The Mortgage Bankers Association released its latest Mortgage Credit Availability Index This Week in Real Estate reporting that U.S. mortgage credit availability increased in August. An increase in the index are indicative of loosening credit, while declines indicate tightening of lending standards. In addition, homeowners with a mortgage withdrew $63 Billion in equity in the second quarter of this year, the most in a single quarter in nearly 15 years. It is expected that such strong equity positions will favorably contribute to limiting the volume of distressed inventory as homeowners exit forbearance. Below are a few newsworthy events from the second week of September that influence our business:
Home Price Appreciation is Skyrocketing in 2021. What About 2022? One of the major storylines over the last year is how well the residential real estate market performed. One key metric in the spotlight is home price appreciation. According to the latest indices, home prices are skyrocketing this year. According to the latest Home Price Index from CoreLogic, each price range is seeing at least a 19% increase year-over-year: Low (22.1%), Low to Middle (20%), Middle to Moderate (19.9%), High (19.1%). Every region in the country is experiencing at least a 14.9% increase in home price appreciation, according to the Federal Housing Finance Agency (FHFA): Pacific (20.1%), Mountain (22.9%), West North Central (14.9%), East North Central (15.7%), Middle Atlantic (17.1%), New England (20.4%), South Atlantic (17.3%), East South Central (16.4%), West South Central (15%). Prices are the result of the balance between supply and demand. The demand for single-family homes has been strong over the last 18 months. The supply of houses available for sale was near historic lows. Price appreciation is expected to slow in 2022 when compared to the record highs of 2021. However, it is still expected to be greater than the annual average of 4.1% over the last 25 years. If you owned a home over the past year, you’ve seen your household wealth grow substantially, and you’ll see another nice boost in 2022. If you’re thinking of buying, consider buying now as prices are forecast to continue increasing through at least next year.
Borrowers Withdrew $63 Billion in Equity in Q2. Borrowers withdrew $63 billion in equity in the second quarter of 2021, according to the latest numbers from Black Knight, the most in a single quarter in nearly 15 years. There is still $9 trillion in tappable equity, a 37% increase year-over-year. Home values have risen so dramatically that the average homeowner could refinance their mortgage and withdraw $173,000 while retaining 20% equity in their home. The amount of such tappable equity increased $20,000 for the average homeowner from the prior quarter. Ben Graboske, Black Knight’s data, and analytics president said homeowners’ equity will serve as a buffer for homeowners exiting forbearance. Of homeowners still in forbearance as of mid-August, 98% have at least 10% equity. During the last downturn, in contrast, 28% of mortgage holders were fully underwater. “Such strong equity positions should help limit the volume of distressed inflow into the real estate market as well as provide a strong incentive for homeowners to return to making mortgage payments – even if needing to be reduced through modification,” Graboske said.
Mortgage Credit Availability in U.S. Upticks in August. The Mortgage Bankers Association’s latest Mortgage Credit Availability Index (MCAI) revealed this week U.S. mortgage credit availability increased in August 2021. The MCAI rose by 3.9 percent to 123.7 in August. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. “Credit availability increased in August, driven by significant activity across all indexes,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “This expansion was heavily driven by the addition of refinance loan programs at a time when the 30-year fixed rate has been above 3% for the past month, and refinance activity has trended lower. Of note, jumbo credit availability increased 9% to its highest level since March 2020. In the conforming space, more lenders offered GSE refinance programs catered to lower-income borrowers to help reduce their rates and payments.
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