More than half of US housing markets were overvalued in April

  • Home prices nationwide jumped 6.9 percent in April from a year ago, according to the latest monthly value report from CoreLogic.
  • While that is slightly less than the 7 percent annual jump in March, it is still making more and more markets unaffordable.
  • Of the nation’s 50 largest housing markets, 52 percent were considered overvalued in April.

Miami, Florida

Getty Images
Miami, Florida

As the sharp gains in home prices continue, more markets are seeing values higher than their local economies can support.

Prices nationwide jumped 6.9 percent in April from a year ago, according to the latest monthly value report from CoreLogic. While that is slightly less than the 7 percent annual jump in March, it is still making more and more markets unaffordable.

Of the nation’s 50 largest housing markets, 52 percent were considered overvalued in April. CoreLogic determines affordability “by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals (such as disposable income).” In March, 50 percent of markets were considered overvalued.

A market is considered overvalued when home prices are at least 10 percent higher than the long-term, sustainable level. By the same metric, 34 percent of the largest markets were considered at value and 14 percent were undervalued.

Not all expensive markets, however, are considered overvalued. San Francisco, for example, where prices are up more than 12 percent from a year ago, is considered at value, because local incomes can support the area’s prices. Boston is also considered at value.

Overvalued markets include Denver, Washington, D.C., Houston, Miami, New York, Las Vegas and Los Angeles.

CoreLogic revised its annual home price growth for all of 2018 to 5.3 percent from 5.2 percent.

High demand and very short supply continue to drive up home prices. The supply of homes has been dropping for three years. While more homes came on the market this spring, they have been selling at the fastest pace on record, according to the National Association of Realtors.

Homebuilders are slowly ramping up production, but most of that is at the move-up or luxury level, not at the entry level, where most of the demand is. Sales of newly built homes fell in April, according to the U.S. Census, even as supplies in that category rose. This is likely because of higher prices.

“The best antidote for rising home prices is additional supply,” said Frank Nothaft, chief economist for CoreLogic. “New construction has failed to keep up with and meet new housing growth or replace existing inventory. More construction of for-sale and rental housing will alleviate housing cost pressures.”

Rising mortgage rates also continue to weaken affordability. Rates have been rising steadily since this year. While they did take a step back last week, as bond yields dropped, they are on the rise again this week. Mortgage applications to purchase a home have also been falling for several weeks.

Some argue that the improving economy will support higher home values. So far that appears to be the case. Overall home sales have been weakening, but most blame that on lack of listings more than weakened affordability, although higher prices have to be sidelining some buyers.

“Extremely low inventory conditions in most markets are preventing sales from breaking out, while also keeping price growth elevated,” said Sam Khater, chief economist at Freddie Mac. “Even if rates climb closer to 5 percent, sales have room to grow more, but only if current supply levels start increasing more meaningfully.”

Where Do Appraisal-Related Adjustments Come From?

Appraisal:

appraisal adjustmentsAppraisal-related adjustments are not just guesses by the appraiser or “rules of thumb.” Nor are they calculated numbers used to mathematically force a preconceived adjusted market value estimate in support of a value conclusion for the subject property. We tend to think of appraisal-related adjustments, as they pertain to residential appraisal assignments, as usually having to do with the sales comparison approach. However, it may become necessary to also provide cost approach adjustments and/or income approach rental adjustments that are not only necessary, but also appropriate, defensible, and reasonable.

Keep reading to learn about specific guidelines for adjustments, where appraisal adjustments actually come from, and a real-life example of adjustments in action.

Common adjustment factors

Adjustment factors that frequently occur with residential properties include:

  • Real property rights conveyed
  • Financing terms
  • Conditions of sale, such as motivation
  • Market conditions affecting the subject property
  • Location
  • Physical characteristics for both the land and improvements
  • Various types of depreciation
  • Use considerations, such as zoning, water and riparian rights, environmental issues, building codes, and flood zones
  • And other factors that may affect the market value of the subject property

What adjustments are not supposed to be used?

