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Unusual Housing Market Dynamics Contributing to Stall in Consumer Sentiment

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HPSI’s Low-Level Plateau Continues as Consumers Remain Frustrated by Lack of Affordability The Fannie Mae Home Purchase Sentiment Index® (HPSI) remained effectively unchanged in August, as consumer confidence toward housing continued along the low-level plateau set earlier this year. Three of the HPSI’s six components increased month over month, most notably the component measuring perceived home-selling conditions. In August, 66% of consumers reported that it’s a good time to sell a home, compared to only 18% who said it was a good time to buy a home. Additionally, despite the significant rise in rates over the last couple years, only 18% expect mortgage rates to go down in the next 12 months. Overall, the full index is up 4.9 points year over year. “Mortgage rates once again breached the 7-percent mark in August, hitting a 22-year high and doing no favors for consumer sentiment,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Consumers remain pessimistic toward the housing market in general and homebuying conditions in particular. The overall HPSI is maintaining the low-level plateau set a few months back, and we don’t see much upside to the index in the near future, barring significant improvements to home affordability, which we also don’t expect. While renters are slightly more pessimistic than homeowners, for two years now a large majority of both groups have told us that it’s a bad time to buy a home, and they’ve continuously cited affordability concerns as the primary reason. If mortgage rates remain elevated, many existing homeowners will likely continue to hold on to their current historically low mortgage rates, suppressing existing home listings and providing support for home prices – assuming mortgage demand maintains resilience despite the higher rate environment. Considering that existing home sales have traditionally represented approximately 85-90% of total home sales, even substantial quantities of new home production are unlikely to produce the inventory needed to meaningfully improve affordability.” Duncan continued: “From a historical perspective, the current housing market is unusual, as demonstrated in part by the HPSI and its recent plateauing. Given the significant home price appreciation and rapid rise in mortgage rates, it is very much a tale of two markets, at least from a consumer perspective. Of course, a third perspective exists among homebuilders, who are currently thriving amid the surge in demand for new home construction, a function of the unusual dynamics at play in the existing home space between would-be sellers and would-be buyers, as well as changing labor market dynamics owing to the ongoing prevalence of remote work. In the past, first-time homebuyers typically sought to purchase existing homes, which were generally more affordable than new homes. They then invested sweat equity before moving further up the housing ladder, often in response to an expanding family or another significant life event. However, Baby Boomers’ desire to age in place and the impact of the ‘lock-in effect,’ in which existing homeowners are disincentivized from listing their homes for sale because their existing mortgage rate is well below current market rates, across demographic groups – but particularly among Gen Xers – has thrown a wrench into this historical cycle, making it more difficult for would-be homebuyers to find affordable existing home purchase options. This is driving demand toward newly constructed homes, which, again, has been great news for homebuilders and the larger economy, at least to this point.” Home Purchase Sentiment Index – Component Highlights Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in August by 0.1 points to 66.9. The HPSI is up 4.9 points compared to the same time last year. Read the full research report for additional information. SOURCE Fannie Mae Author admin View all posts

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Interest Rates Surge to 22-Year Highs, Fueling Housing Market Uncertainties Shift Towards Rental Market Intensifies as Purchasing Activity Declines, Represented by a 27.5% Year-Over-Year Decline in New Listing Volume Closed Prices Continue to Rise as Listed Prices Reached Their Peak in June HouseCanary, Inc. (“HouseCanary”), a national brokerage known for its real estate valuation accuracy, released its August Market Pulse report, which finds that list prices peaked in June while closed prices continued to achieve positive year-over-year growth, despite market activity remaining low from a historical perspective. Interest rates are now at the highest level seen in 22 years due to the Federal Reserve’s efforts to combat the 3.3% year-over-year inflation growth observed in July. Federal Reserve officials and experts are now predicting rates to hike yet again in September, creating more uncertainty in the housing market and overall economy. Homeowners and potential buyers continue to distance themselves from the purchase market and redirect their interest toward the rental market, as can be seen by the continuous year-over-year declines in purchasing market activity and rapidly increasing inventory of single-family rentals. In addition, the low market activity has caused net new listing volume to continue lagging behind contract volume, contributing to depressed inventory. Looking ahead to Q3 and beyond, market activity and inventory are expected to remain low as more rate hikes from the Federal Reserve are likely to be introduced in the upcoming FOMC meetings. Jeremy Sicklick, Co-Founder and Chief Executive Officer of HouseCanary, commented: “In August, the housing market continued to show low net new listings and slow price increases, and with the latest round of rate hikes, these market conditions are only expected to linger. Single-family rentals remain the most desired choice for potential homebuyers in the current uncertain market environment, as price and inventory increase on a year-over-year basis persist. Notably, single-family rental inventory is up 41.4% when compared to August 2022, while inventory in the purchasing market is down 12.5%. As we move into September, we can expect an additional rate hike to be set in the upcoming meeting, continuing the trend of low market activity we have been experiencing over the past year.” Key Takeaways: Learn more at www.housecanary.com. Author admin View all posts

