Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about Here Are 2020’s Hottest Housing Markets According To ZIP Code. This week we’re bringing you:Here’s Why Mortgage Rates Are Outperforming
Home Price Gains Shrug off Covid Concerns*
Both the Federal Housing Finance Agency’s (FHFA’s) Housing Price Index (HPI) and the several S&P CoreLogic Case-Shiller indices showed price gains across the U.S. in June. Case-Shiller’s numbers showed more moderation in the rate of increase than did those from FHFA.
The Case-Shiller’s National Home Price Index, covering all nine U.S. census divisions, was up 4.3 percent for the 12 months ended in June, the same annual increase as was posted in May. Prices rose 0.2 percent month-over-month on a seasonally adjusted basis (SA) and were 0.6 percent higher before adjustment (NSA).
The 10-City Composite annual increase came in at 2.8 percent, down from 3.0 percent the previous month while the 20-City Composite gain was 3.5 percent compared to 3.6 percent in May. The 10 and 20-City Composites had NSA increases of 0.1 percent and 0.2 percent, respectively. After seasonal adjusted the 10-City dipped 0.1 percent and the 20-City index was unchanged. In June, 16 of 19 cities (data remains unavailable from Detroit because of COVID-19 related shutdowns) reported increases before seasonal adjustment, while 12 of the 19 cities reported NSA gains. Read more in-depth here.
The migration to the suburbs continues*
New Home Sales Explode in the Midwest, Boosting National Numbers*
New home sales were expected to dip slightly in July after posting 13.8 percent growth in June and setting a 13-year high. Instead, the June sales were revised upward, from 776,000 to 791,000, bringing that month’s increase to 15.1 percent and July still managed a 13.9 percent gain. Last month’s sales were at a seasonally adjusted annual rate of 901,000 units, the fourth consecutive month-over-month increase. The month’s sales of newly constructed homes were up 36.4 percent from the seasonally adjusted rate of 661,000 units during the same month in 2019.
Analysts polled by Econoday had expected sales to be in the range of 735,000 to 800,000. The consensus was for sales to be essentially unchanged from June at 774,000.
The U.S. Census Bureau and the Department of Housing and Urban Development said the strength in national sales came despite a substantial decline in the Northeast. Sales there fell 23.1 percent although they remained 25.0 percent higher on an annual basis. Read more in-depth here.
That Big Bad Fee on Refinances Has Been Delayed! Here’s What It Means*
Two weeks ago, Fannie and Freddie announced a new guaranty fee (aka “g-fee”) for virtually all refinances. To say this has been a hot topic for the mortgage market would be an understatement. I’d highly recommend reading my initial coverage if you haven’t already:
- Here’s the initial reaction from Wednesday night
- Here’s a more detailed list of bullet points from the following morning
For those who don’t like reading or who already know everything I’m about to say, feel free to skip to the next section (“what does this all mean”) below.
G-fees are a longstanding ingredient in the mortgage market equation. They are collected by Fannie Mae and Freddie Mac (collectively the “agencies” or GSEs) in order to guarantee timely repayment to mortgage investors. In other words, if borrowers don’t pay, the GSEs will make sure investors get paid. No objection there! This guarantee makes mortgages more affordable in the bigger picture and it makes credit more available to more people. Read more in-depth here.
Are existing home sales showing a housing bubble?*
Not at all, as the two main drivers of housing remain rock solid
Today, existing home sales blew out estimates, coming in at 5,860,000. With new home sales, pending home sales, housing starts, housing permits, and purchase applications already in v-shape recovery mode, this last metric completes the v-shaped recovery across the board for housing.
Let’s just say this is the final nail in the coffin for the housing bear troll camps that were so sure that this time, housing would finally crash. COVID didn’t get the housing market, but it did pull a fast one on those pesky bears.
Look, I get it. For the casual observers of the market, it may seem intuitive that with all the economic chaos we suffered during the first half of 2020, the housing market would take a drastic hit – from which it would be difficult to recover. Massive job losses and stay-at-home measures seem like a perfect storm for a disastrous housing market.
That belief, however, assumes that one does not understand the two main drivers of housing: demographics and mortgage rates. All that other stuff, my friends, is just stamp collecting. For the last many years I have been writing that the years 2020-2024 would have the best demographics for housing ever recorded in U.S. history. As it happens, these fabulous demographics are accompanied by the lowest mortgage rates ever recorded in history. Read more in-depth here.
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