these mortgage relief options are available now.

    “For American families impacted by the COVID-19 virus and unable to pay their FHA-insured mortgage, imminently losing their homes
    is now one less fear they should have,” Assistant Secretary for Housing and Federal Housing Commissioner Brian Montgomery said.
    “Today’s actions will ease the immediate pressures faced by many Americans who, through no fault of their own, are struggling with
    financial uncertainty.”


    March 25, 2020

    Are notaries considered essential businesses?

    Title industry adapts to continue operations

    By Brena Nath, Housing Wire -- This year’s spring home-buying market looks drastically different than what was originally predicted.
    The early forecasts for a hot purchase market were instead met with never-before-seen refinance levels, as COVID-19 changed the
    course of the real estate market.

    Despite these changes, the industry not only remains operational, but it’s working in overdrive to meet demand and adjust to the
    challenges that city lockdowns and social distancing are causing.

    One part of the mortgage transaction that’s always been face-to-face is title. Industry demand for remote online notarizations and
    eClosings has moved the needle quite a bit toward automating or digitizing this process, especially over the last month as a bipartisan
    push to legalize RON nationwide has grown to help business continue during lockdowns.

    However, the challenges that COVID-19 is creating shows that there are still plenty of business operations that are not completely
    remote or virtual.

    As more states and localities implement “stay at home” or “shelter in place” orders that allow only essential businesses to operate,
    companies and the customers they serve are having to figure out whether they fall into this category. According to the National Notary
    Association, notaries do provide an essential service.

    “Notaries, like all residents in states like New York and California, have been ordered to minimize outside contact as much as
    possible. These states have ordered businesses that do not provide ‘essential services’ to close. The big question Notaries have
    been asking in these states is do they qualify as businesses that provide essential services? The NNA believes they do,” NNA Vice
    President of Government Affairs Bill Anderson said.

    The government’s memorandum on essential jobs calls on all workers in a critical infrastructure sector, as defined by the Department
    of Homeland Security, to continue to work during the crisis.

    “Many Notaries are signing agents who provide mortgage loan signing services in the settlement services industry. They would fall
    under the scope of Secretary Mnuchin’s memorandum,” said Anderson. “And mobile Notaries who are asked to notarize a healthcare
    power of attorney or probate and estate documents serve another critical infrastructure sector — healthcare.”

    This same question is being asked about title companies, as they work to set the record straight on the state of the industry .

    Craig Haskins, chief operating officer with Knight Barry Title, said a common misconception he is seeing is people think “a lot of our
    real estate business has just stopped.”

    “We’ve been deemed an essential service across the country. Even if your county courthouse is closed, there’s a good chance your
    transaction can get finalized,” Haskins said. “Also, as an industry, we’ve shown our ability to innovate quickly through all of this, and I
    hope it continues when some normalcy returns.”  

    Mother Lode Holding Company, which is the parent company of title companies across the nation, including Placer Title Company,
    Premier Title Company, Texas National Title and North Idaho Title, expanded on this, explaining how they’re navigating the changes.
    Lisa Steele, executive vice president with Mother Lode Holding Company, said, “The most pressing thing is to assure everyone that
    title and escrow companies are open for business while also taking the proper precautions to protect customer and employee health.”

    “We know many people don’t think title when they think of ‘essential services’ but we have been deemed so in the context of this
    situation,” Steele said. “For an industry that is often resistant to change, we should be proud of how we adapted during all of this.”


    March 5, 2020

    Mortgage rates fall to an all-time low

    The average U.S. rate for a 30-year fixed mortgage dropped to 3.29% this week

    By Kathleen Howley, Housing Wire --  The average U.S. rate for a 30-year fixed mortgage fell to 3.29% this week, the lowest ever
    recorded by Freddie Mac in a series that goes back to 1971.

    The rate fell 16 basis points from the prior week after the worst stock retreat since the 2008 financial crisis sent investors piling into
    the bond markets. The yield on 10-year Treasuries, a benchmark for mortgage investors, fell to a record low this week as money
    managers sought safe havens amid coronavirus fears.

    Falling home-loan rates have boosted mortgage applications, a sign the housing market may help the U.S. economy stave off a
    recession, said Sam Khater, Freddie Mac’s chief economist.

