Urban Wire  Housing and Housing Finance

Squeaky-clean loans lead to near-zero borrower defaults—and that is not a good thing

There’s something interesting and important going on in the mortgage market today: borrowers who took out mortgages in the past five years have rarely defaulted, making them better at paying their mortgages than any other group of mortgage borrowers in history. 

This is happening for two main reasons: only the best borrowers are getting loans today and these loans are so thoroughly scrubbed and cleaned before they’re made that hardly any of them end up going into default. A near-zero-default environment is clear evidence that we need to open up the credit box and lend to borrowers with less-than-perfect credit.

http://urbn.is/2bRfalY

August home sales dip, median price growth halted

Realtors blame declining inventory for slight drop in sales; record median price growth ends at four months

Getahn Ward, gward@tennessean.com9:07 p.m. CDT September 7, 2016

615-726-5968 and on Twitter @getahn.

Nashville area home sales were down slightly year-over-year for August, marking a second straight month of decline that Realtors attribute to a drop in inventory and the peak summer moving season winding down.

The region's streak of four consecutive months of record median price of a single-family home, meanwhile, ended last month, according to latest monthly figures from the Greater Nashville Association of Realtors.

After reaching $267,000 for July, the median price declined to $253,000 for August. That, however, was still 7.7 percent higher than the $235,000 local median price of a single-family home recorded in August 2015.

GNAR President Denise Creswell offered this perspective on the 0.8 percent year-over-year decline in overall residential properties sold during the recent month of August to 3,741 closings.

"Considering the time of year and the continued struggle with inventory, a slight decrease in sales is not unexpected," she said. "Once schools are back in session and the holidays begin to approach, the market always slows."

At the end of August, the Nashville area's single-family inventory was 8,412 homes, down 5.5 percent from a year ago and reflecting a 2.7-month supply that represents a seller's market. Overall, the inventory of residential properties was down 9 percent to 12,288, which reflects a 3.3 months supply that's also a seller's market.

Richard Exton, the principal in Nashville-based Manier and Exton, said that declining inventory is likely the significant factor holding back home sales.

"I have anecdotal evidence that sellers looking to move-up are reluctant to place their homes on the market for fear that they will not find something to buy after their house sells quickly," the real estate appraiser said.  "Sellers are unlikely to accept a contract contingent upon the sale of the buyer's existing home, something they might have been willing to do several years ago."

Exton cautioned against reading too much into the month-over-month decline in the marketwide median price as was recorded for August.

"Historically, pricing has followed a stair step pattern as opposed the straight trend line up or down," he said. "Historically, prices rise, then they stabilize, then they rise again."

Exton said he had expected recent stabilization in Nashville area home sales, adding that monthly figures should continue at 2015 levels through next spring. GNAR President Creswell, meanwhile, called the 3,717 sales pending at the end of August a good indicator of local active buyers and sellers going into the fall.

Meanwhile, a separate tracking by the Williamson County Association of Realtors show a roughly 10 percent drop in residential sales to 607 home closings for August. The median price of a single-family home sold in that county rose 6.5 percent to a record $441,990 price for August. That was lower than the $452,706 for July.

Williamson County's Job Growth Highest in Nation

Adam Sichko

Senior Reporter

Nashville Business Journal

Most of us are familiar with the fact that Williamson County is the region's premier corporate address, the fastest-growing county in the state and one of the 20 wealthiest in the nation, based on its median annual household income of $91,000.

Now, for the first time ever, Williamson County is adding jobs at a faster clip than any other county in the nation.

http://bit.ly/1nP4vgB

There were 2,735 sales pending at the end of last month, up 11 percent from a year ago. "It's likely to indicate that we'll have another strong month in March," said Richard Exton, an appraiser with Manier and Exton.

http://www.tennessean.com/story/money/homes/2016/03/07/warmer-weather-lifts-nashville-home-sales-decade-long-record/81440048/

Mortgage Banker's Association predicts mortgage originations will decrease to $1.32 trillion in 2016 from $1.45 trillion in 2015, a 9% decline

The Mortgage Bankers Association announced today that it expects to see $905 billion in purchase mortgage originations during 2016, a ten percent increase from 2015.  In contrast, MBA anticipates refinance originations will decrease by one-third, resulting in refinance mortgage originations of $415 billion.  On net, mortgage originations will decrease to $1.32 trillion in 2016 from $1.45 trillion in 2015.