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Floods, fires and extreme weather are reshaping how people view climate risk and real estate More than 4 out of 5 prospective home buyers consider climate risks as they shop, new Zillow research shows. Most say their major concern is flood risk, followed by wildfires, extreme temperatures, hurricanes and drought. “Climate risks impact where most prospective buyers shop for a home,” said Zillow senior population scientist Manny Garcia. “While all generations juggle trade-offs like budget, floor plans and commute times, younger home shoppers are more likely to face another consideration: They want to know if their home will be safe from rising waters, extreme temperatures and wildfires.” A clear majority of prospective buyers in each region of the United States consider at least one climate risk when shopping for a home. People in the West are most likely to report climate risk as very or extremely impactful in their home search, followed by those in the Northeast. On the flip side, one-third of Midwestern and Southern shoppers say climate risks are not very impactful or not at all impactful to their real estate journey. Total Midwest Northeast South West Share of prospective buyers whoconsidered at least one climate risk 83 % 77 % 85 % 79 % 90 % Share of buyers who said climaterisks are: Very/extremely impactful 49 % 42 % 50 % 43 % 59 % Not at all/not very impactful 28 % 34 % 27 % 33 % 20 % Climate risks are a major concern for younger home shoppers, who are driving the market. The median age of today’s home buyer is 39, and first-time buyers make up 50% of all buyers. Millennial and Gen Z shoppers — who comprise 54% of all home buyers — are most likely to consider a climate risk when determining where to shop for a home. Across generations, a majority of shoppers reported taking into account at least one climate risk when looking for their next home. Total Gen Z(Ages18–28) Millennial(Ages 29–43) Gen X (Ages44–58) Boomers & theSilent Generation(59+) Share of prospective buyers whoconsidered at least oneclimate risk 83 % 84 % 86 % 82 % 70 % Share of buyers whoconsidered each climate risk: Flood 41 % 36 % 42 % 41 % 44 % Extreme temperatures 37 % 37 % 44 % 30 % 26 %77 Wildfires 37 % 39 % 37 % 36 % 37 % Hurricane 33 % 33 % 36 % 30 % 22 % Drought 31 % 30 % 35 % 27 % 23 % While climate risk is affecting attitudes, it isn’t to the point where majorities of buyers are considering a move to a region they consider less risky. About half plan to remain in areas that pose the same climate risks they already face. Some are even thinking about moving to areas with more risks. Only 23% reported that they are considering homes in areas that they believe to be safer from the dangers of climate disasters. Compared to where they live now, prospective buyers are consideringmoving to places with: Total Fewer climate risks 23 % More climate risks 27 % The same climate risks 49 % Affordability is still the greatest hurdle for consumers, especially first-time home shoppers, who tend to accept what they can afford. It takes nearly 12 years for a typical first-time buyer to save up for a down payment. Zillow home listings display down payment assistance, and a new app filter helps shoppers understand their actual monthly mortgage cost rather than a home’s list price. Working with a knowledgeable real estate professional is a great way to navigate both the affordability hurdle and climate challenges in today’s home shopping search. Zillow also publishes industry-leading research to help inform consumers, increase transparency and shape the conversation in real estate. SOURCE Zillow Author admin View all posts

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Powerhouse Team Launches Private Lender Built for Real Estate Investors CV3 Financial Services, LLC, announced the official launch of the company, a private lender, providing financing for fix-and-flip and rental properties to real estate investors in more than 20 states. The company was founded by William J. Tessar, former President of CIVIC Financial Services. Mr. Tessar is joined by an executive leadership team, along with 150 operations, business support staff and originators, that represent 90% of their predecessor firm’s 2022 loan production of $3 billion. Together, this group has originated and funded more than $10 billion in private money loans over the last five years. “What began as a vision by the most decorated leadership team in the industry, of what a private lender could and should be, is an organization with unmatched integrity, trusted expertise, and deep operational support to best serve our clients’ needs,” said Tessar, CEO and President of CV3. “We are a powerhouse team that together built and scaled the leading private lender in the industry,” Tessar continued. “People believe in what we’ve built and what we stand for, and our culture has been based on excellence and integrity at its core. It’s this heritage that defines us and what we are doing today.” Leading the company alongside Mr. Tessar includes: “We are launching what we believe will quickly become the dominant lender in the industry, with a fresh start and without any legacy issues,” stated Tessar. “This enables CV3 to pursue our mission to be the number one choice for financing by real estate investors.” For more information, please visit www.cv3financial.com SOURCE CV3 Financial Services Author admin View all posts

