Morning Briefing: Optimism of mortgage lenders hits new highs

Optimism of mortgage lenders hits new highs

A survey of the optimism of mortgage lenders of all sizes has hit a new high for the US economy and for home prices.

However, Fannie Mae’s Mortgage Lender Sentiment Survey for the first quarter of 2017 shows that unfavorable mortgage rates hit demand for purchase mortgages which declined substantially.

The expectation for demand for purchase mortgages was at its lowest level since the survey started in 2014 while the expectation for demand for refinance loans was only slightly higher than the previous quarter, which was the worst since 2014.

“Lenders’ profit margin outlook remains significantly less positive than this time last year and two years ago,” said Fannie Mae chief economist Doug Duncan. “Lenders cite competition from other lenders and a market shift from refinance to purchase – both of which reached survey highs – as the top reasons for the weak profit margin outlook.”

Duncan added that Fannie Mae expects refinance activity to fall and purchase affordability to tighten in the months ahead due to rising rates.

First American says real house prices up 8.2 per cent

An index of house prices which takes into account consumer buying power shows an increase of 8.2 per cent in the year to January 2017.

The First American Real House Price Index factors in the impact of income and interest rate changes and also shows that prices declined slightly (0.1 per cent) in the month from December.

Consumer home-buying power was up in January compared to December (0.6 per cent) but down 2.3 per cent from a year earlier.

“Almost half of the markets we track saw double-digit affordability declines in January, compared with a year ago. The low inventory of homes for sale across much of the country is creating increased competition and setting the stage for a very robust sellers’ market this spring,” said chief economist Mark Fleming. “While affordability is lower compared to a year ago, the level of affordability in most markets is still high by historical standards, which is why demand is expected to remain strong this spring.”

Maine reports lower sales, higher prices

Sales in Maine slipped in February but prices increased by 12.5 per cent to a median sales price of $180,000.

Maine Association of Realtors reported a 12.9 per cent drop in sales in the month, as a 10-day period of snow hit the state and dissuaded buyers from viewings.

Greg Gosselin, the association’s president, is confident that things will pick up with the better weather of the spring buying season.

“Homes are entering the spring for-sale inventory on a daily basis. Realtors are reporting that pre-qualified, credit-worthy buyers are actively searching now to take advantage of the long-term affordability and tax benefits that home ownership provides," Gosselin said.