The July 26, 2016 Fannie Mae Selling Guide provides some guidance pertaining to what Fannie Mae expects an adjustment not to be. Fannie Mae’s position is summarized as follows:

Fannie Mae does not have specific limitations or guidelines associated with net or gross adjustments. The number and/or amount of the dollar adjustments must not be the sole determinant in the acceptability of a comparable. Adjustments must reflect the market’s reaction to the difference in the properties. Appraisers should analyze the market for competitive comparable sales and apply adjustments with no arbitrary limits on adjustment sizes.

Freddie Mac has stated that adjustments must be sufficiently discussed by the appraiser. Also, without statistical or paired sales analysis, adjustments tend to be subjective and imprecise. If appraisers make precise adjustments to a comparable sale or rent—1, 2, or 7 percent, for instance—sufficient data or discussion should be provided to support their analysis.

So, just where do appraisal-related adjustments come from?

Most, if not all, adjustments should come directly from the real estate market affecting the subject property. The Uniform Standards of Professional Appraisal Practice (USPAP) require appraiser familiarity with the market area where the subject property is located and competence to complete the required appraisal process as stipulated in USPAP. However, there are those occasional unique properties that require the calculation and/or extraction of reasonable adjustments through extraordinary means.

A real-life example

Several years ago, I and another appraiser had taken very separate approaches to determine the actual market value adjustment caused by the removal of 30 beautiful, mature fir trees (50–80 feet in height) bordering an entrance driveway into a 10-acre home site with a high-end, 5,000-square-foot, 3-year-old, excellent-quality residence located thereon.

The trees on the east side of the entrance driveway were thought to be located on the 10-acre tract by the 10-acre tract’s owner. The property owner of the contiguous 50-acre tract argued that the line of trees were on his property. Two independent surveyors were hired to survey the 10-acre property and agreed that the trees were actually on the 10-acre site.

One day, upset, and not believing the surveyors’ findings, the owner of the 50-acre property decided to fell all of the trees in dispute while his neighbor was at work, leaving the stumps, but having the felled trees hauled away the same day to a lumber mill.

The adjustment problem here was that, according to professional tree growers, the only trees that could be used as replacement trees could not be greater than 20–30 feet in height. Trees of greater height could not be safely transported or successfully transplanted.

The question for me and the other appraiser was how could we support the market value adjustment for the now missing trees when it was impossible to replace the removed trees with equal-in-size-and-value trees?

Further complicating the appraisal process was the reality that no comparable sales existed within the subject property’s market area that could be used to extract an adjustment using paired sales analysis.

As stated earlier, two separate adjustment calculation approaches were used. The other appraiser had concluded that the trees should be treated just like the forestry industry considered similar trees being harvested from a stand of similar-in-height-and-quality trees. He stated that the adjustment should be equal to the stumpage value of the trees that were hauled off to the mill and nothing more.

By contrast, I had concluded that the trees lining the entrance driveway had contributed substantially greater value to the property as mature, growing, beautiful fir trees lining the entrance to a very nice property. But I couldn’t prove that opinion using paired sales that did not exist in that market, or some sort of statistical data which might prove up my position. Unfortunately, such documented statistical data didn’t exist either.

What did exist were six very experienced real estate brokers within the subject market area who agreed to provide me with their independent broker’s price opinions of the 10-acre property hypothetically being sold with the previously tree-lined entrance contrasted with the value of the property as a stump-lined entrance. To that statistical average price difference, I added the cost of the removal of the stumps plus the cost of the planting of the much smaller replacement trees that several local horticultural arborists had agreed with the maximum height that could be transplanted being 20–30 feet in height.

The difference between the two approaches to calculating the necessary adjustment for each appraisal report was substantial. The matter was finally resolved by a civil court judge over one year later, with the decision being in favor of my non-textbook adjustment methodology.