    Mortgage applications increased 10 percent last week from one year ago and show no signs of slowing down,” Khater said. “Given
    these strong indicators in rates and sales, as well as recent increases in new construction, it’s clear the housing market continues to
    be a positive force for the broader economy.”

    In addition to making home purchases more affordable as the housing market enters its spring selling season, falling rates are
    spurring more Americans to refinance, according to the Mortgage Bankers Association. That will lower their monthly bills and give
    them more money for the consumer spending that accounts for about 70% of the U.S. economy.

    Conventional refinance applications jumped more than 30% last week, Mike Fratantoni, MBA chief economist, said in a report on
    Wednesday.

    Mortgage rates are falling “amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as
    the tremendous financial market volatility,” Fratantoni said. “Refinance demand jumped as a result.”

    In addition to a drop in the 30-year fixed, other rates dropped as well, according to the Freddie Mac survey. The 15-year fixed rate
    averaged 2.79%, down from 2.95% last week.

    The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.18%, down from last week’s rate of 3.20%.


    February 20, 2020

    Housing Market Potential Reaches Its Highest Level in Nearly Two Years

    “Build it and the homebodies just might buy it and provide welcome supply to the housing market.”

    By Mark Fleming and Odeta Kushi, First American Economic Insights -- The housing market started the year off strong, with the
    market potential for existing-home sales reaching its highest level since January 2018, according to our Potential Home Sales Model.
    Housing market potential increased 1.4 percent in January 2020 relative to the previous month, and grew 4.7 percent year over year,
    an increase of 240,050 potential existing-home sales and the highest rate of yearly growth since December 2017. Actual existing-
    home sales exceeded housing market potential by 1.0 percent, or an estimated 53,900 seasonally adjusted annualized sales.

    Demand Soars, Supply Sinks

    The growth in market potential for existing-home sales was primarily fueled by positive market demand dynamics. In 2020, 4.8 million
    millennials will turn 30 – the peak age for home-buying. They’re fortunate to be entering the housing market at a time of historically
    low mortgage rates and a strong economy. However, there are challenges. Millennials face a very limited supply of existing homes
    available for sale, especially homes in the entry-level price range. In January, the positive impact from market demand outweighed the
    negative impact of limited supply, boosting housing market potential relative to one year ago.


    Lower Rates and Wage Growth Boost Affordability

    The primary reason for increased housing market potential compared with one year ago was increased house-buying power, how
    much home one can afford to buy given household income and the prevailing mortgage rate. In January, after three months of slightly
    increasing mortgage rates, the 30-year, fixed-rate mortgage declined to 3.6 percent, 0.8 percentage points lower than one year ago.
    At the same time, the healthy labor market continued to boost wage growth, contributing to a 2.6 percent increase in household
    income. Low mortgage rates and income growth triggered a 13.5 percent increase in house-buying power compared with a year ago.
    This increase in house-buying power had the greatest impact on housing market potential in January, boosting market potential by
    343,250 potential home sales.

    New Household Growth Boosts Demand for Homes

    According to recent estimates, 1.65 million new households were formed between December 2018 and December 2019. As more new
    households are formed, demand for housing rises. The increase in household formation enhanced market potential by 103,380
    potential home sales in January compared with last year.

    End of Year Housing Supply Relief

    While the construction of new homes, specifically much needed single-family homes, remains below what is needed to satisfy
    demand, homebuilding took a sharp turn higher at the end of 2019. As new housing supply enters the market, the risk of not being
    able to find something to buy lessens, so homeowners may become more confident in the decision to sell their existing home.
    Compared with last year, the addition of new supply increased housing market potential by a modest 248 potential home sales.

    Homebodies Holding Back Market Potential

    The lack of existing homes available for sale is the most significant hindrance to housing market potential. Interestingly, the same
    dynamic that’s making homes more affordable is preventing more supply from entering the market. Persistently low mortgage rates
    can discourage existing homeowners from selling. The majority of homeowners already have a low mortgage rate because there has
    been ample opportunity to refinance to lower rates over the last decade. So, for a homeowner with a low mortgage rate, the only
    house-buying power advantage comes from household income growth. Many homeowners decide to “stay put,” as observed by rising
    average tenure length, and the inventory of homes for sale dwindles further.

