Tag Archives: Housing Affordability

Existing-home sales dipped on both a monthly and annual basis in November, marking the first year-over-year decline in sales in nearly two and a half years. Hurt by higher mortgage interest rates, constrained inventory, and tight credit, sales of previously owned homes came in at an annualized rate of 4.90 million last month, the National Association of Realtors reported.

According to Fannie Mae's November National Housing Survey, positive momentum in the housing market has slowed as Americans remain cautious about their personal finances and the overall state of the economy. Nearly two-thirds of those surveyed believe the economy is on the wrong track. Within the next year, 22 percent expect their personal finances to worsen and only 45 percent expect home prices to increase.

One of the earliest phenomenon of the housing bubble was the ascension of home prices, making housing unaffordable relative to incomes. Markets across the nation cascaded from affordable to unaffordable--a key signal that prompted us to warn of the coming housing downturn. And it now appears that this symptom has cropped up once again, as almost all of California's coastal cities are now unaffordable.

Inventories of homes for sale have been slow to bounce back since the 2007-09 recession, despite steady price appreciation since January 2012. Normally, higher prices reflect robust sales. But lately, prices have been rising even though sales remain stuck at relatively low levels, largely due to a lack of inventory. So why are there so few homes for sale? Two Fed economists examine the many factors affecting today's inventory levels.

""Modest to moderate"" economic growth continues to be the theme at the Federal Reserve, which this week released its Beige Book, tracking expansion across the 12 Fed districts from October through mid-November. The central bank reported improvements in residential real estate activity in the Boston, Philadelphia, Chicago, St. Louis, Minneapolis, and San Francisco regions, with single-family home sales softening in most of the remaining districts.

Fixed mortgage rates increased sharply this week while reports on adjustable-rate mortgages were mixed. Freddie Mac puts the average 30-year fixed-rate mortgage at 4.46 percent for the week ending December 5, up from 4.29 percent last week. Bankrate's weekly national survey showed a rise of 11 basis points for the 30-year fixed-rate mortgage to 4.55 percent. Economists pinned the increases on encouraging growth in new home sales and private jobs.

Home prices are keeping with their trend of slow, but steady, month-to-month improvements. CoreLogic's October Home Price Index (HPI) reveals a 0.2 percent month-month rise in the national home price but a 12.5 percent year-year increase. October marked the 20th straight month of annual price gains, according to CoreLogic, which conceded in its latest report that appreciation was beginning to fall more in line with normal seasonal patterns.

To address widespread negative equity, at least 15 cities and counties are considering using eminent domain to seize underwater homes and lower borrowers' mortgage principal balances, according to the Urban Institute. The institute conducted a study to see what commonalities these communities share and found that all 15 suffer from high levels of poverty and unemployment, stagnant incomes, and low housing prices.

Having risen for the previous four months, mortgage interest rates stumbled in October, according to data from the Federal Housing Finance Agency (FHFA). Using data on more than 5,700 loans from 33 different lenders, FHFA calculated a composite contract rate of 4.32 percent for loans closed in late October, a decline of 4 basis points from September.

After two straight weeks moving upward, mortgage rates reversed course following Federal Reserve chair nominee Janet Yellen's comment to lawmakers that ""there is more the Fed can do."" Investors expect Yellen's retraction of the central bank's stimulus measures to be slow and measured, and both bond yields and mortgage rates came in lower in response. Freddie Mac puts the average 30-year rate at 4.22 percent.