California pending home sales dip slightly in January; Southern California market continues to outshine other regions

Source: C.A.R.

Following relatively strong closed escrow home sales over the past few months, California pending home sales slipped negligibly from a year ago, which suggests a softening in the housing market in the upcoming months, the CALIFORNIA ASSOCIATION OF REALTORS®

(C.A.R.) said.

Making sense of the story

• Based on signed contracts, statewide pending home sales decreased in January on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* slipping 0.2 percent from 107.4 from January 2016 to 107.2 in January 2017. On a monthly basis, California pending home sales were down 9.2 percent from the December index of 118.0.

• Only the Southern California region posted a year-over-year improvement in pending sales last month, rising 8.1 percent from January 2016 and increasing 10.5 percent on a monthly basis. Riverside County led the region in pending sales, posting a 16.2 percent increase from a year ago. Los Angeles, Orange, and San Diego counties also posted modest year-over-year increases of 7.1 percent, 8.0, and 4.0 percent, respectively. San Bernardino County was the only area within Southern California that saw pending sales lower on an annual basis by 2.8 percent.

• For the San Francisco Bay Area as a whole, tight housing supplies and low affordability contributed to a fall in pending sales of 9.7 percent compared to January 2016. Only San Mateo County posted an annual increase, rising 5.3 percent from January 2016 after posting a significant double-digit annual decline (35.3 percent) in December. Pending home sales decreased 21.2 percent in San Francisco County, 7.1 percent in Santa Clara County, 24.9 percent in Monterey, and 4.8 percent in Santa Cruz County. A shortage of homes on the market and poor affordability will likely persist throughout the year, and impact Bay Area home sales.

• Pending sales in the Central Valley fell 7.9 percent from January 2016 and were up 2.2 percent from December. Within Central Valley, pending sales were down 14.6 percent in Kern County and 11.8 percent in Sacramento compared with a year ago.

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In other news…

Spring housing already overheating

Source: CNBC

The spring housing market started early this year, not because of higher-than-average temperatures but because of hotter-than-average demand and overheating home prices.

“This spring housing market is shaping up to be another doozy for homebuyers,” said Ralph McLaughlin, chief economist for home-listing website Trulia. “Housing affordability is the key to helping break yet another year of gridlocked inventory, but all signs are showing that homes this spring will be much less affordable than last year.”

Affordability is being hit on several fronts: The foreclosure crisis is over, but it left behind an entirely new landscape for potential buyers. Entry-level homes are scarce because investors bought tens of thousands of them during the crisis and turned them into rentals. The number of single-family rentals jumped to more than 15 million, up from about 11 million in 2009, according to the U.S. Census.

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What home buyers wish they’d known

Source: NerdWallet

Nearly half of American homeowners recently surveyed said they would do something differently if they were to go through the homebuying process again, according to the NerdWallet’s Home Buyer Reality Report, which analyzed the steps more than 2,200 Americans took to homeownership.

What are the top things consumers say they regretted?

• 20 percent wished they had saved more money before buying a home

• 13 percent would do more research on the mortgage-lending process

• 14 percent would have shopped around more for a mortgage

• 13 percent would research the homebuying process more

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Why new homes are about to get pricier

Source: Builder


With the cost of building materials jumping 25 percent year over year, according to the National Association of Home Builders’ NAHB/Wells Fargo Housing Market Index, builders are increasingly concerned about how this will affect home buyers in the new-construction market. In 2016, builders ranked the cost of building materials low on their list of concerns—but now it’s one of their top five.

The increased cost of lumber is a chief catalyst. “Negotiations on a new softwood lumber agreement between the United States and Canada ground to a halt at the end of 2016 and likely are stalled pending the results of an investigation into unfair import practices requested by the U.S. Lumber Coalition,” the NAHB reports.

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Consumers turn to non-banks for mortgages

Source: Washington Post

More borrowers are choosing non-banks—financial institutions that only issue loans and do not offer savings or checking accounts—to get a mortgage. It’s a major shift in borrower behavior. In 2011, 50 percent of all new mortgage loans originated from the three largest banks: JPMorgan, Bank of America, and Wells Fargo. However, in September 2016, that share plunged to 21 percent.

During that time, non-banks emerged as six of the 10 largest lenders by volume, including Quicken Loans, loanDepot, and PHH Mortgage. In 2011, only two of the 10 largest lenders were non-banks.

Some traditional banks have backed away from the mortgage business after financial regulations were put in place following the last housing crisis, says Meg Burns, managing director of Collingwood Group. That has opened the market to non-banks. “The regulatory atmosphere changed from a risk management regime to a zero-tolerance and 100 percent compliance regime,” Burns says. “Not only were new regulations implemented, but new regulators like the Consumer Financial Protection Bureau were created. At the same time, the CFPB and other agencies became more assertive in their enforcement practices.”

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What happened to black homeownership?

Source: Mortgage News Daily

Homeownership by black Americans has “declined to levels not seen since the 1960s when private racebased discrimination was legal.”  Like most demographic groups, black Americans saw homeownership gains evaporate during the housing crisis, but that community was hit harder than other groups and have not benefitted as fully from the recovery.

The authors of a new Urban Institute blog research piece say that, in the three decades following passage of the Fair Housing Act, black homeownership rose by almost 6 percentage points, reaching 47.3 percent, but from 2000 to 2015 the rate dropped to 41.2 percent.  This happened through forces both within and beyond the housing market.

Black homebuyers bought homes at the peak of the bubble at higher rates than whites and Asians and often did so using subprime loans even though they qualified for prime loans. Two percentage points of the 6 percentage point slide happened from 2000 to 2010, the remainder happened in the following five years, three of them while the recovery was underway. White and Hispanic homeownership dropped less from 2000 to 2015, and homeownership rose for people in other racial groups (mainly Asian Americans).

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What you should know

• Mortgage rates broke their month-long holding pattern as they decreased this week, according to

Freddie Mac’s Primary Mortgage Market Survey.

• The 30-year fixed rate mortgage decreased to 4.1% for the week ending March 2, 2017. This is down from last week’s 4.16% but still up from last year’s 3.64%.

• The 15-year FRM also dropped to 3.32%, down from last week’s 3.37% but still up from last year’s 2.94%.

• The five-year Treasury-indexed hybrid adjustable-rate mortgage decreased slightly to 3.14%, down from 3.16% last week. This is up from 2.84% last year.

• The 10-year Treasury yield remained relatively flat this week, while the 30-year mortgage rate fell six basis points to 4.1%.



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