– U.S. single-family rent prices increased 2.9% year over year in July 2019
– Phoenix had the highest year-over-year rent price increase at 7.2%
Low-end rent prices were up 3.5%, compared to high-end price gains of 2.7%
CoreLogic released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for July 2019 shows a national rent increase of 2.9%, compared to 3.1% in July 2018. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows single-family rent prices have climbed between 2010 and 2019. However, overall year-over-year rent price increases have slowed since February 2016, when they peaked at 4%, and have stabilized over the last year with a monthly average of 3.1%. National rent growth continued to be propped up by low-end rentals in July. Rent prices among this tier, defined as properties with rent prices less than 75% of the regional median, increased 3.5% year over year in July 2019, down from a gain of 4.1% in July 2018. Meanwhile, high-end rentals, defined as properties with rent prices greater than 125% of a region’s median rent, increased 2.7% in July 2019, up from a gain of 2.6% in July 2018. Annual growth of the low-end rental market has consistently outpaced that of the high-end since May 2014. According to data collected from the CoreLogic Consumer Housing Sentiment Study (conducted in partnership with RTi Research), continued growth on the low-end could be due to 63% of younger millennials – ages 21-29 – opting to rent over purchasing a home.
For the eighth consecutive month, Phoenix had the highest year-over-year increase in single-family rents in July 2019 at 7.2% (compared to July 2018). Tucson, Arizona and Las Vegas experienced the second and third highest rent gains in July at 5.7% each, while Miami saw the lowest rent increases of all analyzed metros at 1.2%. Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Phoenix experienced high year-over-year rent growth in July, driven by the annual employment growth of 2.9%. This is compared with the national employment growth average of 1.5%, according to data from the United States Bureau of Labor Statistics. Orlando, Florida also experienced an elevated annual employment growth of 3.8%, which played a role in its above-average year-over-year rent increase of 3.5% in July. “Rent increases on entry-level properties continued to outpace the rest of the rental market,” said Molly Boesel, principal economist at CoreLogic. “This trend should continue in the near term with strong demand from younger millennials who indicate they prefer to rent rather than own a home.”
MBA – mortgage applications flat
Mortgage applications decreased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 13, 2019. Last week’s results included an adjustment for the Labor Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 0.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 10 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week and was 148 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 16 percent compared with the previous week and was 15 percent higher than the same week one year ago. “The jump in U.S. Treasury rates at the end of last week caused mortgage rates to increase across the board, with the 30-year fixed-rate mortgage climbing to 4.01 percent – the highest in seven weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinancing activity dropped as a result, driven solely by conventional refinances.” Added Kan, “The purchase index increased for the third straight week to its highest reading since July. Additionally, the average loan amount on purchase applications increased to its highest level since June. This is a likely a sign that the underlying demand for buying a home remains strong, despite some of the recent volatility we have seen.”
The refinance share of mortgage activity decreased to 57.9 percent of total applications from 60.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.0 percent of total applications. The FHA share of total applications increased to 10.9 percent from 9.3 percent the week prior. The VA share of total applications increased to 12.7 percent from 11.9 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.5 percent the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.01 percent from 3.82 percent, with points decreasing to 0.37 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased to 4.01 percent from 3.84 percent, with points decreasing to 0.29 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.89 percent from 3.76 percent, with points decreasing to 0.30 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.42 percent from 3.28 percent, with points decreasing to 0.36 from 0.47 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. The average contract interest rate for 5/1 ARMs increased to 3.54 percent from 3.42 percent, with points decreasing to 0.29 from 0.48 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
NAHB – builder confidence hits yearly high in September
Builder confidence in the market for newly-built single-family homes rose one point to 68 in September from an upwardly revised August reading of 67, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the mid- to upper 60s since May and September’s reading matches the highest level since last October. “Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” said NAHB Chief Economist Robert Dietz. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China. NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. The HMI index gauging current sales conditions increased two points to 75 and the component measuring traffic of prospective buyers held steady at 50. The measure charting sales expectations in the next six months fell one point to 70. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a two-point gain to 59, the West was also up two points to 75 and the South moved one point higher to 70. The Midwest was unchanged at 57.
MBA – August new home purchase mortgage applications increased 33 percent
The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for August 2019 shows mortgage applications for new home purchases increased 33 percent compared to a year ago. Compared to July 2019, applications decreased by 0.2 percent. This change does not include any adjustment for typical seasonal patterns. MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 785,000 units in August 2019, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. “New home purchase activity was robust in August, as both mortgage applications and estimated home sales increased from a year ago,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Recent increases in new residential housing permits and housing starts, lower mortgage rates, and a still-strong job market all bode well for the new home sales outlook.” The seasonally adjusted estimate for August is an increase of 4.1 percent from the July pace of 754,000 units. On an unadjusted basis, MBA estimates that there were 61,000 new home sales in August 2019, a decrease of 3.2 percent from 63,000 new home sales in July. By product type, conventional loans composed 69.3 percent of loan applications, FHA loans composed 18.1 percent, RHS/USDA loans composed 0.8 percent and VA loans composed 11.8 percent. The average loan size of new homes increased from $325,457 in July to $332,497 in August.
NAR responds to CFPB’s rulemaking notice on the Qualified Mortgage Patch issue
The National Association of Realtors® is calling on the Consumer Financial Protection Bureau to improve the Qualified Mortgage definition and patch while supporting an extension before a long-term solution is secured. The current patch expires on January 10, 2021. “Realtors® believe that homeownership is an integral part of the American Dream. We also believe that the Qualified Mortgage rule should be flexible enough to adopt to changing life patterns in order to ensure homeownership remains within reach for Americans who lack traditional income documentation,” said NAR President John Smaby, a second generation Realtor® from Edina, Minnesota, in the letter(link is external). “Underwriting is the foundation upon which America’s housing finance system is built. The CFPB’s rules process should not be rushed as the re-evaluation of the patch and a market-wide QM require a thorough vetting of alternatives and their impact on both competition and consumer access.” The QM patch was intended as a temporary measure to prevent turmoil in the mortgage and real estate market after the CFPB implemented the Ability to Repay rule. The rule requires lenders to prove that a borrower has the ability to pay back their mortgage at the time of consummation. The ambiguity of the mandate led lenders to request protections, which were delivered in the form of the QM patch. Analysts estimate that more than 3.3 million home purchases financed since 2014 fall into this market segment, and its disruption could raise costs and reduce access to mortgages for hundreds of thousands of otherwise creditworthy homebuyers each year. “The National Association of Realtors® has worked alongside the CFPB to find the most palatable, pragmatic approach to improving the QM definition and patch,” Smaby continued. “While we collaborate with the CFPB to develop a permanent solution that will ensure stability in the housing market, we will continue to contend that any replacement rule must be holistic, look at the complete borrower and must build on the liquidity the QM patch provides in the market.”