Many years earlier, as a new appraiser, I was taught that generally it is better to remove thorny thistles from your garden bed using a dull hoe instead of your bare hands—when that is all that is available. This adjustment example reminds me of that sage advice.

Even with very creative approaches to extracting adjustments from the market, it is a best practice to always carefully study and then extract the necessary adjustments from the current real estate market affecting the subject property. It is time to set any left-over adjustment “rules-of-thumb” or “guesses” aside—forever!

Article by Robert Grafe.

 Robert Grafe is a Texas Certified General Real Estate Appraiser. Robert began his appraisal career on Kodiak Island Alaska in 1971 while the Owner/Broker of R.E. Grafe & Company Real Estate. He has served as a deputy county assessor/appraiser, as the chief appraiser for two national banks, and as the managing appraiser for Valuation Service Company. Robert has an extensive background in arguing both sides of county and state property tax appraisal appeals. He specializes in real property litigation support, valuing commercial properties in transition, and real property tax assessment consultation, with over 40 years of experience. Visit his website at valuationservicecompany.com or email reg@valuationservicecompany.com.

Commentary on the the U.S. Appraisal Market – Change is Coming

This article was first published in the Harbor View Advisors.

About John Martins

John is a Partner and Co-Founder of Harbor View Advisors. He brings over 20 years of experience as an investment banker, investor, equity research analyst and management consultant. John leads Harbor View’s Catalyst for Corporate Development practice where he helps clients fuel growth through acquired innovation. Prior to founding Harbor View, John was a Vice President in the Technology Research Group at Goldman, Sachs & Co. in New York. As a publishing analyst, John’s research spanned companies with a total market capitalization of $100 billion across five industries including payment processing, financial services, travel services, business process outsourcing and business intelligence. Companies under coverage included Accenture, Amdocs, Automatic Data Processing, ChoicePoint, EDS, First Data Corp, Fiserv, Hewitt Associates and Sabre. John’s experience also extends to the “buy-side” as a Partner at Camelot Capital, a hedge fund with targeted investments in public and private software and services companies. John led the investment decisions involving 80 companies in ten industries including business and financial services, payment processing, telecom services and security. Prior to joining Goldman, John worked as Principal for A.T. Kearney in Chicago where he managed global consulting engagements in the U.S., Australia, Brazil, Denmark, Sweden and the United Kingdom. John’s practice expertise included international supply chain, global sourcing, process reengineering and strategic planning. John was active in helping A.T. Kearney establish new offices in Australia and Brazil and facilitated the integration of a consulting firm acquisition in Denmark. A sample of his client engagements includes Visa, Sears, Rolls Royce and General Motors. John received a Bachelor of Arts degree from DePauw University and a Master of Business Administration (MBA) from The University of Chicago. Outside of Harbor View, John is an Ironman, part-time triathlete and a father of three.

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The Appraisal world is under intensifying pressure that will likely accelerate the pace of M&A consolidation.  We see the new “registry” component of the Dodd Frank rollback as another potential catalyst for consolidation in the fragmented appraiser and Appraisal Management Company (“AMC”) arenas.  In this note we highlight where the market is pricing transactions given recent notable deals, including CoreLogic’s high water mark of 13.5X EBITDA. While the larger captive AMCs appear to have satiated their acquisition appetite for now, we see newcomers gaining ground, particularly those with private equity backing, including LenderLive and Class Appraisals or public companies like Altisource (NASDAQ: ASPS) and Real Matters (TSE: REAL).  Further, the savvy independents are sure to make a play at accelerating growth through acquisition including Clear Capital, Dart Appraisal, LRES, Pro Teck and The William Fall Group.

