Morning Briefing: House prices will drop says Bank of America analyst

by MPA02 Jun 2015
House prices will drop says Bank of America analyst
The US faces three years of “modest” declines in house prices according to a new report from one of America’s biggest mortgage lenders. Bank of America analyst Chris Flanagan wrote Monday that the prices will start to dip in 2017 and will continue on that trajectory until the end of the decade. He acknowledges that his outlook flies in the face of popular opinion but he cites continued low wage growth against increasing house prices for his reasoning. Bloomberg reports that Flanagan expects prices to rise by 3.7 per cent this year, then 0.8 per cent in 2016 before reversing with a 1.7 per cent decline in 2017, 2.1 per cent in 2018 and 0.8 per cent in 2019.
 
Second mortgages on underwater homes cannot be voided during bankruptcy
The US Supreme Court has ruled in favor of Bank of America over second mortgages on underwater homes. CNBC reports that two homeowners from Florida had won their case in the appeals court in their state but this was overruled Monday. If the homeowners had won it would have blocked the mortgage lender from foreclosing on the home even if the value increases.
 
Housing affordability continues to grow nationally
Lower mortgage rates and a decline in median house prices is making homes more affordable on a national basis. The latest Housing Opportunity Index from the National Association of Home Builders and mortgage lender Wells Fargo shows that 66.5 per cent of new and existing homes sold in the first quarter of this year were deemed affordable to families earning the median income of $65,800. The national median home price declined from $215,000 in the fourth quarter to $210,000 in the first quarter and average mortgage interest fell from 4.29 per cent to 4.03 per cent. NAHB says that low downpayment schemes introduced by Freddie Mac and Fannie Mae are also making mortgages more affordable for first time buyers.
 
Commercial, multifamily delinquencies fall
New data from the Mortgage Bankers Association shows that delinquent loans in the commercial and multifamily sector continued to fall in the first quarter of 2015. “Increasing property incomes, rising property values and a strong finance market are working together to push delinquency rates lower," said Jamie Woodwell, MBA's VP of commercial real estate research.  The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae, and Freddie Mac.  Together these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.
 

COMMENTS

  • by Griff | 6/2/2015 6:50:40 AM

    My gut says BofA may be correct. Something has to give. House prices cannot continue to climb while wages stagger along and in the face of the millennial student mortgage debt and throw in higher interest rates ahead. It makes sense to me. My immediate market has skyrocketed in price in the last few years. I see many homes asking 20%+ more than what is realistic now, sometimes they actually get it due to no inventory.

  • by Bob S. | 6/2/2015 8:34:35 AM

    Home prices in the SF Bay Area are on a trajectory that cannot be sustained. Home prices are escalating way to fast. First time buyers are not going to be able to afford entry level housing in the not to distant future. If there are no first time buyers there cannot be move of buyers. The B of A analyst is probably right.

  • by BVG | 6/2/2015 8:49:19 AM






    I need to be an analyst or weatherman.

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