Mortgage default risk has remained generally consistent for Freddie and Fannie acquisitions, down from 3.53% to 3.44% quarter over quarter. This brings the share of loans likely to be delinquent (180 days or more) to 3.44%. Read next: Debt ceiling debate hurts housing market Looking at borrower risk, GSE-backed loans remained relatively unchanged at 1.58%, … [Read more…]
Loyalty? Not in the mortgage business. That is, if you actually want to save money on your home loan.
A few years back, an HSBC survey revealed that 52% of U.S. homeowners “switched providers” (sorry, they’re British) when obtaining subsequent mortgages.
This was mainly driven (53%) by the desire to get a better deal, aka a lower mortgage rate with fewer closing costs.
That survey also found that 46% of consumers investigated a mortgage switcheroo, again either to save money or to lock in a new low rate due to rising interest rates.
Other reasons homeowners decided to go with another mortgage company were because they moved and purchased a new property.
Or due to their current mortgage deal was expiring. I think they mean an adjustable-rate mortgage resetting.
A new report from Black Knight claims that loan servicers retained just 18% of the estimated 2.8 million homeowners who refinanced a mortgage in the fourth quarter of 2020, the lowest share on record.
Interestingly, those who refinanced to improve their rate and/or term were retained at a higher rate (23%) versus those pulling cash out as part of the transaction (11%).
This could be due to cash out refinances being harder to come by lately, and thus offered by fewer lenders. Or it just feeling more complex to the homeowner.
But here’s the biggie – among higher-credit quality rate and term refinances, borrowers who switched mortgage lenders received more than an eighth of a percent lower rate than those who refinanced and remained with their current lender/servicer.
In other words, you might get a lower mortgage rate if you switch mortgage lenders, instead of remaining loyal.
So is it bad to switch mortgage lenders? Not if you want to save money! Of course, your old lender might not feel the same way.
It’s really no surprise that a lot of consumers don’t stay with their original mortgage lenders and/or loan servicers.
Aside from some existing lenders sometimes talking borrowers out of a refinance, the product is mostly the same no matter where you get it.
That makes customer retention difficult, especially when other lenders are aggressively marketing to homeowners.
These days, the majority of home loans are backed by the agency guidelines of Fannie Mae, Freddie Mac, or the government via FHA loans and VA loans. I think it’s something like 90% of mortgages.
This means mortgage loans are pretty homogeneous, despite what channel they’re originated in, or which institution provides the financing.
You could get the same exact home loan from a local credit union, a big bank, an online mortgage banker, or a mortgage broker.
And who really cares where you get your mortgage as long as the company is competent enough to close the thing, and honest in terms of rate and fees?
It’s not like you’re going to walk around and brag about your cool mortgage from X bank after the fact. It’s certainly not a status symbol, or a conspicuous transaction.
I’m pretty sure I’ve never had a conversation about someone’s branded mortgage before.
And I doubt an “influencer” is going to post about theirs on Instagram. Well, I take that back, they might…because someone paid them.
This is exactly why insurance companies use celebrity endorsements and smart marketing gimmicks to get you to switch, or conversely, to stick around.
Car insurance isn’t cool or exciting and never will be, nor are mortgages, as much as I want them to be.
Ultimately, we’re all being sold the same thing, it’s just that some companies try to differentiate themselves by slapping clever names onto their products.
For example, Quicken Loan’s Rocket Mortgage is about reinventing the mortgage process, not the mortgage itself.
You’re still probably going to get a 30-year fixed home loan or some other ordinary mortgage that you would get anywhere else.
It’s just the way you get it that might change. Instead of meeting face-to-face with a banker, you might upload documents on your smartphone and authorize the release of documents electronically.
This could make the experience a lot easier and more pleasant, but it doesn’t mean you’re necessarily getting anything different.
Because everyone is basically offering their customers same thing, it comes down to price, customer service, and now perhaps clever marketing.
The one exception is portfolio home loan programs, which are actually unique to the mortgage lender providing them. These are loans kept on the originating bank’s books that contain distinct underwriting guidelines.
