Weekly Economic & Real Estate Market Update

Economic News

More Education is Needed Despite the efforts of housing counselors, real estate agents, lenders and the Consumer Financial Protection Bureau (CFPB), many Americans lack basic knowledge of home loans and the home-buying process. A recent survey by FreeandClear.com, a site that provides mortgage education, found that 20 percent of borrowers think it is impossible to buy a home with a down payment of less than 5 percent. Yet the FHA loan program requires just 3.5 percent, VA loans have no down payment requirement and conventional loans are available with 3 percent down payment options. The primary source of information about home loans, as with most subjects today, is the Internet, with 24 percent of borrowers researching on various sites. However, just 2 percent of borrowers said they learned about home financing from the CFPB. The survey found that 30 percent chose to work with their existing bank and 29 percent chose a lender based on their real estate agent’s referral. Borrowers appear to err on the side of caution when borrowing. When asked what percentage of a buyer’s gross income should be spent on housing costs and all other debt repayment, half answered 34 percent, which is lower than the maximum allowance of 43 percent for most loans. Source: The Washington Post Amazing Consistency After a deep recession in which we lost approximately eight million jobs, America's economy has been quite consistent with regard to the creation of jobs during the past several years. For example, during the period of 2013 to 2017, just over 10 million jobs were created. That comes to just over 200,000 jobs per month. Though the numbers are still preliminary, the December jobs report indicates that we have added 2.1 million jobs in 2017, which is slightly below, but very close to what we have created in the past four years. This is why our country's unemployment rate has fallen from 10% to December's reading of 4.1%, a number most economists consider close to full employment. This is quite a dramatic drop, and the next question is -- where do we go from here? Does full employment mean that we can't improve? There are two numbers which indicate that there is still room for improvement. The labor participation rate of 62.7% is close to long term lows and attracting the long-term unemployed back into the economy is still an important goal. We can also improve upon the types of jobs created. Wage growth of only 2.5% over the past year tells us that we are not creating enough high-paying jobs. Thus, we have come a very long-way. The economy is in much better shape than it was during our recession of a decade ago. But there is still room to add more jobs and better paying jobs -- without the economy being beset by inflation. Inflation is a concern because with inflation comes higher interest rates and low rates have buoyed our recovery. Real Estate News Breaking. Mortgage delinquencies decreased in September to their lowest levels in more than a decade, according to the latest monthly Loan Performance Insights Report from CoreLogic, a property information, analytics and data-enabled solutions provider. As of September, 5% of home loans remained in some stage of delinquency, 30 days or more past due including those in foreclosure. This is down 0.2 percentage points from last year’s overall delinquency rate of 5.2%. “While natural hazard risk was elevated in 2017, the economic fundamentals that drive credit performance are the best in two decades,” CoreLogic President and CEO Frank Martell said. “The combination of strong job growth, low unemployment rates, steady economic performance and prudent underwriting has led to continued improvement in loan performance heading into next year.” The foreclosure inventory rate, which measures the share of home loans in some stage of the foreclosure process, decreased from 0.8% in September 2016 to 0.6% in September 2017. This represents the lowest foreclosure rate since June 2007 when foreclosure inventory was also at 0.6%. “September's early-stage delinquency rate increased by 0.3% from a year ago, the largest increase since June 2009,” CoreLogic Chief Economist Frank Nothaft said. “This does not reflect a deterioration in credit, but rather the impact of the hurricanes in Texas, Florida and Puerto Rico.” Source: National Mortgage Professional Median and average down payments for U.S. homes purchased in the third quarter reached record highs, said ATTOM Data Solutions, Irvine, Calif. The company's third quarter U.S. Residential Property Loan Origination Report said the median down payment for single family homes and condos purchased with financing rose to $20,000, up from $18,161 in the previous quarter and up from $14,400 a year ago to the highest level as far back as data is available (Q1 2000). The average down payment, $76,645, also represented a record. The report said the average down payment of $20,000 represented 7.6 percent of the median sales price of $263,000 for financed home purchases in the third quarter, up from 7.1 percent in the previous quarter and up from 6.1 percent a year ago to the highest level since Q3 2013. In 12 of 99 metro areas surveyed, the median down payment topped $50,000. "Buying a home has become a full-contact sport in many markets across the country, and buyers with the beefiest down payments--not to mention all-cash buyers--are often able to muscle out those with scrawnier savings," said Daren Blomquist, senior vice president with ATTOM Data Solutions. "Despite the increasingly competitive nature of home buying, the number of residential property purchase loans nationwide increased to a 10-year high in the third quarter." Loans backed by FHA accounted for 12.9 percent of all residential property loans originated in the third quarter, down from 13.6 percent in the previous quarter and down from 13.2 percent a year ago. Loans backed by the Department of Veterans Affairs accounted for 6.6 percent of all residential property loans originated in the third quarter, up from 6.5 percent in the previous quarter but down from 7.5 percent a year ago. Source: Mortgage Bankers Association

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