Here is what was at the top of the headlines for the mortgage industry this past week:
1. Housing Recovery Intact but Moderating Fannie Mae says
Fannie Mae’s Economic and Strategic Research Group calls the temporary government shutdown and debt ceiling negotiations in October a blow to consumers who “were cautious in their spending amid continued eroding confidence. Housing indicators slowed further, and housing expectations turned bearish despite declining mortgage rates.” Businesses, however, seemed to have shrugged it off, showing the strongest payroll gains since February which was part of the reason behind the Federal Reserve advancing its schedule for tapering the purchasing program.
The Group predicts the events in October will foreshadow likely continued market volatility during the next few months. Economic growth will be hampered by several unresolved fiscal and monetary policy decisions which will weigh on consumer spending such as the appointment of a new Federal Reserve chair in January and another round of budget and debt ceiling debates. Still the group expects modest growth of approximately 2.0 percent for the remainder of the year followed by a pick-up to 2.5 percent for 2014 once the fiscal drags wane and as labor market conditions improve further.
2. Bid Wars Wane in U.S. Housing Markets on Supply Rise
In states such as California, Arizona and Nevada, where bidding wars have fueled the country’s largest gains in home prices, booming markets are showing signs of cooling as buyers like Imgarten step back. The surge in values, combined with higher mortgage rates, is reducing affordability while also encouraging more sellers to list their properties, indicating that price growth will slow after the biggest increases since 2006.
Asking prices in September were lowered on about 25 percent of listings, the biggest share in two years, while last month they were cut on 23.8 percent, according to Seattle-based brokerage Redfin, which tracks 22 cities across the country. The inventory of unsold U.S. homes climbed in September from a year earlier for the first time since 2011, while contracts to buy previously owned residences plunged the most in three years, data from the National Association of Realtors show.
3. Purchase Mortgages Top 60 percent in October
Mortgage loan originations for the purpose of purchasing topped 60 percent in October Ellie Mae said on Wednesday, for the first time since the company began publishing itsOrigination Insight Report. Quite naturally the refinancing share was below 40 percent for the first time as well.
Purchase mortgages represented 61 percent of all mortgages originated during the month compared to 58 percent in September and 31 percent in October 2012. Refinancing dropped to 39 percent from 41 percent the previous month and 68 percent a year earlier. Ellie Mae first began tracking this data in August 2011.
Sixty-eight percent of originations were conventional mortgages, down from 70 percent in September and 74 percent in October 2011 while FHA-backed mortgages remained at the 19 percent level where it has been for five of the last six months and where is stood in October 2012 as well.
4. Freddie Mac Forecasts First Purchase-Dominated Market Since 2000
The coming year should bring an emergence of the firstpurchase-dominated market the U.S. has seen since 2000 Freddie Mac predicted today. The single-family mortgage market will soon begin a transition from a rate-and-term refinance dominated market, the company’s Chief and Deputy Chief Economists said, to one in which home purchase loans will take the lead.
Freddie Mac’s November U.S. Economic and Housing Market Outlook might be the sunniest forecast Frank Nothaft and Leonard Kiefer have published in some months. They see economic growth in the 2.5 to 3.0 percent range, more than half a percentage point above 2013 expectations and a quickening recovery that will lead to more job creation and an unemployment rate below 7 percent, perhaps by mid-year. And housing features prominently in the medium range outlook.
Freddie Mac expects single-family home sales and housing starts to be at the highest level since 2007 and multifamily transactions and construction to post gains as well. Housing will remain affordable in most parts of the country despite rising interest rates and household formations should finally pick up. The later, along with a slow growth in housing completions should keep inventories tight and vacancies low.