    The aging of the U.S. population has also contributed to rising tenure length as many aging silent generation, baby boomer and
    Generation X homeowners decide to remain in their existing homes. More than half of all existing homes are owned by baby boomers
    and the silent generation, and they are choosing not to sell and consequently not buy either.

    While the year-over-year growth of tenure length slowed in January 2020, it is still 8.0 percent higher than one year ago. The
    increase in tenure length had the only negative impact on housing market potential this month, reducing it by 376,110 potential home
    sales compared with one year ago.

    Should We Expect More Good News for Housing in 2020?

    Housing demand is expected to grow in 2020, as millennials continue to form new households and mortgage rates remain below 4
    percent. Additionally, wage growth driven by a strong labor market will continue to support house-buying power growth. While it’s
    unlikely that tenure length will decline significantly in a low and unchanging mortgage rate environment, additional new housing supply
    can incentivize existing homeowners to move. Build it and the homebodies just might buy it and provide welcome supply to the
    housing market.

    January 2020 Potential Home Sales

  • For the month of January, First American updated its proprietary Potential Home Sales Model to show that:
  • Potential existing-home sales increased to a 5.36 million seasonally adjusted annualized rate (SAAR), a 1.4 percent month-
    over-month increase.
  • This represents a 59.7 percent increase from the market potential low point reached in February 1993.
  • The market potential for existing-home sales increased by 4.7 percent compared with a year ago, a gain of 240,050 (SAAR)
    sales.
  • Currently, potential existing-home sales is 1.37 million (SAAR), or 20.3 percent below the pre-recession peak of market
    potential, which occurred in March 2004.

    Market Performance Gap

  • The market for existing-home sales outperformed its potential by 1.0 percent or an estimated 53,900 (SAAR) sales.
  • The market performance gap decreased by an estimated 14,400 (SAAR) sales between December 2019 and January 2020.

    What Insight Does the Potential Home Sales Model Reveal?

    When considering the right time to buy or sell a home, an important factor in the decision should be the market’s overall health, which
    is largely a function of supply and demand. Knowing how close the market is to a healthy level of activity can help consumers
    determine if it is a good time to buy or sell, and what might happen to the market in the future. That is difficult to assess when looking
    at the number of homes sold at a particular point in time without understanding the health of the market at that time. Historical context
    is critically important. Our potential home sales model measures what we believe a healthy market level of home sales should be
    based on the economic, demographic and housing market environments.

    About the Potential Home Sales Model

    Potential home sales measures existing-homes sales, which include single-family homes, townhomes, condominiums and co-ops on a
    seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population
    demographic data, homeowner tenure, house-buying power in the U.S. economy, price trends in the U.S. housing market, and
    conditions in the financial market. When the actual level of existing-home sales are significantly above potential home sales, the pace
    of turnover is not supported by market fundamentals and there is an increased likelihood of a market correction. Conversely,
    seasonally adjusted, annualized rates of actual existing-home sales below the level of potential existing-home sales indicate market
    turnover is underperforming the rate fundamentally supported by the current conditions. Actual seasonally adjusted annualized
    existing-home sales may exceed or fall short of the potential rate of sales for a variety of reasons, including non-traditional market
    conditions, policy constraints and market participant behavior. Recent potential home sale estimates are subject to revision to reflect
    the most up-to-date information available on the economy, housing market and financial conditions. The Potential Home Sales model
    is published prior to the National Association of Realtors’ Existing-Home Sales report each month.


    February 6, 2020

    Three-year low in rates makes 11.3 million mortgages refi-eligible

    The average savings per borrower would be $268 a month, Black Knight says

    By Kathleen Howley, Housing Wire -- A three-year low in the average U.S. rate for a 30-year fixed mortgage pushed the number of
    “refi eligible” borrowers to 11.3 million, the second-highest on record, according to Black Knight.

    That figures represents the number of borrowers paying interest that’s 0.75% or higher than current rates who also have credit
    scores above 720 and enough equity to get a new loan, the mortgage data and software firm said.

    The average savings per borrower would be $268 a month, Black Knight said. That means the aggregate savings, if all eligible
    borrowers got new mortgages, would be $3.03 billion a month.

    Since Americans love new gadgets, much of that would be put into the economy to boost the consumer spending that accounts for
    about 70% of GDP.

    If you don’t consider credit scores and equity, there are 22 million mortgage holders who have loans more than 0.75% higher than
    current rates, what the mortgage industry calls being “in the money,” Black Knight said. That, too, is the second-highest on record.

