Weekly Economic Update - Cool Down?

There is both data and growing sentiment among consumers that home price growth might finally be leveling off. Two price indices released this week indicate that prices rose during the spring market as usual, but not with their recent irrational exuberance. And, whether it is belief or just hope, consumers told a Fannie Mae survey that price increases aren’t going to continue much longer.

Freddie Mac and Fannie Mae have responded to the wildfires sweeping the West by putting their disaster relief policies into effect. FHA usually echoes their actions.

It isn’t terribly clear as yet whether the frantic price gains of the past few years are actually slowing, but more and more people seem to think so. This week brought sometimes conflicting examples of both data and belief.

Fannie Mae surveys 1,000 households each month, asking about 100 questions to capture attitudes about home buying and personal finances. They distill the answers to six of them into a single number, the Home Purchase Sentiment Index. Two of the questions are whether it is a good time to buy or to sell a house and the net positive answer (the remainder after “no” responses are subtracted from the “yeses”) dropped significantly in July. An even bigger shift came with the answer to whether home prices would continue to rise. The net of those saying yes dropped 11 points, to 39%.

That’s the opinion side of things. Black Knight’s monthly Mortgage Monitor was more data-driven. Executive VP Ben Graboske said the company’s Home Price Index (HPI) slowed in March, April, and May, the first three-month slide in nearly four years. Prices in 32 states and 33 of the largest housing markets followed suit. Graboske said, “In May--typically one of the strongest months of the year for home price growth--every state in the nation saw home prices increase. However, the average monthly gain in value of less than one percent was the lowest for any May in the last four years.”

California outdid the national HPI deceleration rate by a factor of three. Annual appreciation fell from 10.2% in February to 8.8% in May. There was also noticeable cooling in New Jersey, Washington, Oregon, Florida, and Colorado.

Second quarter pricing data from the National Association of Realtors (NAR) also points to a slight slowdown in appreciation, a 5.3% annual gain in Q2 compared to 5.7% in Q1, and while prices rose in 90% of the metros tracked by NAR, far fewer (13% v 30%) posted double digit gains. There was still plenty of price drama however. The median sale price of $269,000 is a new all-time high, and San Francisco joined San Jose in having a median price over $1 million.

Help For Disaster Areas

In non-price news, both Freddie Mac and Fannie Mae have activated their disaster relief policies in response to the California wildfires. Forbearance will be offered to those borrowers with homes in FEMA declared disaster areas and may be available to those who work in those areas even if their homes are elsewhere. FHA will probably follow suit. Contact your servicer for details.

08.10.2018

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