Take a look back at the stories that shaped the week and impacted the industry with MPA's Weekly News Roundup.
Video transcript below:
Hi and welcome to Mortgage Professional, America’s weekly news roundup. Well we’ll have a look at the headlines that have shaped your industry this week.
Today we will be looking at 2013 origination figures, some of the negative consequences of interest rates spikes and opportunities arising in the commercial lending sector.
We take a look at a recent report that was released this week, that showed that the number of new mortgage originations during the first 4 months of 2013 was on track to be higher than the same period during 2012. The Mortgage Monitor Report released Monday by Lender Processing Services, showed that there were about 3.2 million in new originations from January to April of 2013 compared to only 2.5 million during the first four months of 2012. The report showed that originations were strong, coming close to 2007 levels. It’s difficult to know however if this will mean higher origination figures for 2013 overall.
Origination numbers only reflect the data till April 2013. Therefore not including the months of May and June, when interest rates soared more than 1% to nearly 5%. Higher interest rates will reduce housing affordability. Some say 1% is equivalent to an increase of 10% cost to a home purchase. We are not yet certain how much interest rates will affect housing demand. But it will be more clear in July’s new home sale figures released at the end of the month.
In a report by the Wall Street Journal this week, however Bank of America, Merrill Lynch Economist predicted that housing demand shouldn’t dramatically change until rates reached about 6%. It’s still uncertain whether we will reach that number this year, but the report did note that a faster uptake in rates will more negatively affect home buyer demand. On the supply side, inventory is still incredibly low, but there are signs that it’s improving.
According to Redfin, an online real estate database and info provider, there are about 185,000 properties on the market nationally at the end of May, up about 4% from last month, but still down 22% from last year. Inventory could be relieved if institutional investors started releasing some of the inventory they purchased following the financial crisis, but it doesn’t appear that they will be doing so any time soon. Bloomberg reported this week that Blackstone Group, one of the world’s largest private equity firms that purchased more than $250 million in homes in 2012 and more in 2013, will start selling their properties to other investors who hope to do buy to rent strategies.
Under the financing arm called B2R finance, which stands for Buy to Rent, Blackstone will start financing to investors who want to use the same strategy as they did, buying properties on the cheap and making them rental properties, the strategy is expected to last for years, generating a great deal of income for investors, but continually starving the market and inventory for purchase.
It’s been reported that Blackstone is on track to purchase 30,000 homes in 2013 alone. K. C. Conway, Chief Economist from Colliers International, a commercial real estate resource provider told MPA that strength in the industrial warehouse market will be driven by events like the Panama Canal expansion which is expected to increase the size and frequency of shipments on the East Coast. Conway explains that places like Baltimore, Maryland and Norfolk, Virginia which are connecting post Panama ports are cities that are likely to see the most of that industrial expansion.
That’s all for this week’s MPA weekly news roundup. We hope to have all your eyes and ears next time on MPA.