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— The Black Knight HPI hit another all-time high in July, with the annual rate of growth jumping to +2.3% from a revised +0.9% in June — The reaccelerating annual growth rate was driven as much by the price declines of last July providing a lower starting point as it was by July 2023 gains themselves — August will likely see further reacceleration in annual growth with prices already up a seasonally adjusted 2.9% from August 2022 and 4.4% from the start of the year — At the same time, non-adjusted monthly gains fell below their 25-year average after significantly outpacing historical averages from February through June, signaling a slowdown may be underway — Though prices rose on both seasonally adjusted and non-adjusted levels, after five months of above average gains, July’s 0.23% non-adjusted change was smaller than the 25-year average increase of 0.34% for the month — Seasonally adjusted price gains were observed in 99 of the 100 largest markets in July; however, growth rates cooled with three-quarters of markets experiencing smaller monthly gains than they had in June — Black Knight transaction and rate lock data both point to slowdowns in demand, with the seasonally adjusted price per square foot on closed sales falling alongside the average non-adjusted purchase price on locked loans — As extremely tight home affordability could continue to weigh on month-to-month growth, it will be worth keeping a close eye on monthly data trends as we move through Q3 — With rates at 7.23% as of Aug. 24, the P&I payment to purchase the median-priced home using a 20% down, 30-year fixed-rate mortgage had risen to $2,423 – a 91% increase over just the past two years — It now takes 38.3% of the median household income to make the monthly payment on the median-priced home purchase, making housing the least affordable that it’s been since 1984 The Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released a high-level summary of the latest Home Price Index for July 2023. Even with interest rates hovering near 7.25%, home price growth continued in July to push home prices to yet another record high. However, as Black Knight Vice President of Enterprise Research Andy Walden explains, there were some mixed signals in the market data for July, raising questions about a potential downshift. “Home prices continued to rise in July, hitting a new record high for the third month running,” said Walden. “After picking up some small momentum in May and June following 14 straight months of slowing, the annual growth rate spiked to 2.3% in July. Further reacceleration is likely on tap for August as well, given that adjusted prices are already up 4.4% so far this year. Even if seasonally adjusted prices were to stop rising tomorrow, annual home price growth would climb to +2.9% by August and cross +4% by November, simply due to price gains that are already ‘baked in.’ If price gains were to maintain their current pace – which is unlikely given how tight affordability has become – it would result in annual gains returning above 7.5% by the end of the year. Either way, further acceleration in annual appreciation is almost a certainty for August. But that’s only half the story in July’s data – the housing market is sending somewhat mixed signals. “While home prices rose on both seasonally adjusted and non-adjusted bases, July’s 0.23% non-adjusted month-over-month growth was smaller than the 0.34% non-adjusted increase July has seen on average over the past 25 years, suggesting a possible transition may be underway,” Walden continued. “Indeed – in addition to monthly gains slowing below long-term averages – Black Knight rate lock and sales transaction data also points to lower average purchase prices and seasonally adjusted price per square foot among recent sales. All of these factors combined underscore the need to focus on seasonally adjusted month-over-month movements rather than simply relying on the traditional annual home price growth rate.” In other observations from the July 2023 Black Knight HPI, seasonally adjusted price gains were observed in 99 of the largest U.S. markets; however, growth rates cooled at the core-based statistical area (CBSA) level as well, with three-quarters of markets seeing smaller monthly gains than they had in June. Austin was the lone exception, with prices there continuing to fall on a month-over-month basis – albeit modestly at this point (-0.1%). Hartford, Conn., yet again saw the largest increase, up 1.6% from June, with the following cities seeing seasonally adjusted prices rise by 1.0% or more: Providence, R.I. 1.2%; Philadelphia 1.1%; Cleveland 1.0%; Pittsburgh 1.0%; Miami 1.0%; and Buffalo, N.Y., 1.0%. Price growth continues to be strongest in the Northeast and Midwest, with Western states seeing more noticeable slowing from June’s growth rates as affordability continues to weigh heavily on those markets. For more information on Black Knight, please visit www.blackknightinc.com/. SOURCE Black Knight, Inc. Author admin View all posts

