Morning Briefing: Unaffordable housing markets increase 450 per cent

by Steve Randall25 Mar 2016
Unaffordable housing markets increase 450 per cent
There has been a sharp increase in the level of US housing markets that are less affordable than their historic levels. RealtyTrac’s Home Affordability Index for the first quarter of 2016 showed that 9 per cent of U.S. county housing markets were less affordable than their historically normal levels, up from 2 percent of markets that exceeded historic home affordability levels a year ago.

The index includes property taxes and home insurance and considers the mortgage repayments (based on a 30-year loan with 3 per cent downpayment) on a median-priced home in 456 US counties for those on average wages in the market.

The top 20 county housing markets least affordable in the first quarter of 2016 compared to their historic affordability norms included counties in Denver; New York City; Omaha, Nebraska; Austin, Texas; Dallas; San Francisco; and St. Louis.
Signs that mortgage credit is becoming harder to obtain
Fewer mortgage lenders have reported an easing of credit standards for the second straight quarter. Fannie Mae’s Mortgage Lender Sentiment Survey showed that in the three months to February, reports of easing credit standards were lower than those reporting tightening. For the first time since Q3 in 2014 there was a tightening of standards for government loans.

Among other findings, the net share of lenders reporting increased purchase mortgage demand for the prior three months declined significantly across all loan types from one year ago.

“Lender expectations for easing over the next three months have also moderated. Many lenders also indicate a likely increase in the sales of mortgage servicing rights, possibly to compensate for these countervailing pressures on profits and to take advantage of current favorable pricing in the market,” said Doug Duncan, chief economist at Fannie Mae.
Inventory, affordability hit California sales
Home sales in California were hit by lower inventory and affordability in February, the California Association of Realtors says. Statewide pending home sales dipped 0.4 per cent compared to a year earlier. There was recovery from January though, with a rise of 26.4 per cent month-over-month on an unadjusted basis and 6.3 per cent allowing for seasonal factors.

San Francisco, Central Valley and Orange counties saw increases in pending sales year-over-year (7.0, 6.3 and 0.6 per cent respectively) but all other counties saw decline, led by a 16.8 per cent slump in Monterey county.

Realtors are optimistic about 2016 overall though, although low inventory ranked as the top concern of 41 per cent in the CAR’s Market Pulse Survey. Housing affordability (14 per cent) and overinflated home prices (11 per cent) were also concerns.