For 2017, MBA is forecasting purchase originations of $978 billion and refinance originations of $331 billion for a total of $1.31 trillion.

"We are projecting that home purchase originations will increase in 2016 as the US housing market continues on its path towards more typical levels of turnover based on steadily rising demand and improvements in the supply of homes for sale and under construction.  Despite bumps in the road from energy and export sectors, the job market is near full employment, with other measures of employment under-utilization continuing to improve," said Michael Fratantoni, MBA's Chief Economist and Senior Vice President for Research and Industry Technology.  "We are forecasting that strong household formation, improving wages and a more liquid housing market will drive home sales and purchase originations in the coming years.

"Our projection for overall economic growth is 2.3 percent in 2016 and 2017 and 2 percent over the longer term, which will be driven mainly by consumer spending as households continue to buy durable goods, such as cars and appliances.  The housing sector will contribute more to the economy than it has in recent years.  We are forecasting a 17 percent increase in single family starts in 2016 and a further increase of 15 percent in 2017.  Weaker growth abroad will mean fewer US exports, which will be a drag on growth over the next couple of years.  Recurring flights to quality, a demand for safe assets from investors abroad, will keep longer-term rates lower than the domestic growth environment would warrant.

"Coincident with a strengthening economy, we expect the Federal Reserve will begin to slowly raise short-term rates at the end of 2015.  At some point after liftoff, the Fed will begin to allow their holdings of MBS and Treasury securities to run off, likely beginning in late 2016.  Even with these actions, we expect that the 10-Year Treasury rate will stay below three percent through the end of 2016, and 30-year mortgage rates will stay below 5 percent.

"We forecast that monthly job growth will average 150,000 per month in 2016, down from about 200,000 per month in 2015, and that the unemployment rate will decrease to 4.8 percent by the end of 2016, returning to 5.0 percent in 2017 and 2018. The slight rebound will be driven by an increase in labor force participation rates to more typical levels.

"Refinance activity will continue to decline as there are few remaining households that can benefit from an interest rate reduction and because rates will gradually begin to rise from historic lows in the coming years.  Home equity products may see an increase in demand as home prices continue to increase at a decelerating rate," Fratantoni said.

MBA upwardly revised its estimate of originations for 2014 to $1.26 trillion from $1.12 trillion, to reflect the most recent data reported in the 2014 Home Mortgage Disclosure Act (HMDA) data release.

This graph shows the ups and downs since 2000

The Nashville region resumed double-digit gains in home closings last month, but the higher sales amid declining inventory officially pushed the market to where sellers now have the upper hand in negotiations.

Overall, 3,122 residential properties changed hands during September, a 19 percent jump from a year ago and the first double-digit gain posted this year, according to the Greater Nashville Association of Realtors.

The inventory of 9,924 single-family homes at the end of last month equates to a 3.9 month supply that's just below the four to six months range where neither buyer nor seller has an advantage. That's the lowest level since the 3.87 month supply in June more than eight years ago.

"The seller's in a better position because there are fewer choices," said Richard Exton, an appraiser with Nashville-based Manier and Exton.

http://www.tennessean.com/story/money/2014/10/08/nashville-area-home-sales-post-years-first-double-digit-monthly-gain/16922777/

Annual Nashville home sales top 30,000 for first time since 2007

At year-end, 2,032 sales were pending, up 9.4 percent from the same time last year, but down 7 percent from November 2013. That signals that January sales should be better than January 2013 sales numbers, said Richard Exton, an appraiser at Manier and Exton in Nashville.

Historically, January and February are the slowest sales months. But both closings and inventory increase going into the spring as more houses are put on the market.

The median price of a single-family home rose nearly 6 percent for December from a year ago to $198,838; it was up nearly 2 percent from November. Last year, prices continued to rise month-over-month reflecting the decline in inventory, Exton added.

Inventory of single-family homes declined nearly 10 percent from a year ago and 12 percent from November to 8,228. That’s a four-month supply, which is around the tipping point of the level where neither the buyer nor the seller has an advantage.

