Low interest rates could push refinancing to a near three-year high, according to the Mortgage Banking Association’s latest forecast. The MBA estimated that the volume of refinancing could well grow to $180B in Q3 2019. (The recent announcement by the Federal Reserve to cut rates by 0.25% may just kick this estimate over the goal line.) This would be the highest volume of refinances since $265B in Q4 2016.
The MBA also estimated that the refinance share of mortgage originations could be as high as 33%, the highest since Q1 2018 when refinances were 37% of mortgage originations. Knight Frank indicated that millions of homeowners with current 30-year mortgages would be “refi eligible.”
Build to Rent
In August 2019, according to the National Association of Home Builders, new construction starts increased by an eye-popping +12%. Much of that increase was attributed to homebuilders jumping into the single-family rental segment of the housing market themselves and becoming landlords. Along with investors flocking to this market segment of buying to rent, builders are building to rent.
What with the cost of land, the cost of labor, the cost of materials, etc., this move by builders to become landlords makes sense. The reality is sim[le…it’s becoming increasing difficult for builders to make a profit off the sale of a new build.
Mark Fleming, chief economist with First American, told HousingWire’s Kelsey Ramirez that as interest rates decline, and Fleming predicts rates will continue to decline through 2019, homebuyers’ home buying power could increase to 13.35. This would translate into being the highest level ever of home buying power since First American began tracking this data point in 2000.
Housing consumers continue to flee from coastal cities as well as too expensive large metro areas for more affordable metros like Phoenix, Sacramento, Atlanta and Las Vegas, according to Redfin. Redfin reported that 25% of its online users were searching for homes elsewhere, up +1% from last year at this time.
Where are consumers fleeing from? New York City, San Francisco, Los Angeles, Washington DC, Milwaukee, Denver, Chicago, Hartford, Houston and Detroit.
Zillow Home Loans
Zillow began working on the development of its own mortgage software platform as it announced the acquisition of Mortgage Lenders of America last November 2018. Guess what? The creation of that software platform has taken “longer than expected.” CEO Rich Barton told his investors in August 2019 that he was slowing down the hiring for this home loan segment of the business until the software platform for mortgages was “up and running.” Barton did not indicate to his investors when this software platform would be ready to go.
Mortgage Fraud Risk
Thanks to decreased interest rates, the risk of mortgage fraud has substantially dropped. According to CoreLogic’s latest Mortgage Application Fraud Risk Index, fraud risk on mortgage applications was down -11.4% y/y in Q2 2019. Simultaneously, and again due to decreased interest rates, the risk levels from the refinance segment of the mortgage origination segment of this specific market were also down between – 12%-30%, according to CoreLogic.
Thanks to HousingWire’s Kelsey Ramirez for source data.