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Home-purchase market hits a plateau

Housing analysts told Scotsman Guide News this week that the U.S. housing market has hit a plateau. The latest tracking data for home-purchase mortgages appears to confirm that.

Home-purchase loan counts in the second quarter, at an estimated 926,516 purchase mortgages, were running just slightly ahead of the numbers in the April-June period last year, Attom Data Solutions reported this week. The second quarter saw the usual seasonal surge in home-purchase activity during the spring homebuying season, but the loans counts were only running 1 percent higher than the second quarter of 2017, despite the booming economy.

homepurchmarketAttom Data’s Daren Blomquist told Scotsman Guide News that the demand for home-purchase loans “was trudging along,” but rising mortgage rates and eroding affordability have taken a toll.

“Especially when you look at some of the local markets, we are starting to see mortgage rates have a chilling effect on some of the purchase originations,” Blomquist said. He noted that home purchase counts have declined by double-digits in Los Angeles and Dallas, where affordability has become a problem.

Blomquist said this flatness in the home-purchase market will likely continue until home prices cool off, or come down. 

“It has been such a strong sellers’ market, but this spring and summer may have been a bit of a wake-up call for sellers that they can’t get whatever they want for homes,” Blomquist said.

 “So, we may see some recalibration there on the purchase side, which would help the purchase market get some steam back.”  

Attom’s estimate for purchase originations in the second quarter roughly matches data from the American Enterprise Institute (AEI). AEI tracks the loan counts for Fannie Mae, Freddie Mac and the government loan programs. Preliminarily, AEI has estimated 940,000 home-purchase originations in the second quarter, which is down slightly from the second quarter of 2017, said Ed Pinto, co-director of AEI's Center on Housing Markets and Finance. AEI plans to release an origination report next week.

Other analysts recently told Scotsman Guide News that the housing market has been in a bit of a holding pattern.

“If you look at home sales, they are plateauing and that began in late 2017,” said Freddie Mac Chief Economist Sam Khater during a recent interview. “It preceded the run-up in mortgage rates that began in February through April or so." Khater noted that home sales started to decline in late spring and early summer after rates ran up several months earlier.

 “It felt like a bit of delayed reaction,” Khater said. “Usually there’s a tighter reaction between home sales and changes in interest rates. My guess is that occurred because fiscal policy pushed one end, the tax cut; then rates pulled in the other direction. But net, the market from a sales perspective began to plateau in late 2017, and it’s been that way since then.”

Given the weakness in the recent data, the Mortgage Bankers Association (MBA) has lowered its forecast for both home starts and sales, and expects only sluggish growth in 2019 and 2020, MBA’s Chief Economist Mike Fratantoni said.

“It seems like the stronger growth in the housing market that should be supported by the robust economic backdrop has been paused for a time,” Fratantoni wrote in a recent column for Scotsman Guide's residential magazine. “We now expect $1.15 trillion in purchase originations this year, a 3.5 percent increase over 2017, and for that to grow by around 4 percent in 2019 and 3 percent in 2020 — to around $1.2 trillion for each of those years.”   


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