We’re starting to see more of them, though most lenders remain fairly cautious with the mortgage crisis still a not-too-distant memory, despite taking place a decade ago.
For example, a lot of the zero down mortgages you see are unique to the companies offering them, the latest one I came across from Ideal Credit Union.
And some of the so-called fintech disruptors like SoFi Mortgage are actually providing unique offerings like a 5/1 ARM with an interest-only option and jumbo loans as high as $3 million with just 10% down.
Those exceptions aside, many of us have very similar mortgages that are only unique in terms of where they originated from.
As noted, most of today’s mortgages are conforming loans, meaning they meet the guidelines of Fannie and Freddie. Or they’re simply backed by the government via the FHA, VA, or USDA.
And just about all of them are 30-year fixed-rate loans that function exactly the same.
That’s why you have to ask yourself – if the company isn’t offering anything different, why pay more?
Might as well bargain shop and find the best mortgage rate with the lowest closing costs, instead of simply going with a household name because of a funny commercial.
At the end of the day, as long as they get you to the finish line, you’ll probably never think about your mortgage company again. Just make sure they’re reputable first…
Chances are your mortgage will be sold off in a matter of months anyway, so the company you get it from likely won’t even service it.
In fact, your final correspondence might be a notice of your home loan changing hands…
(photo: lamdogjunkie)
Source: thetruthaboutmortgage.com
Sophia Bell is a Mortgage Banker at our Leominster, MA branch. She was born and raised in Leominster, MA, where she graduated from Leominster High School and started her career in the banking industry, where she has spent 14 years focusing on the needs of her clients.
What motivates you to wake up and go to work?
Knowing that I can be present for my children for any event of their life will always be my biggest motivation, while also being able to provide a life for my children that I didn’t have. I spent years of my professional life before becoming licensed subjected to the corporate world in an executive position where I didn’t have the flexibility to be around for my children and was told how to hustle. This career allows me to be in control of my success and that keeps me grinding every day!
What would you do for a career if you weren’t doing this?
Hard to say, I didn’t have the opportunity to go to college after high school since I moved out on my own at the age of 17. I got right into banking from high school and spent my years working my way up the corporate ladder until I decided to bet on myself and become licensed as a Loan Officer. When I was a child I always wanted to be a gym teacher though, so if I had the opportunity to go to college, I’d probably have pursued that career.
What do you enjoy doing in your free time?
Sports and playing with my children! I’m a sports junkie and have played nearly every sport; basketball, soccer, co-ed football, women softball, co-ed softball, hockey, golf, snowboarding, fishing, etc…Once I was pregnant with my first, I quit all sports except for women softball and continue to play on the same team for almost 20 years, even though my second pregnancy.
If you could have any superpower what would it be and why?
That’s a great question! Teleport! With having family all over the united states, a very demanding job, and kids of my own – teleporting would allow me to be more present at family gatherings, while also not missing work events or my children! (because we all know traveling on a plane with two kids under the age of 5 isn’t a fun time hahah.
What’s your favorite food?
Tacos!!
What are 3 fun facts about you?
I’m a forced extrovert, I LOVE to bake but usually don’t eat 90% of what I bake hahah, and I HATE being cold.
If you won the lottery, what’s the first thing you would do?
The very first thing I would do is pay off my mortgage. Then make sure my family was taken care of.
If someone was going to visit your hometown, what is one local spot you’d suggest they visit and why?
Oh goodness, it’s Leominster so I’d say there is a lot of cool places to go BUT I would recommend coming here in the fall and doing apple picking at Sholan farms.
What’s your favorite thing about working at Total Mortgage?
How the majority of folks all have the same mindset that it’s about the client and getting them to closing, which means rolling up our sleeves and working nights/weekends, etc…
Source: totalmortgage.com
HomeServices of America, Berkshire Hathaway’s real estate brokerage business, has increased its ownership stake in Title Resources Group, an underwriter currently partially owned by Anywhere Real Estate.
Terms of the deal were not disclosed.