“It would be reasonable to expect some of the decrease in the inventory is due to owners taking their properties off the market for the holiday season and inventories are likely to rise moving forward, pushing the months of supply up,” Exton added.

http://www.tennessean.com/interactive/article/20140108/BUSINESS/301090027/Annual-Nashville-home-sales-top-30-000-first-time-since-2007

Nashville unemployment rate posts big drop from 6.7% to 5.8%

Eric Snyder

Managing Editor-Nashville Business Journal

Davidson County's unemployment rate dropped to 5.8 percent in November, according to new data from the Tennessee Department of Labor and Workforce Development, down from 6.7 percent in October.

The new data shows that unemployment decreased in 93 counties in November, increased in one and remained flat in one.

Davidson County posted the eighth-lowest unemployment rate in the state in November, and the lowest of the state's major metropolitan areas. Williamson County posted the state's lowest unemployment rate, at 5 percent, down from 5.7 percent in October.

Around the region, Cheatham County's unemployment rate dropped to 5.5 percent, down from 6.3 percent in October; Maury County's rate dropped to 8 percent, down from 9 percent; Montgomery County's rate fell to 7.8 percent, down from 8.6 percent; Robert County's rate fell to 5.7 percent, down from 6.4 percent; Rutherford County's rate fell to 5.6 percent, down from 6.4 percent; and Wilson County's rate fell to 5.4 percent, down from 6.6 percent.

Tennessee's statewide unemployment rate for November was 8.1 percent, down from 8.5 percent in October. November's national unemployment rate was 7 percent, down from 7.3 percent.

http://www.bizjournals.com/nashville/blog/2013/12/nashville-unemployment-rate-posts-big.html?ana=twt via @nashvillebiz

In its housing outlook for 2014, Forbes has ranked the Nashville metropolitan statistical area as the fourth-best U.S. market in which to buy a home next year, noting a growing local economy and housing prices that are still under-valued despite a recent uptick.

http://www.forbes.com/sites/erincarlyle/2013/12/26/best-buy-cities-where-to-invest-in-2014/

U.S. growth revised higher, economy on firmer footing, GDP grew at 4.1%

(Reuters) - The U.S. economy grew at its fastest pace in almost two years in the third quarter, the government said on Friday as it revised its estimates of business and consumer spending higher.The broad revisions hinted at some underlying strength, which could help the economy better absorb the blow from an anticipated cutback in inventory accumulation this quarter.

The Federal Reserve on Wednesday gave the economy a vote of confidence, announcing it would reduce its $85 billion monthly bond purchases by $10 billion starting in January.

Gross domestic product grew at a 4.1 percent annual rate instead of the 3.6 percent pace reported earlier this month, the Commerce Department said in its third estimate.

That was the quickest pace since the fourth quarter of 2011 and an acceleration from the April-June quarter's a 2.5 percent.

Economists had expected third-quarter GDP growth would be unrevised at a 3.6 percent rate.
"This is a fairly solid report, said Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania, adding that the mix of factors in the report was more positive than expected.

http://reut.rs/19h8yuo via @reuters

The Greater Nashville Association of Realtors posted their month sales figures today (http://gnar.org/news/septhomesales).  Sales are up, inventories are down, and pricing is up compared to September 2012.  Pending sales were up compared to 9/2012.  This indicates that October sale will exceed 10/2012.  It is significant to note that the difference in the number of pending sales between 2012 and 2013 has been declining most months this year.  This it likely to translate in to a flat market as we head into 2014.

Here are the year to date sale through the end of the third quarter for the past 4 years:

Sales though 3rd quarter
2013	Res	20254
	Condo	2660
2012	Res	16489
	Condo	2216
2011	Res	13200
	Condo	1685
2010	Res	13532
	Condo	1943

GNAR does not report Median Price by Quarter.  This is a better indicator of overall market pricing trends as opposed to comparisons of month to month or month to the same month in the previous year.  This is due to the larger data sample available for a quarterly analysis.

An analysis of median price by quarter show significant price gains in comparison of year over year and prior quarter.  Basic economic theory is in play here.  Supply is down, demand is up, pricing is move forward.

Median Price by Quarter
2012	1st	Res	$162,050		2013	1st	Res	$169,900
		Condo	$139,900				Condo	$146,434
	2nd	Res	$175,000			2nd	Res	$195,500
		Condo	$153,500				Condo	$163,000
	3rd	Res	$177,000			3rd	Res	$198,000
		Condo	$149,900				Condo	$162,250
	4th	Res	$180,635
		Condo	$151,950

Manier and Exton Studies Updated

Current Manier and Exton Studies have been updated and posted to Exton.biz.

