Editor’s Note: The Mortgage Mix is RISMedia’s weekly highlight reel of need-to-know mortgage-industry happenings. Watch for it each Friday afternoon.
While mortgage rates reached a 19-month low this week, industry experts cautioned it still isn’t enough to significantly alter a hindered housing market for buyers and sellers, who are still facing over-inflated home prices and inventory challenges. But, experts say, there are signs things are moving in the right direction.
“Though the market remains challenging for homebuyers, a few key shifts suggest that more favorable housing conditions may be ahead,” said Realtor.com® Senior Economic Research Analyst Hannah Jones. “Easing employment gains and cooling inflation both bolster expectations of a Fed rate cut next week. The market’s anticipation of rate cuts also has a positive impact on mortgage rates, which continue to move lower. With the mortgage rate side of affordability starting to improve, many buyers hope to see prices do the same.”
Here’s a look at some of the other mortgage industry headlines from this past week:
-Federal Reserve Board Vice Chair for Supervision Michael S. Barr announced Tuesday significant alterations to banks’ capital requirements which will affect how they would handle low down payment mortgages under so-called Basel III “endgame” changes.
Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. The measures aim to strengthen the regulation, supervision and risk management of banks.
In a statement released Tuesday, the National Association of REALTORS® (NAR) welcomed the revisions.
“The Federal Reserve’s revised Basel III proposal is a win for the housing market, REALTORS®, and consumers,” said NAR President Kevin Sears. “By making it easier for banks to support low down payment loans, these changes should ensure continued access to affordable home financing. The proposal laid out by the Federal Reserve also recognizes the strength of changes made more than a decade ago to regulation and oversight of the housing finance industry in the wake of the subprime crisis. We applaud the Fed for this thoughtful adjustment, which ultimately reflects a commitment to a healthy housing market and reinforces the stability we’ve worked hard to achieve.”
NAR said the changes announced Tuesday were a high-level summary. The advocacy group will study the proposed rule when it is released to examine how its other changes will affect housing finance.
-National Mortgage Professional reported Friday that Rocket Pro TPO announced it will be the first lender to increase the national conforming loan limit for 2025, with brokers working with them being able to loan up $802,650, an increase from this year’s limit of $766,550. National Mortgage Professional reported that the announcement comes early and marks the third consecutive year that Rocket is the first to announce loan limits.
-CoreLogic’s latest Homeowner Equity Report (HER) for the second quarter of 2024 shows that U.S. homeowners with mortgages (roughly 62% of all properties) saw home equity increase by 8% year-over-year, representing a collective gain of $1.3 trillion and an average increase of $25,000 per borrower since the second quarter of 2023, bringing the total net homeowner equity to over $17.6 trillion in the second quarter of 2024.
Experts say this means homeowners have kept mortgage delinquency rates at historic lows despite elevated inflation and higher costs for related expenses, such as homeowners’ insurance.
“Persistent home price growth has continued to fuel home equity gains for existing homeowners who now average about $315,000 in equity and almost $129,000 more than at the onset of the pandemic,” said Dr. Selma Hepp, chief economist for CoreLogic. “The substantial accumulation of home equity for existing homeowners has served as an important financial buffer in times of uncertainty, as some homeowners are facing higher costs of homeowners’ insurance and taxes and have had to tap into their equity to prevent falling behind on their mortgages. As a result, mortgage delinquency rates have remained at historical lows despite the inflationary pressures and higher costs of almost all non-mortgage homeownership-related expenses.”
-In its Q2 Special Housing Risk Report, ATTOM reported this month that certain markets in California, New Jersey and Illinois had the highest concentrations of the “most-at-risk” markets in the country in the second quarter, based on home affordability, underwater mortgages and other measures, with some of the biggest clusters in the New York City and Chicago areas, as well as inland California. Their report cited less-vulnerable markets remain spread mainly throughout the South, along with parts of the Midwest.
According to the report, counties were considered more or less at risk based on the percentage of homes facing possible foreclosure, the portion with mortgage balances that exceeded estimated property values, the percentage of average local wages required to pay for major homeownership expenses on median-priced single-family homes and local unemployment rates.
ATTOM CEO Rob Barber said the housing market is gaining some steam, but notes that keeping an eye on regions potentially more at risk of a downturn is critical to the health of the overall market.
“The housing market boom continues to gain momentum, thanks to another Springtime boost. However, some markets show signs of potential instability, which suggests a mixed level of risk, particularly in certain regions that repeatedly show signs of concern,” said Barber. “While these observations don’t indicate immediate red flags or warning signs of an impending downturn, they do highlight areas of relative risk. With the housing market still facing challenges, it’s crucial to closely monitor regions where key indicators suggest a higher likelihood of issues.”
–Online loan marketplace LendingTree issued a report this week on home values in small towns compared to their counterparts in the nation’s largest cities. In the report, LendingTree analyzed 50 towns in the United States with populations between 10,000 and 50,000 with the most expensive median home values, ranked the towns based on home values and then compared them to home values in the nation’s 50 largest cities. The report found that many towns across the country are full of expensive real estate, with prices that rival and, in some cases, exceed those found in big cities. For example:
- Vineyard Haven, Massachusetts; Jackson, Wyoming; and Breckenridge, Colorado, are the towns with the most expensive real estate in the U.S. The median home values in these towns are $998,100, $847,300 and $760,000, respectively.
- At $93,225, $102,435 and $100,611, median household incomes are higher in Vineyard Haven, Jackson and Breckenridge than in most other areas—but not high enough to offset high home values.
- While the towns featured in this study are the 50 most expensive in the country, not all are staggeringly high-cost. For example, median home values in Evanston, Wyoming; Cambridge, Maryland; and Brookings, South Dakota, are $224,800, $226,000 and $227,800, respectively.
- Homes are least expensive relative to income in Evanston, Williston, North Dakota, and Rock Springs, Wyoming. The median home value in these areas is an average of only 2.95 times higher than the median area household income.
“Unfortunately, high housing costs can be very difficult for many small-town residents to deal with,” commented Jacob Channel, LendingTree senior economist and author of the report. “This is especially true in areas that are popular vacation destinations–like most of the towns that populate the higher end of our study’s ranking–where buyers who earn their money elsewhere and only live in a town part time can afford to outspend an area’s full-time residents.”
Click here to take a look at the full report.
