Qa& In the Past Month
raymond fleischmann is senior associate editor at Scotsman Guide. reach him at (800) 297-6061 or firstname.lastname@example.org.
URBAN INSTITUTE, HOUSING FINANCE POLIC Y CENTER
home sales are higher than expected
WaSHINGTON, D.C. — New-home sales were beating expectations at the end of this past year, despite an adjusted
seasonal rate that estimates the number of the nation’s
home sales dipped slightly this past November from a five-year high in October.
year over year, new-home sales increased by an estimated
16. 6 percent in November, but dropped 2.1 percent from a
high mark in October, the U.S. Commerce Department reported. from September to October, the new-home sales
shot up 17. 6 percent, the biggest monthly gain in more than
Numerous media outlets reported that home sales still
remain well below the rate of 700,000, which is generally
consistent with a healthy market. New-home sales reached
a seasonally adjusted annual rate of 464,000 in November,
compared to the November 2012 rate of 398,000. October’s
rate of 474,000 was the highest since July 2008.
home prices climb
WaSHINGTON, D.C. — average U.S. home prices climbed
for the 21st consecutive month this past October but were
still 8. 8 percent below the april 2007 peak.
Prices rose a half percentage point in October from September. Prices were up 8. 2 percent compared to October 2012,
the federal Housing finance agency reported. The agency
tracks prices of homes with mortgages backed by freddie
Mac and fannie Mae.
Prices in October were roughly the same as the april 2005
index level, the agency reported.
The Pacific division states of Washington, Oregon, California, alaska and Hawaii had the largest price increase in a
year-to-year comparison, at 17. 5 percent.
Builder confidence jumps after shutdown ends
Wa SHINGTON, D.C. — after flagging during the federal government shutdown, builder confidence rallied at the end of
this past year, the National association of Home builders
The NaHb/Wells fargo Housing Market Index, which measures builder confidence for newly built, single-family
homes on a scale of 0 to 100, was up 11 points over December 2012 and has held higher than 50 for seven months.
any number higher than 50 indicates that more builders
view conditions as good rather than poor.
The index gained four points to reach 58 this past December, NaHb reported.
“The recent spike in mortgage interest rates has not deterred consumers as rates are still near historically low
levels,” said NaHb Chief Economist David Crowe. “
following a two-month pause in the index, this uptick is due in
part to release of the pent-up demand caused by the uncertainty generated by the October government shutdown.
We continue to look for a gradual improvement in the housing recovery in the year ahead.”
pending home sales were stable in november
WaSHINGTON, D.C. — The U.S. Pending Home Sales Index
ended a five-month slide this past November, the National
association of realtors said.
The trade group’s Pending Home Sales Index increased
0.2 percent to 101. 7 from a downwardly revised October
level of 101. 5.
The index was 1.6 percent lower than the November 2012
reading of 103. 3.
Until this past November, the index had slipped in every
month since May, when it hit a six-year peak.
The Pending Home Sales Index, which reflects sales activity one and two months down the road, is a comparison to
the monthly average for 2001, its first year, which was assigned a value of 100.
BY RAYMOND FLEISCHMANN
aS The MoRTgage induSTRy ChangeS, So doeS iTS niChe
The mortgage industry is no stranger to change, but change isn’t always uniform across the
industry’s many corners. as one niche grows, another invariably recedes, and economic
experts often can shed light on this evolution. founded in 1968, the Urban Institute strives
to foster successful public policymaking by way of careful data collection and evaluation. Its
recently formed Housing finance Policy Center aims to do the same specifically for the housing
industry, striving to educate homebuyers and policymakers on pressing market issues. We
spoke with the center’s director, Laurie Goodman, to learn more about the center and today’s
trends within the mortgage industry.
Why was the housing Finance policy Center formed, and what are a few of
We noticed that a lot of policy decisions being made in the housing-finance world are based
on ideological considerations without support from the data, so we thought that there was a
role to use data to help inform policy decisions in a nonideological manner. The idea behind
the center was that we basically would do data-driven analysis of policy issues, and we’ve
assembled a very good group of people to do that.
you co-authored a report on reforming the government-sponsored enterprises
(gSes). What does the future hold for Fannie Mae and Freddie Mac?
There’s a broad consensus developing that the GSEs should be replaced, that the private
sector should provide the first level of credit enhancement and then there should be a
catastrophic government guarantee behind it. One of the purposes of this paper was just to
show that, while in theory that all sounds very good, once you actually get into the plumbing
it becomes difficult to actually come up with [a solution to the problem]. While we can all
agree that the capital requirement should be around 5 percent, for instance, when you
actually go to implement it, it just becomes a lot more difficult. GSE reform should happen,
but it’s going to be a lot harder to achieve and it’s going to take a lot longer than most
people think, just because it’s a lot easier to agree on the themes and a lot harder to agree
on the exact implementation.
The qualified mortgage (QM) rule went into effect this past month. are non-QM
loans poised to become a major new niche within the mortgage industry?
There’s going to be a couple of niches for non-QM lending. The first is going to be basically
very prime, almost hard-money lending — the guy who has a DTI [debt-to-income ratio] higher
than 43 percent but has tons of assets and is a customer of the bank. Those loans are going to
be retained in portfolio, so it’s almost going to look like hard-money lending in the prime area,
and that’s going to be a nice-sized market. It may be hard to securitize those mortgages, but
that’s going to be a vibrant portfolio market. and then, at the other extreme, you probably will
have relatively few loans that are fairly low in credit quality where the borrower doesn’t qualify
for an established program but is willing to put down enough to give the lender comfort, and
those loans are likely to be extended at a much higher rate.
does the increasing amount of student-loan debt pose a significant threat to the
first-time homebuyer market in the next few years?
One of the reasons we’re focusing on credit availability going for ward is that it’s a huge issue
and it’s going to become a bigger issue over time. you’ve got a bunch of different factors that
are all contributing to this. The first is the huge amount of student-loan debt, and the second
is that the U.S. population is becoming much more diverse. Over the next 10 years, net new
household formation is going to be about 70 percent minority, and the reality is that many of
those borrowers don’t have family wealth to draw on and tend to have very low savings, so
either the homeownership rate will continue to decline, or [the industry] needs to figure out
some way to extend credit availability to incorporate some of these borrowers.
In addition, when you look at real wage growth, what you find is that overall it’s been
absolutely flat over the last 15 to 20 years, and when you look at the prime household
formation age group — the 25- to 34-year-olds — that number is absolutely down. finally,
there’s a very subtle change in views toward homeownership between the baby boomers and
the echo boomers. [The baby boomers] viewed homeownership as a way to store value and
accumulate wealth. [Many echo boomers] who have lived through the last five years can’t
possibly view it that way.