CoreLogic – US Housing Credit Index shows a decrease in mortgage credit risk
CoreLogic released its Q4 2016 CoreLogic Housing Credit Index (HCI™) that measures variations in home mortgage credit risk attributes over time, including borrower credit score, debt-to-income ratio (DTI) and loan-to-value ratio (LTV). A rising HCI indicates that new single-family loans have more credit risk than during the prior period, while a declining HCI means that new originations have less credit risk. The current HCI shows mortgage loans originated in Q4 2016 continued to exhibit low credit risk consistent with the previous quarter and tighter than in Q4 2015. In terms of credit risk, Q4 2016 loans are among the highest-quality home loans originated since 2001. “Mortgage loans closed during the final three months of 2016 had characteristics that contribute to relatively low levels of default risk,” said Dr. Frank Nothaft, chief economist for CoreLogic. “While our index indicates somewhat less risk than both a quarter and a year earlier, this partly reflects the large refinance share of fourth-quarter originations. Refinance borrowers typically have a lower LTV and DTI than purchase borrowers.” Nothaft observed that mortgage rates have moved higher since November and are anticipated to rise even further during 2017. “Refinance volume will decline with higher mortgage rates, and lenders generally will respond by applying the flexibility in underwriting guidelines to make loans to harder-to-qualify borrowers. As this occurs, we should observe our index signaling a gradual increase in default risk. The evolution to a more purchase-dominated lending mix is also likely to increase fraud risk.”
HCI Highlights as of Q4 2016
– Credit Score: The average credit score for homebuyers increased 4 points year over year between Q4 2015 and Q4 2016, rising from 733 to 737. In Q4 2016, the share of homebuyers with credit scores under 640 was about one-tenth of those in 2001.
– Debt-to-Income: The average DTI for homebuyers in Q4 2016 was similar to Q4 2015, remaining at 36%. In Q4 2016, the share of homebuyers with DTIs greater than or equal to 43% had increased slightly compared with 2001.
– Loan-to-Value: The LTV for homebuyers increased by less than 1 percentage point year over year between Q4 2015 and Q4 2016, rising from 86.7% to 87.1%. In Q4 2016, the share of homebuyers with an LTV greater than or equal to 95% had increased by more than one-fourth compared with 2001.
Oil prices hit lowest since nov on expanding US inventories
Oil prices fell to almost four-month lows on Wednesday after data showed US crude inventories rising faster than expected, piling pressure on OPEC to extend output cuts beyond June. The American Petroleum Institute said late Tuesday that US inventories climbed by 4.5 million barrels to 533.6 million last week, outpacing analyst forecasts of 2.8 million. Investors now want to see whether Wednesday’s figures from the US Energy Information Administration confirm the rise. EIA will release its report at 10:30 a.m. EDT (1430 GMT). “With US crude stocks continuing to mount into record territory both in total and at Cushing following almost two months of OPEC production restraint, we feel that the odds of a gradual unraveling in the OPEC agreement have been increased significantly,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note. Global benchmark Brent futures for May delivery were down 59 cents, or 1.1%, at $50.37 a barrel by 9:48 a.m. EDT (1348 GMT). Earlier the contract fell as low as $50.05, its lowest since Nov. 30 when OPEC countries agreed to cut output. On its first day as the front-month, US West Texas Intermediate (WTI) crude futures for May were down 53 cents, or 1.1%, at $47.71 per barrel. “A look below $50 (for Brent) is quite possible today if (EIA) data show a similar pattern, but it’s impossible to say how far below $50,” Commerzbank analyst Carsten Fritsch said. A deal between the Organization of the Petroleum Exporting Countries and some non-OPEC producers to reduce output by 1.8 million barrels per day (bpd) in the first half of 2017 has had little impact on bulging global stockpiles of oil.