Anywhere, a competing real estate franchisor formerly known as Realogy, sold 70% of TRG to Centerbridge Partners in October 2021 for $210 million in cash.
Then in May 2022, HomeServices purchased its first stake in TRG, but the size and price were not disclosed. However, Anywhere reported it made a sale that quarter of a 4% share of its portion of the title company to an unnamed purchaser for a $4 million gain in a Securities and Exchange Commission filing.
More recently, iBuyer Opendoor Technologies took an ownership interest during March in the title insurance underwriter, but again, details were not provided. But in the SEC filing, Anywhere reported a further 1% reduction of its stake for a $1 million gain during the first quarter.
Title Resources Guaranty, TRG’s business unit, finished 2022 as the eighth largest underwriter by market share, with 2.5% of the premiums generated according to American Land Title Association data.
Industry-wide, title insurance premiums generated totaled $21 billion last year. Among the independent underwriters — those not affiliated with Fidelity National, First American, Old Republic and Stewart — TRG only trailed Westcor, which had a 4.4% share.
During 2021, TRG had a 2.4% share of the $26.2 billion of total title insurance premiums written.
“The team and I are thrilled about HomeServices of America’s decision to increase its ownership stake in our company,” Scott McCall, TRG’s president and CEO, said in a press release.” Our expanded relationship with HomeServices of America speaks volumes to the value we create for our customers and our best-in-class solutions.”
Jonathan Weiss/jetcityimage – stock.adobe.com
Messages were left with TRG and HomeServices to get further specifics about the transaction but not returned by press time.
“Our partnership has already created value for our operations,” Gino Blefari, CEO, HomeServices of America, in the same press release. “We look forward to continuing our collaboration and the positive impact we will have on the industry over the years to come.”
Source: nationalmortgagenews.com
The four-day business week accompanying the Memorial Day Holiday contributed to a further slowdown in mortgage applications. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 1.4 percent on a seasonally adjusted basis and dropped 12 percent on an unadjusted basis.
The Refinance Index decreased 1.0 percent from the previous week and was 42.0 percent lower than the same week one year ago. The refinance share of mortgage activity increased to 27.3 percent from 26.7 percent the previous week.
The seasonally adjusted Purchase Index dipped 2.0 percent. The unadjusted index was down 13.0 percent week-over-week and 27 percent on an annual basis.
“Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The 30-year fixed rate dipped to 6.81 percent; 10 basis points lower than last week but still the second highest rate of 2023 to date.
“Overall applications were more than 30 percent lower than a year ago, as borrowers continue to grapple with the higher rate environment. Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers. There was less of a decline in government purchase applications last week, which was consistent with a growing share of first-time home buyers in the market.”
Highlights from MBA’s Weekly Mortgage Applications Survey
Source: mortgagenewsdaily.com
Mortgage lending is largely about the numbers. The process of originating a mortgage is logical, mathematical and should, therefore, be predictable.
From a homeseeker perspective, the process of searching for and purchasing a home is both logical and emotional. The logical side of the process often means a long list of requirements like square footage, number of bedrooms and baths, school quality, proximity to work and shopping, etc.
But for those searching for a home, there is a fair deal of emotion that factors into their decision to make an offer. Who hasn’t fallen in love with a property and conjured up visions of what life could be in a new home? This is likely one of the reasons real estate agents are known to say, “Marry the home, date the rate.”
Once the homeseeker has found that dream home, it’s now time for them to figure out how they are going to pay for it. And while you might think that this is when the homeseeker flips the switch from emotion to logic, our recent research suggests that there is a strong emotional component to the financing of a home. Keep in mind that, for most, going through the mortgage application is something that happens a small handful of times in their lives.
Earlier this year, CreditXpert fielded a national survey of those that had recently purchased a home, refinanced a mortgage or anticipated being in the market for a home in 2023. Through this survey we wanted to better understand how consumers think about their credit, the process of applying for a mortgage and what they thought about CreditXpert’s predictive analytics tool that gives them the precise steps they need to take to reach a target credit score.
