Conventional Loan Update – in January the Federal Housing Finance Agency (FHFA) announced new Loan Level Price Adjustments (LLPA) which are currently taking effect with 45 day locks. These updates are an effort to ‘increase support for borrowers historically underserved by the housing finance market while ensuring a level playing field for small and large lenders.’ This is a major update and with FHA’s reduction of their Mortgage Insurance Premiums please be sure to educate your clients and sellers that we will be seeing a lot more FHA offers this year. Many of these clients making FHA offers will be able to qualify for conventional but FHA will make more sense due to rates/pricing/monthly payment. Another interesting wrinkle is that 740 is no longer considered top tier credit for conventional loans 780 is now supreme. The price adjustments on 3% down and low credit significantly improved. Unfortunately, borrowers in the 700-760 credit score with 10-20% down will be facing price increases as will folks with a debt-to-income ratio over 40%.
Mortgage Rates – increased slight this week and have now increased for 4 consecutive weeks. The price of Mortgage-Backed Securities is responding negatively to inflation data out of the Eurozone. Rates are up nearly 2.75% from this time last year.
Jobs – the number of people filing for unemployment claims for the first time remained relatively flat over the previous 6 weeks as did the number of folks filing for unemployment on an ongoing basis. Looking at data from recruiters and the BLS JOLT report we are seeing the number of job postings decline.
Home Values – declined by 0.8% in December (0.3% when seasonally adjusted) and remain up 5.8% year over year. The 20 City Index declined slightly more at 0.9% and is up 4.65% year over year. This makes sense as many cities experienced extremely rapid and volatile growth and are now ‘rubber-banding’ back a bit.
Rents – Apartment List reported that rents increased 0.3% in February and are up 3% year over year (down from 3.3% last month). This is back in line with the more moderate pre-pandemic annual increases. During the pandemic the year over year increase peaked at 17.6%.
Inflation – while we are still waiting for FED rate hikes to have a dampening effect on inflation, we are seeing year over year rents and home values decelerate significantly. There is a lag time before these reports are considered in inflation indices. As key factors in the CPI and PCE we do expect to see those indices decline as the more current rents and home values are factored in.
Mortgage Applications -to purchase homes declined by 5.6% last week and are down 44% year over year. Refinance applications declined 5.5% last week and are down 74% from this time last year.