Appraisals Rising

Beware of “small” rule changes

An executive at a leading MortageTech company once told me, “Beware of a seemingly small rule change in a highly regulated market like mortgages.  The impact can be deadly.”  The Appraisal world is facing one of these changes.  We see the new “registry” component of the Dodd Frank rollback as a potentially massive catalyst for consolidation in the fragmented appraiser and Appraisal Management Company (“AMC”) worlds.  The forces bashing this industry have been relentless:

  • Appraiser population demographics leading to supply “shocks”
  • Low margins and limited pricing power has advantaged only the largest providers
  • Domineering government sponsored enterprise rule changes (GSEs – Fannie, Freddie)
  • A fundamental change from a form-driven industry to more data-driven value proposition
  • Looming disruptive technology innovations from drones to mobility

As every AMC tries to navigate these headwinds, along comes the “registry” change whereby an incremental fee is about to hit every AMC’s panel of appraisers.  The larger providers are better positioned to absorb these new requirements and fees, however, basic math for the smaller AMCs suggests a new expense burden with no direct beneficial offset.  Further, each state is likely to implement differently, potentially creating a complex, expensive and risky compliance environment for the AMC industry.

Merger activity is heating up

Expect continued consolidation within the AMC world, and given the permanent economic impact of “registry”, there may be further pressure on sellers to realize the valuation multiples of recent transactions.  A review of recent AMC acquisitions suggests the market is pricing these assets between 6X – 8X EBITDA, with the exception of CoreLogic’s transactions as they were considerably above this range, continuing to set the market high water mark.  In our client work, the key valuation drivers have been scale, diversity of services and technology leverage.  See the table below for recent transactions:

Forces are driving greater scale and technology innovations

U.S. real estate assets are marked to market through a unique mechanism – the appraisal.  While much has been written about the aging population and brain drain among the 40,000+ U.S. residential and commercial property appraisers, little attention has focused on the key node in the system, the AMC.   The AMCs include large captives of loan, title or data service providers and more independent, often regional, companies.

Scale and technology forces will continue to define the landscape of players.  We expect the strong AMCs to strengthen further while the middle market is more likely to consolidate the smaller players.  We also expect technology advancement in key areas like mobility and analytics.  The GSE’s are likely to drive accelerated adoption of these technologies and more efficient approaches – further accelerating industry consolidation.

Expect consolidation to pick up in the middle market

The larger captive AMCs appear to have satiated their acquisition appetite for now and we don’t expect to see much from CoreLogic, ServiceLink or First American in the near term.  However, we see newcomers gaining ground, particularly those with private equity backing, including LenderLive and Class Appraisals or public companies like Altisource (NASDAQ: ASPS) and Real Matters (TSE: REAL).  Further, the savvy independents are sure to make a play at accelerating growth through acquisition including Dart Appraisal, LRES, The William Fall Group and Pro Teck. We have summarized the AMC market segments below:

How to Write a Brilliant Blog Post per Week

Great observations and tips on how to write a brilliant blog from the fellow blogger Christian Mihai.

Click on writer’s name highlighted in red to see original post.

Thank you Christian!

Hi guys,

Today’s post is all about writing that great post. The one that is going to attract new readers, build trust with the old ones, and engage every one who stumbles upon your blog to comment…

We’ve already talked about writing a blog post in 15 minutes, which is a great skill to have, and we also tackled the issue of being consistent.

Consistently creating great content is the backbone of any blog.

But how can you make that happen? Well, one option is to caffeinated yourself to the point of near death and stay up late the night before you publish your post.

But the better option is to spread the writing and editing process over a few days. Sounds good?

Quality over quantity

The truth is that publishing a great post once a week is better than posting mediocre content on a daily basis.

That’s what your goal should be: one weekly post that will attract attention, engage readers emotions, and turn them into loyal subscribers.

The idea is that you should be able to sustain the pace. Writing content on a daily basis is not easy to sustain, even if you dedicate a lot of your time on your hand.

So, how exactly do you write a great post a week? Well, let’s all take in day by day.

Day 1: Ideas and headlines

Start by thinking about your topic, and what angle you’ll approach it from.

Think of what the readers has to gain from reading your post. How exactly is your post going to help me? How is it going to make them feel?

What are YOU trying to make them feel?

Think of all these things as you write down as many ideas for a headline as possible. First impressions matter, so you need to create the best headline that is sure to attract attention.