After showing the participants the tool, we asked them to share the top three reasons they would use CreditXpert to improve their credit score. The number one reason (“will help me save money over the life of the loan”) was clearly logical and not much of a surprise to our team. But subsequent reasons caught us by surprise and clearly pointed to the emotional side of the mortgage application process.
The pink bars in the chart below clearly spell it out. Homeseekers cited more confidence that they were getting the best interest rate (28%), felt empowered to work with their lender (25%), took the mystery (fear) out of the process (21%), gave them more confidence (there’s the confidence word again!) they could qualify (20%) and took some of the stress out of the process (18%).
The mortgage application process is stressful, meet your borrowers where they are
All borrowers start out hopeful and get excited when they see a home that’s nearly perfect. As the deal gets closer to the closing table, applicant anxiety begins to enter the red zone. There are always one or two reasons for the applicant to panic before it’s all signed and then, when it’s all over, they swiftly go from elation to exhaustion, as they realize how much this process took out of them.
For the loan originator, the mortgage is a transaction. For the borrower, the mortgage makes a life-changing event possible.
Not to put too fine a point on it, the chart makes clear that for the mortgage borrower the housing/mortgage transaction is much more emotional than logical.
Building empathy to build applicant trust
The perfect example of by-the-numbers mortgage lending is the refinance transaction. If it makes sense, it’s clearly visible in the numbers for everyone to see. There is little emotion for the homeowners either, as they are only in the deal to get a better rate and term.
A purchase mortgage transaction is different.
New homebuyers are strapped into an emotional roller coaster and once they make the offer, they are in a desperate rush to the closing table.
Demonstrating empathy and understanding towards your borrowers is crucial for building trust. When people feel genuinely heard, understood and cared for, trust builds.
The simple act of helping your borrowers improve their credit score helps build that trust by empowering them, building their confidence, taking the mystery out of the transaction and overall reducing their stress. In a highly competitive market, that’s a recipe for closing more loans.
For those that need help qualifying for a mortgage, improving their score can be lifechanging. For those that are well qualified, improving their score could help you make a more competitive offer and lower their cost of homeownership. And for those where an improved score would not result in a better outcome, the simple act of showing them that you are shaking the trees and working hard for them will increase transparency, build trust and help you close more loans.
To learn more about CreditXpert, click here.
Source: housingwire.com
United Wholesale Mortgage CEO Mat Ishbia may no longer financially support Michigan State University (MSU) athletes to “avoid conflict” with Ishbia’s professional sports teams, the Phoenix Suns and Phoenix Mercury. UWM said it has decided to end its name, image, and likeness (NIL) deal with MSU at the end of June. The Pontiac-headquartered wholesale mortgage … [Read more…]
Let’s talk mortgage basics: “What is the loan-to-value ratio?”
If you’re currently shopping for a home or already going through the mortgage loan process, chances are you’ve heard the phrase loan-to-value ratio get thrown around on more than one occasion.
You may have also encountered the acronym “LTV” while perusing mortgage advertisements or playing around on mortgage rate comparison websites.
Regardless of what’s going on in the housing market, you should know all about this very important term when applying for a home loan.
Why? Because it can greatly affect mortgage rate pricing, refinance options, and overall loan eligibility.
Simply put, the loan-to-value ratio, or “LTV ratio” as it’s more commonly known in the industry, is the mortgage loan amount divided by the lower of the purchase price or appraised value of the property.
If we’re talking existing mortgages (in the case of refinance loans), it’s the outstanding loan balance divided by the appraised value.
When calculating it, you will wind up with a percentage. That number is your LTV. And the lower the better here folks!
It’s actually very easy to calculate (no algebra required) and takes just one step. You don’t even need a mortgage calculator. In fact, you might be able to run the numbers in your head. Honest!
Let’s calculate a typical LTV ratio:
Property value: $500,000
Loan amount: $350,000
Loan-to-value ratio (LTV): 70%
In the above example, we would divide $350,000 by $500,000 to come up with a loan-to-value ratio of 70%.
