Morning Briefing: Young buyers push sentiment index to record high

by Steve Randall09 Aug 2016
Young buyers push sentiment index to record high
The sentiment of US homebuyers continues to edge higher with the improving economy but there is a cautious note. The latest Fannie Mae Home Purchase Sentiment Index has increased to a new high of 86.5 in July, up 3.3. points from June.

However, chief economist Doug Duncan commented: enthusiasm should be tempered because the increase only returns the index to a very gradual upward trend,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “One interesting potential bright note for housing in the July survey is that younger households may finally be shifting toward buying rather than renting in greater numbers.”

Duncan noted that it is too soon to say whether that shift among younger buyers is a trend but said that there is some further evidence coming through which is encouraging in this respect.

The main components of the index increased including: now is a good time to buy (up 1 point to 33 per cent); now is a good time to sell (up 2 points to 20 per cent); mortgage rates will be lower over the next 12 months (up 5 points to negative 36 per cent); and home prices will be higher after decline in June (up 8 points to 41 per cent).
Millennials are buying and their credit is good
Young Americans are increasingly able to become homeowners and secure a mortgage thanks to better credit scores.

Ellie Mae’s Millennial Tracker shows that the average FICO scores of millennial buyers who closed a mortgage loan in June was 723, edging 1 point higher than in May, which was 1 point higher than April.

“Economic uncertainty may be contributing to a general tightening of credit, which could explain why we are seeing a slight uptick in the average FICO scores for closed loans to millennials,” said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. “We also continue to see FHA loans play a significant role in helping millennials make their homeownership dreams a reality. These types of loans make up 37 per cent of all closed loans to this generation, compared to just 23 per cent of closed loans across all generations of homebuyers.”

Once again, women made up 32 per cent of primary borrowers who closed a loan in June, 61 per cent were listed as single.
New York property investor activity slower so far in 2016
Following particularly strong activity among real estate investors in New York in the first half of 2015, the same period this year has been slower.

Data from the Real Estate Board of New York shows that, across the 5 boroughs, total sales were down 20 per cent in commercial, manufacturing and multifamily rental property to a combined $29.5 billion. Volume was down 19 per cent citywide to 2,581 transactions.

“The moderation of the New York City investment sales market follows an outstanding first half of 2015, which was driven by sky high transactions like the $1.95 billion sale of the Waldorf Astoria,” said John H. Banks, III, REBNY President.  “Demand remains robust for core assets throughout the city and top office building sales recorded in the first half of 2016 demonstrate the continued strength of the market.”

Office buildings made up 41 per cent of transactions in the first half of 2016 in dollar terms, totaling $12.1 billion.


Should CFPB have more supervision over credit agencies?