While you’re at it, you can also write down your subheads. The general ideas of the post. Try to get a feel for it, to sense the direction in which everything’s headed.

That’s enough for day one.

The first step is the most difficult, and you’re off to a good start. Move on to the rest of your day, and prepare for tomorrow — it’s going to be a heavy one.

Day 2: The devil is in the details

First off, revise the headline and subheads you wrote yesterday. Do they still make sense? Are they still intriguing? Are you looking forward to filling in what’s missing?

If not, edit. Once you’re satisfied, it’s time to fill in the details. Ready? Set? Go!

I know what you’re saying right now. “It’s not a race.” Actually, it kind of is.

Don’t think, just write.

Don’t try to analyse your writing, don’t linger too much on any one paragraph. Write as fast as you can.

Punch the damn keys!

Write from the heart.

Finally, before you wrap up working on your post for the day, look for an image, something that will capture what your post is all about.

Now, it’s time to walk away. Stop thinking about your post. Take a break.

Day 3: Writing is rewriting. Also, editing.

On day three, read through your first draft to see how it looks today. You might want to read it out loud in a monotone voice to be sure it still makes sense and sounds good, even with no inflection.

Now, it’s time to rewrite and edit. Move text around, keep reading, keep tweaking.

When you’re pleased with the final result, it’s time to format your post. Add bulleted lists where you can. Add excerpts using block quotes. Break up long paragraphs into smaller chunks to make them easier to read on screen.

Last thing on your do-do list should be about checking a few more things:

  • Does the headline make a reader want to know what your post is all about?
  • Is the image intriguing enough?
  • Do the subheads tell your story all by themselves?
  • Have you asked an engaging question at the end to encourage comments and conversation?
  • Did you add a call to action for a product, service, or your email list?

Ideally, you should be answering yes to all of these questions.

Day 4: This is the day

Now, don’t think that if you get to hit that “publish” button that your job is done. No. You also need to promote your post.

How can you do that? Try:

  • Making yourself available to respond to comments, answer questions and converse with your readers
  • Promoting your post across the social media channels you use
  • Include it in your e-mail newsletter.

It’s not easy to write epic posts week after week, but dividing the work up over several days will make it a lot easier.

Building time into your schedule to get away from your post will make you a better editor.

What’s your writing schedule?

This is one way to write brilliant posts, but there are many others.

Do you have a favorite technique?

Let’s talk about it in the comments.

3 Major Credit Bureaus

What do you think, will it boost real estate sales?

Will it help dying appraisal profession?

On the 8th of June, there will be changes on how your credit is reported. These include:

• Collections that aren’t at least 180 days old will be rejected by the 3 major credit bureaus. You will now have time to pay them off before it is even reported.

• Medical collections will no longer show on credit reports as long as it is being paid (through either you or insurance)

• Collection accounts that have not been updated in six months or more will not be factored into scores.

• Any collection that did not result from a contract or agreement to pay by the consumer, will be removed.

 

What Does The Partial Rollback Of Dodd-Frank Mean For The Largest U.S. Banks?

Trefis Team , Contributor
Last week, President Trump signed into law a partial rollback of the Dodd-Frank Act after the proposed changes cleared legislative hurdles in the Senate and the House. The Crapo bill dilutes some of the stringent regulations imposed by the Dodd-Frank Act on the U.S. financial system, and is primarily aimed at making things easier for small- and medium-sized U.S. banks, which were seen as being affected by the tougher rules in a disproportionate manner compared to their larger rivals.

But the bill did have things to offer to some of the largest U.S. banks – especially the two U.S. custody banking giants, BNY Mellon and State Street. Based on the changes proposed by the new bill, and using our interactive dashboards for BNY Mellon and State Street, we expect these two banks to return more cash to investors in the near future, as their profits improve marginally over coming years. As this will increase net margins and reduce outstanding shares for the banks going forward, this implies a small upside to these banks’ valuations.