Using a basic household calculator, not a so-called “LTV calculator,” simply enter in 350,000, then hit the divide symbol, then enter 500,000. You should see “0.7,” which translates to 70% LTV. That’s it, all done!
This means our hypothetical borrower has a loan for 70 percent of the purchase price or appraised value, with the remaining 30 percent the home equity portion, or actual ownership in the property.
LTV ratios are extremely important when it comes to mortgage rate pricing because they represent how much skin you have in the game, which is a key risk factor used by lenders.
Essentially, the lower the loan-to-value ratio, the better, as it means you have more ownership (home equity) in the property.
Someone with more ownership is less likely to fall behind on payments or foreclose, seeing that they have a greater equity stake, aka financial interest to keep paying the mortgage each month.
They’ve also got more options if they do struggle with payments, as they could just sell the property without taking a loss (or the bank losing money).
Not only that, but banks and mortgage lenders also set up pricing adjustment tiers based solely on the LTV ratio.
Those with lower LTV ratios will enjoy the lowest interest rates available, while those with high LTVs will be subject to higher mortgage rates and/or closing costs.
For example, if you’re being “hit” by the lender for having a less-than-stellar credit score, that adjustment will grow larger as the loan-to-value ratio increases (higher LTV ratio = greater risk).
So if your mortgage rate is bumped a quarter percent higher for a loan-to-value ratio of 80%, that same pricing hit may be increased to a half percentage point if the LTV ratio is a higher 90%.
This can certainly raise your interest rate in a hurry, so you’ll want to look at all possible scenarios with regard to down payment and loan amount to keep your LTV ratio as low as possible.
More importantly, just maintain an excellent credit score and you’ll have plenty of loan options, regardless of your chosen down payment or available home equity.
Most borrowers (who have the means) elect to put 20% down when buying a home, as it allows them to avoid mortgage insurance and the much higher pricing adjustments often associated with LTVs above 80%.
Fewer adjustments mean you can secure a lower interest rate on your mortgage. And if you can avoid PMI at the same time, it’s a win-win for your monthly housing payment!
You may also find it easier to get approved, as virtually all banks and mortgage lenders will accept LTVs of 80% or less.
But you don’t necessarily need to put 20% down to enjoy the benefits of a low-LTV mortgage.
Looking at the above example again, if you were to raise the first mortgage amount to $400,000 and add a second mortgage of $50,000, the combined loan-to-value ratio, or CLTV as its known, would be 90%.
Banks and mortgage lenders have both LTV and CLTV limits, meaning they won’t allow homeowners to borrow more than say 80, 90, or 100 percent of the property value.
These limits came down after the Great Recession but are creeping back up again…
Let’s do the math here; again, no mortgage calculator required!
Simple math: $400,000 + $50,000 = $450,000 / $500,000 = 90% CLTV
You would have a first mortgage at 80% LTV, and a second mortgage for an additional 10% LTV, making the CLTV 90%. Simply add up both numbers.
Sometimes borrowers elect to break up home loans into a first and second mortgage, known as combo mortgages.
This keeps the loan-to-value ratio below key levels, thereby reducing the interest rate and/or helping the homeowner avoid private mortgage insurance.
Tip: The undrawn portion of a home equity line of credit (HELOC) typically isn’t included in the CLTV calculation.
There are certain LTV limits based on home loan type, with conventional loans (non-government) typically being more restrictive than government loans.
And mortgage refinance programs often less accommodating than home purchase loans.
At the moment, you can get an FHA loan as high as 96.5% LTV, which is just 3.5% down payment.
You can get a conventional loan as high as 97% LTV, which at just 3% down is higher than it used to be.
In recent history, the maximum was 95% LTV, but now Fannie Mae and Freddie Mac are competing directly with the FHA.
[See FHA vs. conventional for more on that.]
You can get either a VA loan or USDA loan at 100% LTV (which represents no money down).
These are the most flexible loan programs LTV-wise, but they are also only available to veterans or those living in rural areas, respectively. So not everyone will qualify for these types of mortgage loans.
There are also proprietary home buying programs from various private mortgage lenders that allow for 100% LTV financing if you take the time to shop around.