NAR – existing-home sales stumble in February
After starting the year at the fastest pace in almost a decade, existing-home sales slid in February but remained above year ago levels both nationally and in all major regions, according to the National Association of Realtors (NAR). Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, retreated 3.7% to a seasonally adjusted annual rate of 5.48 million in February from 5.69 million in January. Despite last month’s decline, February’s sales pace is still 5.4% above a year ago. The median existing-home price for all housing types in February was $228,400, up 7.7% from February 2016 ($212,100). February’s price increase was the fastest since last January (8.1%) and marks the 60th consecutive month of year-over-year gains. Total housing inventory at the end of February increased 4.2% to 1.75 million existing homes available for sale, but is still 6.4% lower than a year ago (1.87 million) and has fallen year-over-year for 21 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (3.5 months in January). All-cash sales were 27% of transactions in February (matching the highest since November 2015), up from 23% in January and 25% a year ago. Individual investors, who account for many cash sales, purchased 17% of homes in February, up from 15% in January but down from 18% a year ago. Seventy-one% of investors paid in cash in February (matching highest since April 2015). First-time buyers were 32% of sales in February, which is down from 33% in January but up from 30% a year ago. NAR’s 2016 Profile of Home Buyers and Sellers — released in late 2016 — revealed that the annual share of first-time buyers was 35%.
According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage inched up in February to 4.17% from 4.15% in January. The average commitment rate for all of 2016 was 3.65%. Properties typically stayed on the market for 45 days in February, down from 50 days in January and considerably more than a year ago (59 days). Short sales were on the market the longest at a median of 214 days in February, while foreclosures sold in 49 days and non-distressed homes took 45 days. Forty-two% of homes sold in February were on the market for less than a month. Inventory data from realtor.com reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in February were San Jose-Sunnyvale-Santa Clara, Calif., 23 days; San Francisco-Oakland-Hayward, Calif., 27 days; Vallejo-Fairfield, Calif., 33 days; Seattle-Tacoma-Bellevue, Wash., 36 days; and Boulder, Colo., at 37 days. NAR President William E. Brownsays being fully prepared is the right strategy for prospective buyers this spring. “Seek a preapproval from a lender, know what your budget is and begin discussions with a Realtor early on about your housing wants and needs,” he said. “Homes in many areas are selling faster than they were last spring. A buyer’s idea of a dream home in a popular neighborhood is probably the same as many others. That’s why they’ll likely have to decide quickly if they see something they like and can afford.”
Distressed sales — foreclosures and short sales — were 7% of sales for the third straight month in February, and are down from 10% a year ago. Six% of February sales were foreclosures and 1% were short sales. Foreclosures sold for an average discount of 18% below market value in February (14% in January), while short sales were discounted 17% (10% in January). Single-family home sales declined 3.0% to a seasonally adjusted annual rate of 4.89 million in February from 5.04 million in January, and are now 5.8% above the 4.62 million pace a year ago. The median existing single-family home price was $229,900 in February, up 7.6% from February 2016. Existing condominium and co-op sales descended 9.2% to a seasonally adjusted annual rate of 590,000 units in February, but are still 1.7% higher than a year ago. The median existing condo price was $216,100 in February, which is 8.2% above a year ago. February existing-home sales in the Northeast slumped 13.8% to an annual rate of 690,000, but are still 1.5% above a year ago. The median price in the Northeast was $250,200, which is 4.1% above February 2016. In the Midwest, existing-home sales fell 7.0% to an annual rate of 1.20 million in February, but are still 2.6% above a year ago. The median price in the Midwest was $171,700, up 6.1% from a year ago. Existing-home sales in the South in January rose 1.3% to an annual rate of 2.34 million, and are now 5.9% above February 2016. The median price in the South was $205,300, up 9.6% from a year ago. Existing-home sales in the West decreased 3.1% to an annual rate of 1.25 million in February, but are 9.6% above a year ago. The median price in the West was $339,900, up 9.6% from February 2016.