A Quick Summary Of The Changes Implemented By The Bill Aimed At Banks
The Crapo Bill, formally signed as the Economic Growth, Regulatory Relief, and Consumer Protection Act, introduces changes on several aspects of the U.S. financial industry. The following is a summary of changes that target the bank holding companies:
Increase In SIFI Threshold

• Current regulations label all banks with more than $50 billion in assets as systemically important financial institutions, and subject them to higher regulatory scrutiny, in addition to stricter capital requirements. The bill increases the SIFI threshold to $100 billion, and will raise the threshold further to $250 billion after 18 months.

• Which Banks Are Affected? The Federal Reserve Board currently includes 38 banks with assets worth more than $50 billion in its rigorous annual stress tests. This figure will fall to just 12 given the new threshold, as nearly all regional banks will now be exempt from stricter regulatory oversight. Notably, investment banking giants Goldman Sachs and Morgan Stanley will not get any respite because of their identification as Global SIFIs by the Basel Committee

• Why Does This Matter? While the banks with $100 billion to $250 billion in assets are not completely off the hook (and will be subjected to stress tests periodically), they will save millions in regulatory compliance costs linked with the stricter scrutiny.
Boost To Supplementary Leverage Ratio Figure of Custody Banks

• Current regulations require banks to leave out any deposits they have with central banks of developed nations (like the Fed and the ECB among others) while calculating their supplementary leverage ratio. Overall, this requirement has a negative impact on this key ratio figure. However, the new bill allows only the custody banks to include these deposits in their calculation of supplementary leverage ratio – resulting in an immediate boost to this figure

• Which Banks Are Affected? This change is a welcome one for BNY Mellon, State Street and Northern Trust. Despite being the third- and fourth-largest custody banks in the world, JPMorgan and Citigroup will not benefit from this change because of their diversified business models (with significant investment banking exposure).

• Why Does This Matter? BNY Mellon and State Street have regularly fared among the best at the Fed’s annual stress tests in terms of impact of a severely adverse economic conditions on their profits and capital ratio figures. As their capital ratio figures are already very strong, the relaxed leverage ratio requirements should free up considerable amount of cash for these custody banks – allowing them to return a sizable chunk to shareholders through dividends and share repurchases in the near future.
Change In Treatment Of Certain Municipal Obligations
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• The current classification of securities held by banks does not allow U.S. Municipal Securities to be included as a part of high-quality liquid assets. The bill makes these securities admissible as a level 2B liquid asset (which can be included as a part of the Tier 2 capital ratio figure, with a haircut of 25-50%) provided they are investment grade and are marketable.

• Which Banks Are Affected? As all banks hold some proportion of municipal securities, this move is likely to have a positive (albeit small) impact on all U.S. banks

• Why Does This Matter? Banks with a sizable portfolio of eligible U.S. municipal securities on their balance sheets should be able to report a small uptick in their capital ratio figures thanks to this amendment. Clearly, the positive impact will be more for banks with a larger proportion of these securities.

These charts were made using our interactive dashboard platform, which is used by CFOs and Finance teams, private equity professionals and more to build interactive models and create, share and present scenario analyses.

Original article with original foot notes is here.

Image not mine, source not known. From internet

The Appraisal Subcommittee Denies Bank’s Request for Appraisal Waiver

The Appraisal Subcommittee unanimously rejected a temporary waiver request from TriStar Bank of Dickson, Tennessee, during a special meeting April 23 in Washington. The Appraisal Institute led industry efforts opposing the bank’s request for a waiver of certification requirements, which would have allowed appraisals to be completed by non-certified appraisers.

The ASC board heard a summary of comments received during a 30-day public comment request published in the Federal Register and gave representatives from TriStar Bank the opportunity to address the board.

During deliberations, several ASC board members questioned the supporting documentation provided by the bank, including information on purported increases in turnaround times. The board did not see the nominal increased turnaround time as representing a scarcity of appraisers, especially considering comments submitted by local appraisers who had worked for the bank.