If it’s a jumbo home loan, a cash-out refinance, or an investment property, the loan-to-value will be a lot more limited, potentially capped at just 70-80% LTV, depending on all the attributes.
And finally, those underwater or upside down borrowers you hear about; they owe more on their mortgage than the property is currently worth.
This can happen due to negative amortization and/or home price depreciation.
Property value: $400,000
Loan amount: $500,000
Loan-to-value ratio (LTV): 125%
As you can see, the underwater borrower has a LTV ratio greater than 100% (this equates to negative equity), which is a major issue from a risk standpoint.
For the record, you get 1.25 by dividing 500 by 400.
The problem with homeowners in these situations is that they have little incentive to stick around, even with a modified mortgage payment, as they’re so far in the red that there’s little hope of recouping home value losses.
However, the popular Home Affordable Refinance Program (HARP) allowed millions of underwater homeowners to refinance to lower rates with no LTV limit. And many of these folks are probably now back in the black.
Today, this type of program still exists, but is a permanent option known as a high-LTV refinance, or HIRO for short.
So there are options to refinance and get a lower interest rate, as long as your loan is owned by Fannie Mae or Freddie Mac, no matter the mortgage balance relative to the property value.
Same goes for FHA loans and VA mortgages thanks to the FHA streamline refinance and the VA IRRRL option.
Despite being far behind new homeowners entering the market in terms of building home equity, many of these formerly-underwater borrowers now have lots of equity thanks to rising home prices and several years of paying down their mortgages.
That’s why you have to consider the long-game in real estate and never give up, even when times get tough. This also illustrates why home buying shouldn’t be a quick or hasty decision.
As noted, a lower LTV will likely result in big savings thanks to a lower interest rate.
Additionally, you may be able to avoid costly private mortgage insurance, enjoy expanded loan program eligibility, and have an easier time getting approved for a mortgage.
If your LTV is higher than you’d like it to be, there are some creative options to lower it.
If we’re talking about a home purchase, simply bring in more down payment money and the LTV will be lower. Easier said than done, sure, but possible for some.
Perhaps someone will gift you the money or act as a co-borrower?
Alternatively, you can look into breaking up your financing into two loans, with both a first and second mortgage.
If it’s a mortgage refinance, simply pay down the mortgage balance a bit more before you apply, whether on schedule or by making extra mortgage payments.
This can be especially helpful if you’re super close to a certain LTV threshold, or just above the conforming loan limit.
Speaking of, pay close attention to your LTV – if it’s just above 80% or some other meaningful tier, think about adjusting your loan amount down (your loan officer should advise you here!).
Lastly, there’s another way existing homeowners can get their LTV down and it requires no effort whatsoever.
You don’t have to do anything except sit back and watch your property value increase over time, thereby lowering your LTV in the process. Of course, the opposite can happen too if home values drop!
But as noted, real estate should be treated with a long time horizon, so be sure you have the ability to ride the ups and downs and make moves when it’s most favorable to you.
Read more: 10 ways to build home equity.
Source: thetruthaboutmortgage.com
Tina Terenzio is a Mortgage Banker at our Fairfield branch and has her license in CT, FL, MA, NJ, and TX. She is a native of Fairfield, CT, and received her Bachelor’s degree from UCONN. Tina enjoys spending time with her husband, a USMC Veteran, and their two dogs, Charlie and Moose.
What motivates you to wake up and go to work?
As a Loan Officer, I love being able to help people achieve their dream of homeownership. I know that if I’m able to help people achieve their goals, that makes me successful too! It’s a win-win!
What do you enjoy doing in your free time?
I enjoy spending time with my husband Chuck and our two dogs, Charlie and Moose. We are a very active family. We run daily with and without the dogs. I am also an Aunt to three girls, and I love spending time with them.
If you could have any superpower what would it be and why?
I would go back in time.
What’s your favorite food?
Mac & Cheese
What are 2-3 fun facts about you?
I was an athlete in college and I have a family house in Italy!
If you won the lottery, what’s the first thing you would do?