    The record for both categories was set in September, the last time rates fell to a three-year low. But, many of the borrowers who were
    refi-eligible then have already gotten new loans with cheaper financing.

    The average U.S. rate for a 30-year fixed mortgage this week fell to a three-year low of 3.45% as worries about coronavirus drove
    investors into the U.S. bond markets.

    When investors get rattled, they tend to cash out of stocks and put their money in bonds, which are perceived as being safer. That
    creates more competition for bonds, including mortgage bonds, and forces investors to accept smaller yields. When they do,
    borrowers reap the benefit because it translates into cheaper rates for home loans.

    The three year low reported by Freddie Mac on Thursday was the cheapest rate since 3.42% in the first week of October 2016 and it’
    s almost a full percentage point below the 4.41% recorded a year earlier.


    February 3, 2020

    How Low Mortgage Rates Help and Hurt Housing Market Potential

    By Mark Fleming and Odeta Kushi, First American Economic Insights Blog -- The final month of 2019 saw actual existing-home
    sales exceed housing market potential by 1.2 percent, or an estimated 64,830 seasonally adjusted annualized sales. According to our
    Potential Home Sales Model, housing market potential increased 1.7 percent in December 2019 relative to the previous month, and
    grew 2.6 percent year over year, an increase of 134,460 potential existing-home sales.

    The Duality of Low Mortgage Rates

    The growth in the market potential for existing-home sales is the net result of several forces that either boost or bash housing market
    potential. However, one market driver is actually both a positive and a negative influence on housing market potential – persistently
    low mortgage rates.

    “Lower rates boost housing market potential, but also discourage homeowners from selling and increase tenure length, thus
    reducing the supply of existing homes for sale – this is the duality of low mortgage rates.”

    Lower Rates Boost Affordability

    In December 2019, the primary driver of rising housing market potential compared with one year ago was increased house-buying
    power, how much home one can afford to buy given household income and the prevailing mortgage rate. House-buying power was
    12.5 percent higher than a year ago. This increase in house-buying power had the greatest impact on housing market potential in
    2019, boosting market potential by 316,000 potential home sales.

    The house-buying power surge was driven by the combined impact of lower mortgage rates, which were 0.92 percent lower in
    December than they were a year ago, and a 2.4 percent increase in annual household income. Clearly, lower mortgage rates result in
    considerable affordability gains for potential home buyers, which boost home-buying demand and, in turn, market potential.

    Persistently Low Rates Increase Tenure Length, Reduce Supply

    Falling mortgage rates can help incentivize homeowners to sell their home and purchase a different home, but persistently low
    mortgage rates can have the opposite effect. The decades-long decline in the 30-year, fixed mortgage rate, dropping from a high of
    18 percent in 1981 to a low of nearly 3 percent in 2012, to just below 4 percent today, has helped prod the housing market. This long-
    run decline increased affordability and encouraged existing homeowners to move.

    However, the 30-year fixed-rate mortgage has hovered below 5 percent since the end of the Great Recession – nearly a decade ago!
    While historically low rates increase buying power and make it more affordable for potential buyers to purchase a home, they also
    discourage many existing homeowners from selling. There is little to no house-buying power benefit for homeowners with an already
    low mortgage rate, so the only way existing homeowners can increase their house-buying power is through household income growth.
    This helps explain why more and more homeowners have decided to “stay put,” reducing the inventory of homes for sale.

    As a result, tenure length (how long one stays in a home between moves) has increased dramatically. Prior to the recession, tenure
    length was less than six years on average. In December 2019, tenure length approached 12 years, up 8 percent compared with one
    year ago. According to our analysis, lower rates boost housing market potential, but also discourage homeowners from selling and
    increase tenure length, thus reducing the supply of existing homes for sale – this is the duality of low mortgage rates.

    What Does This Mean For 2020?

    Consensus among forecasters is that mortgage rates will remain below 4 percent for the next two years. Low mortgage rates and
    increased house-buying power will continue to boost demand, as will demographic tailwinds from millennials entering their prime home-
    buying years. On the other hand, those persistently low rates will discourage existing homeowners from selling, pushing up tenure
    length and limiting the inventory of homes available for sale. However, that doesn’t necessarily mean we should expect housing
    market potential to decline. There are many considerations that go into one’s housing tenure decision, which could result in the
    desire to move. The lack of housing supply has been the norm for several years, yet the housing market has endured.