The ASC board offered to provide TriStar Bank with the names of local appraisers who expressed interest in working with the bank during the open comment period as the bank attempts to resolve ongoing operational issues.

Learn more about the bank’s request.

Original article

 

What I learned in five years of blogging

It always good to read/hear that you are not alone in your journey. Romanian kid, keep going and keep writing … 🙂

Cristian Mihai

Five years. Five years of daily blogging. Five years since I decided to never give up, no matter what. To keep writing, to keep blogging, to just keep at it for as long as it took.

And what a ride it has been. Around the world, indeed. 200 or so countries. Lots and lots of people, lots and lots of stories…

View original post 906 more words

The 7 Golden Rules of Blogging

Great tips for bloggers!

Cristian Mihai

I’ve been following and reading a number of blogs for over five years now. I remember this blog by a Romanian journalist; I would spend hours reading the posts, the comments — oh, the comments were so funny and great. It was quite addictive. He got an insane number of comments, and I was jealous of his success.

I was quite sure that I would never become a successful blogger. I created some blogs on various platforms, but I never had the patience to build an audience. The thing is that I never asked myself whether I had something worth writing about on an almost daily basis. I think this is something a lot of bloggers struggle with. What’s worth sharing? What’s considered useful information? Also, I believe that a lot of writers simply focus too much on trying to come up with an original idea for a blog, a new…

View original post 1,033 more words

Mortgage Applications Heat Up After Holiday Lull

TRUE or FALSE?

Mortgage application activity roared out of the gate in the first week of the New Year, as the country got back down to business.  Much of the week’s gain could probably be attributed to consumers catching up after the usual holiday induced December slowdown. Applications for both refinancing and home purchasing were up substantially during the week ended January 5. It was, in fact, the strongest week for refinancing applications since mid-July.

The Mortgage Bankers Association said its Market Composite Index, a measure of loan applications volume, increased 8.3 percent on a seasonally adjusted basis and rose 46 percent compared with the week ended December 29 on an unadjusted basis. The week’s report included an adjustment to account for the New Years Holiday. MBA said there was also a revision of unspecified degree to the December 29 report.

There was a 5 percent increase in the seasonally adjusted Purchase Index compared to the previous week while the unadjusted index was 44 percent higher. The unadjusted index was down 1 percent relative to the same week in 2017.

The Refinance Index increased 11 percent from the previous week. The share of applications that were for refinancing increased from 52.1 percent to 52.9 percent.

The FHA share of total applications increased to 11.1 percent from 10.8 percent the previous week and the USDA share declined to 0.7 percent from 0.8 percent. The VA share was unchanged at 11.4 percent.

New and higher conforming loan limits went into effect on January 1 and were reflected for the first time in this week’s report.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with loan balances of $453,100 or less increased to 4.23 percent from 4.22 percent.  Points declined to 0.35 from 0.37 and the effective loan rate was unchanged from the prior week.

The average contract interest rate for 30-year FRM with jumbo loan balances higher than $453,100, rose to 4.16 percent with 0.23 point from 4.14 percent with 0.22 point. The effective rate also increased.

Thirty-year FRM backed by the FHA had an average rate of 4.16 percent, down 1 basis point from the previous week.  Points increased to 0.42 from 0.40 and the effective rate moved lower.

The average contract interest rate for 15-year FRM rose to 3.66 percent from 3.64 percent and points moved from 0.34 to 0.42.  The effective rate increased from last week.

The share of applications submitted for adjustable rate mortgages fell from 5.3 percent the previous week to the lowest level since mid-November 2016, 5.0 percent.  The average contract interest rate for 5/1 ARMs decreased to 3.50 percent from 3.53 percent, with points decreasing to 0.51 from 0.53.  The effective rate decreased from last week.

MBA’s Weekly Mortgage Applications Survey has been conducted since 1990 and covers over 75 percent of all U.S. retail residential mortgage applications.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.

Original Article is Here