Home price acceleration pushing more homebuyers past conforming limits.
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LendingLife Crew:
Today is the last day of the school year at my daughter's pre-school. And while this annual benchmark traditionally signals the beginning of a busy home-buying season, we all know that historical norms have changed quite a bit in the last 15 months. Let's step back for a second and take a look at where we currently stand in the housing economy:
Jobs: With over 40% of the country vaccinated, we expected jobs to skyrocket in April, but the April jobs report was pretty dismal with only 266,000 new jobs created. Nonetheless, housing economists shrugged off the report and uniformly agreed that we should expect robust job growth and housing demand for the remainder of the year.
Applications: After weeks of decreases, mortgage applications rose 2.1% for the week ending May 7, 2021. Joel Kan of the MBA suggests, "The decline in rates helped the refinance index reach its highest level in eight weeks, driven by a 4% increase in conventional refinances." Kan adds that the first week of May was also strong for the purchase market, with applications up 13% from a year ago — but take note that all year-over-year metrics are a little noisy when compared to Q2'20.
Home Prices: The latest Case-Shiller report showed the largest home-price increase in 15 years with a 12% annual gain. In short, home prices are rising too fast. The best housing demographics in U.S. history and the lowest mortgage rates in history are a powerful combination — but kind of like pouring gasoline on an already blazing fire.
Products: Home price dynamics are pushing more homebuyers past conforming limits and into jumbo loans – encouraging lenders to roll out or loosen terms on existing prime jumbo products. Rocket rolled out a new jumbo product in March. Jumbo was the topic du-jour in the most recent UWM earnings call. Non-QM lenders like Angel Oak are in the market with prime jumbo and "Platinum Jumbo" for borrowers that don't qualify for prime. These product trends are backed up by data, with the Mortgage Credit Availability Index (MCAI) showing a 7% lift in jumbo.
And while inventory remains the biggest bottleneck of the housing economy, expanding credit availability is a really good sign that investor appetite is back in full swing. A recent report by digital mortgage exchange MAXEX reported that the higher quality of the non-agency market loans is supported by record levels of jumbo RMBS Issuances. The report says, "There is a good amount of pent-up demand for quality RMBS supply that is contributing to the increased transactions, albeit at wider spreads. This investor demand will create opportunities for more non-QM product to support jumbo lending, investor loans, bank statement loans and loans for self-employed borrowers that really suffered from a lack of products during the pandemic — even though many of them were financially unscathed.
Mortgage credit availability loosened up in April by 2.2%, per the MBA. The drivers were in conventional mortgages and GSE programs for ARMs and high-balance loans.
HousingWire spoke with Mike Fierman, managing partner and co-CEO of Angel Oak, about how non-QM lending can help maintain volume as originators pivot towards the purchase market. Learn more here.
HousingWire spoke with Mike Fierman, managing partner and co-CEO of Angel Oak, about the non-QM market and how non-QM can help maintain volume as originators pivot towards the purchase market. Presented by Angel Oak
The FHFA has limited GSEs to a 7% cap on loan purchases for second home and investment properties. Here's how this impacts originators. Presented by Angel Oak
How do appraisers value a home in a market where prices are escalating rapidly – and where nearly two-thirds of listed homes faced bidding wars in March? HW+ Premium Content
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