    December 2019 Potential Home Sales

    For the month of December, First American updated its proprietary Potential Home Sales Model to show that:

  • Potential existing-home sales increased to a 5.30 million seasonally adjusted annualized rate (SAAR), a 1.7 percent month-
    over-month increase.

  • This represents a 57.8 percent increase from the market potential low point reached in February 1993.

  • The market potential for existing-home sales increased by 2.6 percent compared with a year ago, a gain of 134,460 (SAAR)
    sales.

  • Currently, potential existing-home sales is 1.43 million (SAAR), or 21.3 percent below the pre-recession peak of market
    potential, which occurred in March 2004.

    Market Performance Gap

  • The market for existing-home sales outperformed its potential by 1.2 percent or an estimated 64,830 (SAAR) sales.

  • The market performance gap decreased by an estimated 44,610 (SAAR) sales between November 2019 and December 2019.

    What Insight Does the Potential Home Sales Model Reveal?

    When considering the right time to buy or sell a home, an important factor in the decision should be the market’s overall health, which
    is largely a function of supply and demand. Knowing how close the market is to a healthy level of activity can help consumers
    determine if it is a good time to buy or sell, and what might happen to the market in the future. That is difficult to assess when looking
    at the number of homes sold at a particular point in time without understanding the health of the market at that time. Historical context
    is critically important. Our potential home sales model measures what we believe a healthy market level of home sales should be
    based on the economic, demographic and housing market environments.

    About the Potential Home Sales Model

    Potential home sales measures existing-homes sales, which include single-family homes, townhomes, condominiums and co-ops on a
    seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population
    demographic data, homeowner tenure, house-buying power in the U.S. economy, price trends in the U.S. housing market, and
    conditions in the financial market. When the actual level of existing-home sales are significantly above potential home sales, the pace
    of turnover is not supported by market fundamentals and there is an increased likelihood of a market correction. Conversely,
    seasonally adjusted, annualized rates of actual existing-home sales below the level of potential existing-home sales indicate market
    turnover is underperforming the rate fundamentally supported by the current conditions. Actual seasonally adjusted annualized
    existing-home sales may exceed or fall short of the potential rate of sales for a variety of reasons, including non-traditional market
    conditions, policy constraints and market participant behavior. Recent potential home sale estimates are subject to revision to reflect
    the most up-to-date information available on the economy, housing market and financial conditions. The Potential Home Sales model
    is published prior to the National Association of Realtors’ Existing-Home Sales report each month.



    January 23, 2020


    Home seller profits hit new high as people are staying in their homes longer than ever

    Which came first, the housing tenure or the profit?

    By Maleesa Smith, Housing Wire --  People are staying in their homes longer than ever before, but it may pay off big for them
    should they choose to move.

    That’s according to a recent report from ATTOM Data Solutions, which stated that both homeownership tenure and home seller
    profits simultaneously hit new highs.

    ATTOM’s Year-End 2019 U.S. Home Sales Report states that the average American home seller took in a $65,500 profit in 2019.
    That’s up from $58,100 in 2018 and up from $50,027 before that.

    In percentages, that seller profit represents a 34% return on investment compared to the original purchase price. In 2018, sellers saw
    a 31.4% return, while sellers in 2017 brought in a 27.4% return on investment.

    “The nation’s housing boom kept roaring along in 2019 as prices hit a new record, returning ever-higher profits to home sellers and
    posing ever-greater challenges for buyers seeking bargains. In short, it was a great year to be a seller,” said Todd Teta, chief
    product officer at ATTOM Data Solutions.

    “But there were signs that the market was losing some steam last year, as profits and profit margins increased at the slowest pace
    since 2011,” Teta added. “While low mortgage rates are propping up prices, the declining progress suggests some uncertainty going
    into the 2020 buying season.”

    And while the average home sellers are bringing in higher profits than ever before, homeowners are also staying put longer than ever
    before too.

    ATTOM states that homeowners who sold in the fourth quarter of 2019 had owned their homes an average of 8.21 years. That’s an
    increase from a homeownership tenure of 8.08 years in the third quarter.

