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Housing Finance in Today’s Market

The March 2017 issue of Housing Finance at a Glance, compiled by the Housing Finance Policy Center at the Urban Institute, gives a 44-page in-depth look at housing finance in today’s market.  It’s a virtual encyclopedia of information concerning the finance of housing in today’s market.

Areas discussed in the current issue include:

  • The total value of the US Housing Market surpassed its pre-crisis level in Q4 2016, driven by the household equity increase.
  • Refinance shares continued to decline in February 2017, expected to slide further with recent interest hike.
  • The share of loans in negative equity declined YOY to 6.2 percent in Q4 2016.
  • Agency issuances continued to fall in February 2017, but the YTD totals were still up YOY.
  • VA and private mortgage insurers gain market share over FHA in 2016.
  • Special quarterly feature includes GSE default, composition, loss severity, and repurchase indicators.

The Housing Finance Policy Center’s stated mission is to produce analyses and ideas that promote sound public policy, efficient markets, and access to economic opportunity in the area of housing finance. At A Glance, a monthly Chartbook and data source for policymakers, academics, journalists, and others interested in the government’s role in mortgage markets, is at the heart of this mission.

One area discussed in the March Chartbook is Market Size Overview. The Federal Reserve's Flow of Funds report has consistently indicated an increasing total value of the housing market driven by growing household equity since 2012, and 2016 was no different. While total debt and mortgages were stable at $10.3 trillion, household equity reached a new high of $14.0 trillion, bringing the total value of the housing market to $24.3 trillion, surpassing the pre-crisis peak of $23.9 trillion in 2006.

Agency MBS makes up 59.2 percent of the total mortgage market, private - label securities make up 5.1 percent, and unsecuritized first liens at the GSEs, commercial banks, savings institutions, and credit unions make up 29.9 percent. Second liens comprise the remaining 5.8 percent of the total.

Origination volume for 2016 was close to $2.0 trillion to close out the year. In 2017, Fannie Mae, Freddie Mac, and MBA expect origination volume to be in the $1.5-$1.6 trillion range, owing to a sharp decline in refinance activity due to rising interest rates.

In 2017, refinance activity is expected to be in the 27-33 percent range, representing a drop from the 48 percent refi-share in 2016. Fannie, Freddie, and MBA all forecast 2017 housing starts to total 1.24 to 1.27 million units, an increase from 2016. Home sales forecasts for 2017 range from 5.90-6.37 million, with Freddie predicting a small drop from 2016 levels, while Fannie and MBA are expecting home sales to rise from 2016 levels.

Other areas for discussion include various types of securities, origination volume and composition, first lien origination volume, agency MBS issuance, mortgage origination projections, credit availability and originator profitability, national housing affordability over time, and serious delinquency and negative equity share, among other topics.

About Author: Sandra Lane

Sandra Lane has extensive experience covering the default servicing industry. She contributed regularly to DS News' predecessor, REO Magazine, from 2004 to 2006, covering local market trends, the effects of macroeconomic shifts on market conditions, and "big-picture" analyses of industry-driving indicators. But her understanding of the mortgage and real estate business extends even beyond those pre-crisis days. She is a former real estate broker and grew up in what she calls "a real estate family." A journalism graduate of the University of North Texas, she has written articles for various newspapers and trade journals, as well as company communications for several major corporations.
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