Sales Rates and Inventories for Selected Middle Tennessee Neighborhoods as of 7/8/2013

Average Sales Prices and Average List Price to Sales Price Ratio for Selected Middle Tennessee Neighborhoods as of 7/8/2013

Days on Market for Home Sales and Listings for Selected Middle Tennessee Neighborhoods as of 7/8/2013

Sales Rates and Inventory By Price Range for Homes over $700,000 in Middle Tennessee as of 7/8/2013

A good appraisal is good for all: Buyer, seller, agent on Brentwood Home Page

A good appraisal is good for all: Buyer, seller, agent on Brentwood Home Page

Forbes names Nashville 2nd best city for jobs.  http://www.forbes.com/pictures/edgl45fedm/no-2-nashville-davidson-murfreesboro-franklin-tn/

Currently the inventory of homes offered for sale based on current list prices is as follows:

Sales Rate for High Priced Homes in Middle Tennessee
		2011	2012	Number of Listings 4/4/2013	Current Months of Inventory based on 2012 Sales
$1,000,000	$1,099,999	31	33	29	10.5
$1,100,000	$1,199,999	25	31	38	14.7
$1,200,000	$1,299,999	25	33	39	14.2
$1,300,000	$1,399,999	14	21	24	13.7
$1,400,000	$1,499,999	14	13	28	25.8
$1,500,000	$1,599,999	10	13	19	17.5
$1,600,000	$1,699,999	0	8	17	25.5
$1,700,000	$1,799,999	4	6	14	28.0
$1,800,000	$1,899,999	3	4	6	18.0
$1,900,000	$1,999,999	5	2	12	72.0
$2,000,000	$2,499,999	8	14	26	22.3
$2,500,000	$2,999,999	10	9	25	33.3
$3,000,000	$3,999,999	3	3	19	76.0
$4,000,000	and Up	0	4	16	48.0
Based on listings sold in MLS on sites of less than 20 acres - Study area includes Davidson, Williamson, Cheatham, Robertson, Sumner, Wilson and Rutherford Counties.

This study indicates that currently there is a minimum of 1.46 years worth of inventory in each price range over $1,500,000, with 6.3 years worth in the 3 to 4 million dollar range.

Additionally, we examined sales of homes with final list prices from $1,500,000 to $2,900,000, that sold from January 1, 2011 to April 9, 2013, on lots of 20 acres or less.  In 2011 the average total marketing time from original listing to accepted contract was 456 days, in 2012 the average was 301 days, and through the first quarter of 2013 the average was 627 days. Half year comparisons also showed declining marketing times, with the first half of 2011 showing an average of 504 days, second half of 2011 - 429 days, first half of 2012 - 330 days, and the second half of 2012 - 276 days.

Not surprisingly with a decrease in the average marketing time there was a corresponding increase in average original list price to sales price ratio. In 2011 it averaged 80.45% and in 2012 it had increased to 83.19%. Noting that year to date marketing times in 2013 are higher, and the original list price to sales price ratio has declined to 79.18%.

http://bit.ly/Y0cN24

Home values performed 42 percent better when located near public transportation

Market Watch Wednesday, April 03, 2013

Location, location, location near public transportation may be the new real-estate mantra according to a new study released by the American Public Transportation Association (APTA) and the National Association of Realtors (NAR). Data in the study reveals that during the last recession, residential property values performed 42 percent better on average if they were located near public transportation with high-frequency service.

“When homes are located near public transportation, it is the equivalent of creating housing as desirable as beach front property,” said APTA President and Chief Executive Officer Michael Melaniphy. “This study shows that consumers are choosing neighborhoods with high-frequency public transportation because it provides access to up to five times as many jobs per square mile as compared to other areas in a given region. Other attractive amenities in these neighborhoods include lower transportation costs, walkable areas and robust transportation choices.”

“Higher home values reflect greater market demand for areas near public transportation,” said NAR Chief Economist Lawrence Yun. “Transportation plays an important role in real estate and housing decisions, and the data suggests that residential real estate near public transit will remain attractive to buyers going forward. A sound transportation system not only benefits individual property owners, but also creates the foundation for a community’s long-term economic well-being.”