US investment banks strengthen global lead over Europe
JP Morgan retained its place atop the global investment banking league table last year, with the top five places now firmly in the hands of US banks, reflecting their domination over struggling European peers, data on Wednesday showed. JP Morgan’s revenues from trading, mergers and acquisitions and other investment banking activity rose 11% to $25.2 billion last year from $22.7 billion in 2015, according to industry analytics firm Coalition. That strong increase was mirrored by US peer Citi, which rose in the overall ranking to joint second from joint third, a performance that far exceeded the average 3% decline across the 12 banks surveyed. JP Morgan retained its crown in fixed income, currencies and commodities (FICC) trading, its position solidified by dominance in G10 rates and foreign exchange trading. JP Morgan held the top two spots in all but one – municipal finance – of the seven FICC categories, Coalition said. Morgan Stanley secured fifth place in the ranking by consolidating its leadership position in equities, meaning all top five spots are held by US banks. In 2015 Morgan Stanley shared fifth spot with Germany’s Deutsche Bank. US banks now take in around a two-thirds share of the investment banking revenue pie, the gap widening consistently since 2011 when the US-European split was roughly 50-50. But that may be about to reverse. “European banks had some significant trading underperformance last year, which we don’t see repeating,” said Amrit Shahani, research director at Coalition. “They should improve, albeit from a low base. We expect them to maintain and build on their market share this year.” Shahani said banks at the top and bottom ends of the ranking are taking market share from those in the middle.
MBA – mortgage applications decrease in latest MBA weekly survey
Mortgage applications decreased 2.7% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 17, 2017. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2% compared with the previous week. The Refinance Index decreased 3% from the previous week. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 5% higher than the same week one year ago. The Government Refinance Index decreased 12% to the lowest level since December 2014. The refinance share of mortgage activity decreased to 45.1% of total applications from 45.6% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.0% of total applications, the highest level since October 2014. The FHA share of total applications decreased to 10.9% from 11.1% the week prior. The VA share of total applications decreased to 10.1% from 11.1% the week prior. The USDA share of total applications remained unchanged at 0.9% from the week prior.
CoreLogic – cash and distressed sales update: December 2016
– The full-year cash sales share for 2016 was 32.1%
– The cash sales share in December 2016 was 33.1%
– The full-year distressed sales share for 2016 was 8.9%
Cash sales accounted for 33.1% of total home sales in December 2016, down 1.3 percentage points year over year from December 2015. For the full-year 2016, the cash sales share was 32.1%, 2.2 percentage points below the full-year 2015 share, and the lowest annual cash sales share since 2007 when it was 27%. The cash sales share peaked in January 2011 when cash transactions accounted for 46.6% of total home sales nationally. Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25%. If the cash sales share continues to fall at the same rate it did in December 2016, the share should hit 25% by mid-2019. Real-estate owned (REO) sales had the largest cash sales share in December 2016 at 61.1%. Short sales had the next highest cash sales share at 34.2%, followed by resales at 33% and newly constructed homes at 16.7%. While the percentage of REO sales within the all-cash category remained high, REO transactions have declined since peaking in January 2011. REO sales made up 5.8% of total home sales and short sales made up 2% in December 2016. The distressed sales share of 7.8% in December 2016 was the lowest distressed sales share for any month since October 2007.
The distressed sales share for the full-year 2016 was 8.9%, down 2.1 percentage points from the full-year 2015 and the lowest annual distressed sales share since 2007 when it was 6%. At its peak in January 2009, distressed sales totaled 32.4% of all sales with REO sales representing 27.9% of that share. The pre-crisis share of distressed sales was traditionally about 2%. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal” 2-percent mark by mid-2018. All but nine states recorded lower distressed sales shares in December 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 17.9% in December 2016, followed by Connecticut (17.6%), Michigan (15.8%), New Jersey (15.5%) and Illinois (13.6%). North Dakota had the smallest distressed sales share at 1.3%. While some states stand out as having high distressed sales shares, only North Dakota, Utah and the District of Columbia are close to their pre-crisis levels (each within one percentage point). New York had the largest cash sales share of any state at 47.9%, followed by New Jersey (47.6%), Alabama (46.1%), Michigan (44.3%) and Florida (42.1%).