    That said, the national average tenure certainly does not apply to all cities including Colorado Springs, Colorado (down 9% in
    housing tenure); Modesto, California (down 7%); Visalia, California (down 5%); Oklahoma City, Oklahoma (down 5%) and Olympia,
    Washington (down 5%).

    However, people living in Connecticut seem to be there for the long haul. According to the report, the top five longest homeownership
    tenures all stemmed from the northern state, including: Norwich (13.49 years); New Haven (13.32 years) Bridgeport-Stamford (13.23
    years); Torrington (12.33 years) and Hartford (12.25 years).



    December 31, 2019

    The 2010s: A decade that changed the way agents work

    Desk time, cold calls, and wet-ink signatures have gone out of style

    By Kathleen Howley, Housing Wire --  The 2010s marked a tectonic shift in the way real estate agents conduct business.

    It wasn’t the most tumultuous decade in real estate history. The 2000s have that distinction because of the record-setting crash that
    started in 2007. But looking at the way agents spend their days, few 10-year stretches have seen such change.

    Here’s a look back:

    Once upon a time – a decade ago – all the people who wanted to buy houses had to meet with real estate agents in person to sign
    disclosures with pens. Think brick-and-mortar offices and stick-or-click pens with a choice of blue or black ink. Today, most
    disclosures are signed electronically.

    Agents went to the office more, back then, and many were required to do “desk time” at least once a week. That meant sitting in the
    front to answer the brokerage’s main telephone line and greet walk-in visitors, hoping to nab a client.

    Yes, back then people cold-called brokerages looking for information on buying and selling a home. And, agents cold-called potential
    customers, as a way to generate leads.

    “Who calls people anymore?” said David Michonski, who sold real estate for more than three decades and now is the CEO of Quigler,
    an app to track compliance for agents and clients. “If you don’t recognize a caller ID, you don’t answer it, ‘cause it’s all robo-callers.”

    Today, agents tend to purchase leads from online sources such as Zillow and other real estate websites, he said. Clients tend to call
    agents on their cell phones after finding them on the internet, Michonski said.

    “Prospecting has changed quite a bit,” he said.

    For the most part, weekly office meetings for agents and their coworkers to collaborate are a thing of the past, said Michonski, who
    ran several brokerages.

    “I used to insist that agents come into the office because I felt there was a synergy, a shared energy, and people bonded, but most
    brokerages have stopped doing that in the last 10 years,” Michonski said. “More agents now are sort of siloed, as opposed to being
    part of a unit.”

    A decade ago, agents with customers looking at homes were more likely to be driving them around. That led to the distinction
    between a “listing car,” used to visit a potential seller with a marketing packet and a contract to be signed in-person with a pen, and a
    “showing car” that needed to be free of dog hair and Cheerios because it was used to ferry potential buyers to an array of properties.

    Smartphones were new inventions, back in 2010, and people tended to rely on verbal directions, rather than using Google Maps or
    another GPS app. Part of the value agents brought to a transaction was a geographical knowledge of their market.

    Today, agents are more likely to text an address to customers and meet them at the property. And, the buyers are more likely to have
    vetted available homes online and have a clearer idea of what they’re interested in seeing.

    In 2010, the nation had just passed the zenith of the foreclosure crisis: 3 million families lost their homes in 2009. Only about 60% of
    Americans thought homeownership was a good idea, as opposed to about 92% today, as measured by Fannie Mae.

    And, being a real estate agent was not seen as a fabulous life choice. Membership in the National Association of Realtors tumbled
    30% between October 2006 and March of 2012.

    Today, some of the shine is back on the real estate industry. NAR membership reached a record high of 1.41 million in October.

    One problem agents didn’t have back then is a shortage of homes for sale. In May 2010, the seasonally adjusted “months supply” of
    homes for sale, meaning the time it would take to sell off the entire inventory, was 9.3 months.

    In November, it was 3.9 months, the lowest ever recorded for that month. Most economists consider a 6-month supply to be a
    balanced market.


    November 22, 2019

    Federal Reserve united against Trump’s demand for negative interest rates

    The use of negative rates carries too much instability risk, Fed policymakers said

    By Kathleen Howley, Housing Wire --  President Donald Trump has extolled negative interest rates on Twitter and in speeches,
    making clear he wants the Federal Reserve to slash its benchmark rate below zero, a policy it has never used before.