The study, The New Real-Estate Mantra: Location Near Public Transportation, investigates how well residential properties located in a half-mile proximity to high-frequency public transportation or in the “public transit shed” have performed in holding their value during the recession compared to other properties in a given region.

While residential property values declined substantially between 2006 to 2011, properties close to public transit showed significantly stronger resiliency. The following are a few examples from the study: In Boston, residential property in the rapid transit area outperformed other properties in the region by an incredible 129 percent. In the Chicago public transit area, home values performed 30 percent higher than the region; in San Francisco, 37 percent higher; Minneapolis-St Paul, 48 percent; and in Phoenix, 37 percent higher.

The study looked at five regions, which illustrate the types of high-frequency public transit systems throughout the country. High-frequency public transportation includes subway (heavy rail), light rail and bus rapid transit. This sample accurately projects the nationwide average (42 percent) variance among properties located near high-frequency public transportation and those that are located further away from public transit.

“Stable property values in areas with public transit access have a number of policy implications,” Melaniphy said. “As Congress and state and local governments look for ways to accelerate economic growth, this study shows that investing in public transportation is a boon to revitalizing our economy.”

“When consumers choose a home, they also choose a lifestyle. Shorter commutes and more walkable neighborhoods matter to a growing number of people, especially those living in congested metro areas,” Yun said.

Home prices rais 9.2% in past year - CoreLogic

Nashville Post reports "There's no sign of weakness yet in local home prices, according to research firm CoreLogic. In fact, we may be getting slightly frothy for a market that supposedly doesn't see the extremes of cities such as Miami or Vegas. February prices of non-distressed properties clocked in 9.2 percent higher than the mark of the year before, up from 6.3 percent in January. Throw in distressed homes and the increase was 'only' 7 percent. The national numbers are equally impressive."

Real estate market studies updated

Manier and Exton has updated our studies of the Middle Tennessee real estate market as of 7/14/2012.  Visit http://exton.biz/ for more information.  For regular updates "Like" our Facebook page - https://www.facebook.com/NashvilleAppraiser

Mortgage rates chart new depths

Rates on 30-year fixed-rate mortgage (FRM) averaged 3.62 percent with an average 0.8 point for the week ending July 5, down from 3.66 percent last week and 4.60 percent a year ago, Freddie Mac said in releasing the results of its Primary Mortgage Market Survey. That's a new all-time low in Freddie Mac records dating to 1971. http://www.inman.com/news/2012/07/5/mortgage-rates-plunge-deeper-uncharted-depths

Ben Bernanke Assesses the Housing Market

Ben Bernanke Assesses the Housing Market

On February 10, Federal Reserve Chairman Ben Bernanke addressed the 2012 National Association of Homebuilders International Builders' Show in Orlando, Florida. His topic was the national housing market, including an analysis of where it stands and where it's going:

*** BEGIN QUOTE ***
One way to understand conditions in the housing market is to focus on the balance of supply and demand. For the past few years, the actual and potential supply of single-family homes has greatly exceeded the effective demand. The elevated number of homes that are currently vacant instead of owner occupied reflects the imbalance. According to the most recent estimate, about 1-3/4 million homes are currently unoccupied and for sale. While this figure has declined slightly during the past few years, it is nonetheless up dramatically from the first half of the 2000s, when readings of about 1-1/4 million vacant homes were the norm. Of course, housing conditions vary by region, and vacancy rates in some locations are substantially higher than the national average....

Moreover, a very large number of additional homes are poised to come on the owner-occupied market. In each of the past few years, roughly 2 million homes have entered the foreclosure process, and many of these homes have been put up for sale, crowding out much of the need for new building. Looking ahead, the relatively high rate of foreclosures is likely to continue for a while, putting additional homes on the market and dislocating families and disrupting communities in the process.

At the same time, a number of factors are constraining demand. Household formation has been down, particularly among young adults. High unemployment and uncertain job prospects may have reduced the willingness of some households to commit to homeownership. Availability of mortgage credit is an important constraint, to which I will return later. Additionally, housing may no longer be viewed as the secure investment it once was thought to be, given uncertainty about future home prices and the economy more generally.
*** END QUOTE ***

To see a transcript of his remarks, in their entirety, go to:
http://www.federalreserve.gov/newsevents/speech/bernanke20110210a.htm