I would purchase more real estate in different areas.
If someone was going to visit your hometown, what is one local spot you’d suggest they visit and why?
If visiting my hometown of Fairfield CT I would suggest stopping at Sasco Beach. It’s beautiful and serene. I have spent a lot of time.
What’s your favorite thing about working at Total Mortgage?
The people I work with. I am so grateful for my team.
Filed Under: Uncategorized
Source: totalmortgage.com
Rebecca Noble/Bloomberg
Surging interest rates and building costs in 2022 led single-family construction to plummet by the first quarter of this year, while the multifamily sector experienced growth, the National Association of Home Builders said.
All types of markets measured in NAHB’s newly released Home Building Geography Index saw single-family building continue to decelerate in the first quarter to varying degrees, prolonging their fall since the start of 2022. The trade group’s moving average growth rate is determined based on the past five quarters of activity.
“The latest findings illustrate that labor shortages, supply shortages and higher mortgage rates continue to hamper the industry, particularly the single-family market: Single-family home building experienced negative growth rates in all submarkets,” the NAHB said.
The pace of construction in core-county large metros decreased the most, at 25.6% compared to 16% in the fourth quarter and a positive growth rate of 7.9% a year ago.
Large metropolitan areas in suburban counties followed with a drop of 23.7%, reflecting further slowing from 16.3% three months earlier, while a year ago activity had increased by 5.4%. Meanwhile, growth diminished by 22.7%, compared to 12.1% in the fourth quarter, within similarly sized metros of outlying counties. The submarket also experienced the largest year-over-year reversal after numbers surged by 17.4% a year ago.
Small metropolitan communities also saw slowdowns by double-digit percentages. Single-family construction within small metros of core and outlying counties dipped 22.1% and 19.4% in the first quarter, respectively, compared to 14% and 11.7% three months earlier, and positive growth of 10.5% and 13.5% a year ago.
Single-family home building in micro and rural counties likewise dropped by 2.9% and 8.3%. In the fourth quarter, the rate of single-family construction in micro counties had grown by 6.8% but fell 1% in nonmetro communities. The latest quarterly numbers are down from positive growth of 15.4% and 18.9% last year.
Single-family construction in large metro areas also fell to a 49.7% share relative to total activity, suggesting that builders continue to see potential in smaller markets after the pandemic-fueled housing boom.
The decline seen in NAHB’s latest index comes even as data from the homebuilding industry shows some hints of a rebound emerging in 2023. Single-family housing starts, as well as permits, rose in the past few months this year, as scarce existing-home inventory led more consumers to consider purchases of new units.
The early-year increase in numbers thus far has also led to an upswing in homebuilder sentiment, after it darkened consistently throughout 2022. NAHB’s latest gauge of industry sentiment came in higher for the fifth month in a row in May, reaching a neutral mark of 50 on its 100-point scale since July last year.
But the single-family construction industry is likely to face ongoing economic pressures that could blunt current momentum, according to housing researchers.
“We continue to expect the economic backdrop to weaken, and many smaller homebuilders are likely facing tighter construction loan credit amid the fallout from recent banking turmoil,” said Fannie Mae Chief Economist Doug Duncan in a recent research statement.
Duncan also said a resurgence of interest rates cannot be ruled out. “If this occurs, we believe the current strain on affordability could worsen and work to suppress future demand.”
But the multifamily segment told a different story. Although growth slowed over the past 12 months, activity was still up across all submarkets in the past year, according to the homebuilding geography index. The smallest annual pace of growth showed up within large metro areas of core counties at 3.2%. But multifamily activity in the same-sized markets in suburban and outlying counties surged 8.5% and 24.5%.
Among small metropolitan communities, multifamily building grew 11.5% and 13.2% in core and outlying counties.
Meanwhile, construction in metro and nonmetro areas of rural micro counties accelerated 20.2% and 19.1%.
But as in the single-family segment, multifamily builders are confronting economic headwinds likely to slow annual growth by 14% in 2023, according to recent data from the Mortgage Bankers Association.
Source: nationalmortgagenews.com