Untangling Housing Stats is a Numbers Game

March 08, 2014

Mortgage statisticsThe number crunchers have been churning out reams of data about the relative health of the housing market, though every shred of seemingly good news — and there’s a fair amount of it — almost simultaneously is followed by a statistical nugget that makes it hard to buy wholeheartedly into the housing industry’s rah-rah-rah that the bad old days are behind us.

It’s a numbers salad, real estate style:

Good news: Mortgage lending standards are easing. Not good news: Nobody’s applying for a loan, relatively speaking.

For the many in the housing industry who have been complaining loudly that lenders are too cautious, thus impeding the market’s recovery, the standards appear to be getting a little looser. Mortgage technology provider Ellie Mae reported that credit standards for mortgages ended 2013 at their lowest level all year, with the average credit score for a borrower who closed on a loan in December at 727, down from 748 a year earlier.

On the other hand: Weekly mortgage applications in late February fell to the lowest level in nearly 20 years, according to the Mortgage Bankers Association.

The trade group said such inactivity was surprising, given that we’re on the edge of the spring homebuying season.

Cold weather got part of the blame, but a CNBC report gave greater weight to the retreat of investors from the closing table and said that typical consumers aren’t rushing to fill the void.

Good news: Foreclosure numbers eased up. Not good news: A ton of home equity lines of credit will reset this year.

Citing “substantial improvement,” the Mortgage Bankers Association said the rates of mortgage delinquencies and foreclosures declined to their lowest levels in six years during the fourth quarter of 2013. It said most measures of troubled loans are back to “pre-crisis levels.”

On the other hand: A new wave of defaults may be looming, according to Professional Builder magazine.

The trade journal said that about $30 billion worth of home equity lines dating as far back as 2004 are going to reset to new rates this year, with many more in the pipeline through 2018, a pending “wave of disaster” for borrowers who are unable to refinance to manageable monthly payments, according to Amy Crews Cutts, chief economist at Equifax.

Coming up are $53 billion in resets in home equity balances in 2015; $66 billion in 2016; $77 billion in 2017; and $111 billion in 2018, according to the report.

Good news: Buying beats renting in many metro areas. Not good news: Average house payments catapulted upward for end-of-year buyers in 2013.

The Trulia listings website compared the average cost of renting and owning for all homes on the market within the 100 largest metro areas in December 2013, factoring in transaction costs, taxes, purchase price and numerous other costs, and concluded that buying beat renting (though it described the situations in Honolulu, the New York metro area, and San Jose, San Francisco and Orange County in California as a “tough call”).

It also calculated that mortgage rates would have to hit 10.6 percent in order for renting to become cheaper than buying on a national basis.

On the other hand: People who closed on a median-priced three-bedroom home late last year are carrying a monthly payment on a 30-year mortgage, insurance, taxes and maintenance that’s 21 percent higher than a year ago, according to data firm RealtyTrac, which blamed rising home prices and rising mortgage interest rates that it described as “dangerously disconnected” from stagnant median incomes.

Good news: The underwater picture is improving. Not good news: It’s still a problem.

In recent years, the term “underwater” took on a painfully familiar meaning to millions of homeowners, as they found themselves stuck with negative equity — houses that are worth less than the balances they owed on their mortgages. But things are looking up: Zillow reports that the negative equity rate ended 2013 below 20 percent (of all outstanding mortgages) for the first time in years.

The website reports, encouragingly, that the rate has declined for seven consecutive quarters.

On the other hand: The problem isn’t going away.

Zillow estimates that the rate is still four times what it would be in a “normal” market (anybody remember one of those?).

Further, the “effective negative equity” rate — that is, homeowners with mortgages who have less than 20 percent equity in their homes — is about 37 percent of all such loans, and Zillow economist Stan Humphries said this means they’re unlikely to be able to sell their homes for enough profit to purchase another one comfortably.

This post was originally published on on March 7, 2014. To view the original article, click here.

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