    Fed policymakers are unanimous in their distaste for the idea, judging from the minutes released on Wednesday for the Fed’s
    October meeting. The use of negative rates carries “risks of introducing significant complexity or distortions to the financial system,”
    according to the minutes.

    It’s the first known time the policymakers on the Federal Open Market Committee, or FOMC, have had an on-the-record discussion
    about the possibility of using the monetary policy the European Central Bank introduced in 2014.

    At the Oct. 29 to 30 meeting, the Fed cut its rate by a quarter of a percentage point to a range of 1.5% to 1.75% and signaled it likely
    was done with easing, for now.

    “All participants judged that negative interest rates currently did not appear to be an attractive monetary policy tool in the United
    States,” the minutes said. “It was unclear what effects negative rates might have on the willingness of financial intermediaries to lend
    and on the spending plans of households and businesses.”

    The adoption of negative interest rates by the European Central Bank has failed to stave off a slowdown. Economic growth in the
    Euro Area probably will fall to 1.1% this year and 1% in 2020, according to the average estimate of economists in a Bloomberg poll.
    Last year, the growth rate was 1.9% and in 2017 it was 2.7%.

    “Remember we are actively competing with nations who openly cut interest rates so that now many are actually getting paid when they
    pay off their loan – known as negative interest,” Trump said in a speech to the Economic Club of New York on Nov. 12. “Whoever
    heard of such a thing? Give me some of that. Give me some of that money. I want some of that money. Our Federal Reserve doesn’t
    let us do it.”

    Under a negative rate policy, banks and other financial institutions have to pay interest for parking excess reserves with the central
    bank. It’s a way to encourage banks to lend to businesses and consumers, who don’t get paid to borrow, contrary to the president’s
    description.

    “Differences between the U.S. financial system and the financial systems of those jurisdictions suggested that the foreign experience
    may not provide a useful guide in assessing whether negative rates would be effective in the United States,” the Fed minutes said.
    “Negative rates could have more significant adverse effects on market functioning and financial stability here than abroad.”


    November 15, 2019

    U.S. housing market experiences largest inventory decline since 2018

    In October, the number of homes for sale grew 3.9% from the previous year

    By Alcynna Lloyd, Housing Wire --  In October, America’s home sales rose by 3.9%, marking the fourth month of the past six to post
    a year-over-year increase in sales, according to the RE/MAX National Housing Report.

    “October continued a recent win streak for home sales, and the market is positioned much better than it was a year ago,” said
    RE/MAX Holdings CEO Adam Contos. “Demand is strong, due in part to low-interest rates, but buyers have limited options because
    inventory remains such a challenge.”

    RE/MAX reports that although sales increased last month, the nation’s housing inventory posted a steep decline. According to the
    company, housing inventory fell 9% year-over-year across the report’s 54 housing markets, representing the largest retreat since
    May 2018.

    Furthermore, October posted a 3.1-month supply of inventory, marking the lowest October amount in the report’s 11-year history.
    RE/MAX indicates homes spent 49 days on the market, which is the second-lowest figure for October in report history.

    As the nation’s housing inventory dwindles, home prices continue to rise across the country, Contos said. However, key forecasts
    suggest an increase in new-homes moving onto the market next year, which Contos said may help address inventory constraints and
    potentially slow steady price gains.

    According to the report, the median price for a home was $254,000 in October, climbing 8.4% from last year. Going back to October
    2013, last month’s total now marks the highest annual increase for the month.

    NOTE: The RE/MAX National Housing Report is based on MLS data in approximately 53 metropolitan areas, including all residential
    property types, and is not annualized. For maximum representation, many of the largest metro areas in the country are represented,
    and an attempt is made to include at least one metro from each state.

    market that measures the confidence of building contractors who work on renovations showed a slight increase. Remodeling Market
    Index published by the National Association of Home Builders rose one index point to 55 in the second quarter of 2019. Since the
    second quarter of 2013, the RMI has been consistently above 50 — indicating that most remodelers report market activity is higher
    compared to the previous quarter. The index averages current remodeling activity and future indicators.

    “The demand for remodeling continues to hold strong throughout the country,” said Tim Ellis, of NAHB. “However, the lack of skilled
    labor continues to be one of the largest roadblocks in the industry.”