Category Archives: Mortgage & Real Estate

Existing home sales decrease for third consecutive month

Existing home sales decreased for the third consecutive month in June, but the ongoing supply and demand imbalance helped push the median sales price to an all-time high, according to the latest report from the National Association of Realtors.

Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 0.6% to a seasonally adjusted annual rate of 5.38 million in June. This is down from a downwardly revised 5.41 million in May, and sales are now 2.2% below the rate of June 2017, the report showed.

“There continues to be a mismatch since the spring between the growing level of homebuyer demand in most of the country in relation to the actual pace of home sales, which are declining,” NAR Chief Economist Lawrence Yun said.

“The root cause is without a doubt the severe housing shortage that is not releasing its grip on the nation’s housing market,” Yun said. “What is for sale in most areas is going under contract very fast and in many cases, has multiple offers. This dynamic is keeping home price growth elevated, pricing out would-be buyers and ultimately slowing sales.”

The median existing home price for all housing types reached an all-time high in June, increasing to $276,900 and passing up last June’s $263,000. This is a 5.2% increase from June last year and marks the 76th straight month of year-over-year gains.

Total housing inventory rose 4.3% at the end of June to 1.95 million existing homes available for sale and is 0.5% higher than last year’s 1.94 million. Unsold inventory rests at a 4.3-month supply at the current sales pace, up from 4.2 months last year.

“It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels,” Yun said. “Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”

Properties stayed on the market an average of 26 days in June, unchanged from the last three months and down from 28 days a year ago. The report states that 58% of homes stayed on the market for less than a month.

The percentage of first-time homebuyers remained unchanged from the previous month at 31% but is still down from 32% from a year ago.

“Realtors throughout the country continue to stress that there’s considerable pent-up demand for buying a home among the millennial households in their market,” Yun said. “Unfortunately, they’re just not making meaningful ground, and continue to be held back by too few choices in their price range, and thereby missing out on homeownership and wealth gains.”

Regionally, declines in the South and West exceeded sales gains in the Northeast and Midwest.

Existing home sales in the Northeast climbed 5.9% to an annual rate of 720,000 in June but is 4% below a year ago. The median price in the Northeast rose 3.3% from June 2017 and came in at $305,900.

In the Midwest, existing-home sales rose 0.8% to an annual rate of 1.27 million in June but remains 3.1% below June 2017. The median price in the Midwest was $218,800, increasing 3.5% from this time last year.

Southern existing-home sales decreased 2.2% to an annual rate of 2.25 million in June, however sales are 0.4% higher than a year ago. The median price in the South was $237,500, increasing 2.7% from June 2017.

Existing home sales in the West declined 2.6% to an annual rate of 1.14 million in June and are now 5% below June 2017. The median price in the West was $417,400, increasing 10.2% from June 2017.

“The modest uptick in new listings last month is perhaps good news for would-be buyers who are still in the market after a highly competitive spring buying season,” NAR President Elizabeth Mendenhall said. “As summer winds down, the number of home shoppers begins to decrease.”

However, Mendenhall says that although listings are scarce, she expects patience will deliver positive results for those looking to buy in the months ahead.

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Rent: San Franciscans’ burden to bear

Over the last 28 years, San Francisco’s population has become drastically more susceptible to rent burden.

A study by the San Francisco Planning Commission revealed that people making 80% to 120% of the area median income ($82,900 as of April) have become susceptible to rent burden. Nearly three decades ago, this would have been nearly unheard of.

According to the study, in 1990 just over 10% of renters in the 80% to 120% AMI category were rent burdened. From 2011 to 2015, the number of rent burdened renters in that category jumped to over 30% with a small portion (under 10%) of them exhibiting severe rent burden (paying more than 50% of their income for rent).

The picture gets much, much bleaker for those in who live in San Francisco and make less than 80% of AMI.

The study shows that just under 60% of San Francisco renters in the 50% to 80% AMI category are rent burdened, and roughly 15% of those renters are severely burdened.

Rent burden chart

(Courtesy of the San Francisco Planning Commission)

Going down the list, about 75% of renters making between 30% and 50% AMI are rent burdened, with over 40% under severe rent burden.

And finally, roughly 80% of renters making 0% to 30% of the AMI are rent burdened with over 60% of them under severe rent burden.

This is actually a slight improvement over 1990, when just under 85% of renters in this category were rent burdened and about 65% were severely rent burdened.

The total number of rent burdened households in San Francisco increased from about 38,000 to 49,000 from 1990 to 2015.

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What’s worse than assembling furniture? The current mortgage lending process

In the past, shoppers had to take separate trips to the butcher, baker, and market to find and gather the ingredients they would need to prepare a meal.

Then, supermarkets were born, and this fragmented shopping system was turned into a “one-stop shop” where consumers could get anything they needed for dinner in one place.

Now, technology has taken this concept a step further, with mega e-commerce vendors acting as online marketplaces where you can get everything from groceries to furniture, even cars and industrial machinery, with just a few clicks of a button.

While these sites allow a consumer to go to one place to research, compare and ultimately purchase almost anything, mortgage lenders need more than just a mega-vendor that can sell them individual point products. They need a provider who can package individual products into intelligent and integrated solutions or bundles that plug into existing workflows to help make their processes faster, less expensive, and more user-friendly.

Let’s take this analogy a step further, and think about what happens when your package, say a piece of furniture, arrives from a store. Unless you’ve paid for assembly, you’ll open the box to find pieces of wood, some different sized screws, a small Allen wrench, and a numbered instruction booklet; all of which should make the process pretty straightforward.

However, like evaluating and verifying a borrower’s loan file, the process of building a piece of furniture is laborious, time-consuming, and subject to human error. That’s why items that arrive “pre-assembled” are so appealing – there’s no fuss, no confusion and no waking up in the middle of the night to a large thud when your dresser drawer falls off.

Mortgage lenders need a solution that helps take the guesswork out of evaluating and verifying a borrower’s qualifications; one that helps streamline and standardize existing manual processes to yield more consistent results in a fraction of the time; an automated process that helps mortgage underwriters feel more confident when facing QC and audit reviews.

While many other industries have turned to technology to optimize manual processes, mortgage underwriting has continued to lag behind on digital transformation. But what if every origination wasn’t like putting together a piece of wobbly furniture?

We believe the mortgage origination process of the future will provide lenders with intelligent, integrated solutions from one vendor, delivered in a way that is flexible enough to use a variety of different workflows with varying data formats. It will minimize human touches and maximize process transparency for both underwriters and consumers to reduce redundant feedback loops and other workflow inefficiencies.

By increasing the reliability of the process and increasing underwriter productivity, this workflow will help reduce the time and costs required to close loans while improving the overall user experience. With millions of mortgages issued each year, we’re hoping the mortgage origination process of the future isn’t too far away. 

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