Morning Briefing: Homes more affordable now but it’s set to change

by Steve Randall02 Feb 2016
Homes more affordable now but it’s set to change
Housing affordability is better now than it was ten years ago but the good news for buyers isn’t expected to last. That’s one of the findings of a new market report from mortgage technology firm Black Knight Financial. Its Mortgage Monitor found that (at the end of December 2015) a buyer would require 21 per cent of the national median monthly income to buy a national median-priced home with a 30-year mortgage. That’s down from 33 per cent in the peak 2006 market and is also down from the 26 per cent needed before the housing bubble.

However, that may mean that we are in a sweet spot for affordability as the firm says that if mortgage rates increase by 50 basis points and home prices continue to appreciate at current levels, affordability will be close to the upper limit of the pre-bubble average within two years.

Black Knight Data & Analytics senior VP Ben Graboske says: “Eight states would be less affordable than 2000-2002 levels within 12 months and 22 states would be within 24 months. Right now, both Hawaii and Washington D.C. are already less affordable than they were during the pre-bubble era. On the other hand, even after 24 months under this scenario, Michigan – among other states – would still be much more affordable at the end of 2017 than it was in the early 2000s.”

The report also found that cash-out refinances increased by volume in the third quarter of 2015; the 6th consecutive quarter of rises. There were 300,000 refi originations in the quarter and around 1 million over 12 months. The average cash-out amount was the highest since 2007 at $60,000 and the total cashed-out with refinances during the 12 months to the end of Q3 2015 was $64 billion.
Commercial/multifamily originations set for record year
Originations of commercial and multifamily mortgages are set to hit a record $511 billion in 2016, up 3 per cent from 2015’s total and surpassing the previous $508 billion high. The Mortgage Bankers’ Association’s Jamie Woodwell says that conditions are right for strong growth in the market: “Property incomes are rising, interest rates are low and property values are up.  We expect the momentum to continue into 2016 and to support both the demand for and supply of commercial and multifamily mortgage capital.  We anticipate a growing economy, coupled with only gradual increases in interest rates.” He notes though that higher interest rates could stem the flow of originations.

Meanwhile the MBA says that this year will see a 51 per cent rise in the number of commercial and multifamily loans reaching maturity. “The 'wall of maturities' that has been the focus of concern the last many years is receding," said Woodwell, "This year's survey found that 2016 maturities had dropped by 18 per cent to $183 billion as loans prepaid and paid-down.  That's roughly the same amount that matured in the year 2010." 
Live here if you want to be healthier
Hawaii is the top state for wellbeing according to a new study. The Aloha State reclaimed its top spot in the Gallup-Healthways Wellbeing Index, knocking Alaska into second place. The rest of the top ten are: Montana, Colorado, Wyoming, South Dakota, Minnesota, Utah, Arizona and California. Kentucky and West Virginia continue to be the lowest-ranked states for wellbeing according to the survey’s metrics.


Should CFPB have more supervision over credit agencies?