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Residential Loans Up 21 Percent Following Eight Straight Quarterly Declines; Purchase Lending Leads the Way, Spiking 29 Percent; Refinance and Home-Equity Activity Also Rise ATTOM, a leading curator of land, property, and real estate data, released its second-quarter 2023 U.S. Residential Property Mortgage Origination Report, which shows that the total number of mortgages secured by residential property (1 to 4 units) in the United States increased to 1.56 million during the second quarter of 2023. While that remained down 38 percent from a year earlier, it was up 21 percent from the first quarter of 2023 – the first such increase in two years. The turnaround resulted from across-the-board quarterly increases of 13 percent to 29 percent in purchase, refinance and home-equity lending. Total activity rose after eight straight declines that had reduced lending by two-thirds. The increase was spurred, at least partly, by a resumption in the nation’s 11-year housing market boom, which had stalled from the middle of last year into early 2023. Overall lending did remain down sharply during the second quarter compared to highs hit in 2021 right before rock-bottom mortgage rates doubled and inflation spiked, spurring a rise in economic uncertainty across the country. But even as interest rates ticked upward again during the second quarter of this year, overall home-mortgage activity included a 29 percent quarterly jump in loans granted to home purchasers, to almost 794,000, and a 14 percent increase in refinance packages, to 477,000. Home equity lines of credit, known as HELOCs, also went up in the second quarter of 2023, by 13 percent, to 285,000. Lenders issued $494 billion worth of residential mortgages in the second quarter of 2023. That remained down annually by 41 percent, but up quarterly by 23 percent. While lending revived, the portion of all residential mortgages represented by different kinds of loans changed by smaller amounts. Purchase loans still comprised about half of all mortgages issued in the second quarter of 2023, with refinance packages making up almost one-third and home-equity loans just under 20 percent. That remained far different from two years ago, when refinance deals made up two-thirds of all activity and purchase loans just one-third. The second-quarter revival in mortgage activity came amid a combination of economic forces that created conditions for increases in the number of loans American households seek. Home-mortgage rates were relatively stable, dipping back down in April toward 6 percent for a 30-year fixed-rate loan, before rising back up toward 7 percent by June. That followed a year when they had more than doubled from historically low levels under 3 percent. At the same time, the Spring home-buying season heated up after a period when home prices had fallen from mid-2022 to early 2023, inflation was easing, and the stock market was improving. All that provided more financial resources and buying power for house hunters, leading to a 10 percent jump in the national median home price in the second quarter. “Home buyers and owners alike lined back up again at the doors of mortgage lenders this Spring seeking loans of all kinds. It looks like owners took advantage of the small rate drop to refinance existing loans, while a jump in mortgages for purchasers was likely fueled by a number of forces that pushed the overall housing market to heat back up during the Spring buying season,” said Rob Barber, CEO at ATTOM. “Buyers also might have jumped back in amid worries about even more rate increases that could have price them out of a new home.” Barber added that, “Lenders certainly aren’t anywhere near as busy as they were back in 2021. And the second quarter surge could be just a momentary thing. But the upturn was significant, and a testimony to how strong the housing market remains around the country.” Total lending activity increases quarterly in more than 95 percent of nation Banks and other lenders issued a total of 1,555,469 residential mortgages in the second quarter of 2023. That was up 20.8 percent from 1,287,442 in first quarter of 2023, although still down 37.6 percent from 2,493,790 in the second quarter of 2022. The revival followed a two-year slump that had reduced total lending numbers to almost their lowest point this century. Despite the second-quarter turnaround, the latest total still was 63 percent less than the most recent high point of 4,171,212 hit in early 2021. That gap reflected eight consecutive quarterly decreases before the recent gain – the longest run of drop-offs this century. A total of $494.3 billion was lent in the second quarter of 2023, which was down 41.5 percent from $844.3 billion a year earlier, but up 23.5 percent from $400.3 billion in the first quarter of 2023. Overall lending activity remained down annually in all 197 metropolitan statistical areas around the U.S. with a population of 200,000 or more and at least 1,000 total residential mortgages issued in the second quarter of 2023. However, it increased from the first quarter to the second quarter of 2023 in 192, or 97 percent, of those metro areas. Total lending activity rose at least 15 percent quarterly in 167 of those areas (85 percent). The largest quarterly increases were in Knoxville, TN (total lending up 109.4 percent from the first quarter of 2023 to the second quarter of 2023); Sioux Falls, SD (up 49 percent); Rochester, MN (up 48.6 percent); Des Moines, IA (up 45.4 percent) and Manchester, NH (up 44.4 percent). Metro areas with a population of least 1 million that had the biggest increases in total loans from the first quarter to the second quarter of 2023 were Milwaukee, WI (up 39.8 percent); Chicago, IL (up 37.6 percent); Boston, MA (up 32.1 percent); Cleveland, OH (up 32.1 percent) and San Jose, CA (up 31.7 percent). The only metro areas with a population of at least 1 million where total lending went down during from the first quarter of 2023 to the second quarter of 2023 were Buffalo, NY (down 39.2 percent)