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Economic Center Blog

Will The Return Of ARMs Lead To Surging Loan App Defect Risk?

By Mark Fleming on March 29, 2018

It’s been a long time coming – a rising rate environment. The 30-year, fixed-rate mortgage has been below 4.5 percent since late 2013 and is now finally moving consistently higher. According to the consensus of economic forecasts, it is likely to approach 5 percent by the end of this year. This matters for defect, fraud and misrepresentation risk as rising mortgage rates reduce the benefit of refinancing and increase the share of purchase loan transactions in the market. As we have noted before, purchase loan transactions are riskier than refinance transactions.

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Topics: Interest Rates, Loan Application Defect Index, mortgage rates

Will Rising Mortgage Rates Hurt House Prices?

By Mark Fleming on March 26, 2018

As expected, the Federal Open Market Committee increased the Federal Funds rate last week, and signaled they expect to increase rates further later this year. It’s clear we have entered the rising interest rate environment that many have been predicting for years. With rising rates the new reality for the housing market, earlier this month we examined the possible impact of a dramatic increase in 30-year, fixed-rate mortgage rates on the market potential for sales. We found that even doubling the mortgage interest rate may only reduce the market potential for home sales by about 5 percent.

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Topics: Interest Rates, Potential Home Sales, Real House Price Index, insider, mortgage rates

How High Is Too High For Mortgage Rates?

By Mark Fleming on March 20, 2018

The Federal Open Market Committee (FOMC) meeting is just around the corner, and experts agree that an increase in the Federal Funds Rate is almost certain. In fact, the expectation of future Fed rate hikes is already putting upward pressure on mortgage rates. The benchmark 30-year, fixed-rate mortgage rate jumped three basis points to 4.4 percent this past week. Since the start of the year, the benchmark rate has climbed almost half a percentage point and has increased for eight consecutive weeks. Concern is growing about the impact of the rising mortgage rates on the housing market, but it is important to keep today’s mortgage-rate environment in perspective.

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Topics: Interest Rates, Homeownership, Potential Home Sales, insider, mortgage rates

What Does Faster Inflation And Rising Mortgage Rates Mean For Housing?

By Mark Fleming on March 9, 2018

As the March Federal Reserve (Fed) meeting approaches, overall positive economic conditions are troubling those who follow the Fed closely. Many might pose the question, why would positive economic conditions be troubling?

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Topics: Interest Rates, Federal Reserve, affordability, insider, mortgage rates

How Will Rising Rates Impact Home Sales?

By Mark Fleming on February 20, 2018

This month, the market potential for existing-home sales increased to a 6.1 million seasonally adjusted annualized rate (SAAR), a 0.4 percent month-over-month increase, and a gain of 210,000 (SAAR) sales from January 2017. The gap between actual market performance (existing-home sales) and market potential (potential home sales) has significantly narrowed as actual existing-home sales have surged in recent months. Nonetheless, the housing market is still underperforming its potential.

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Topics: Interest Rates, Homeownership, Potential Home Sales, mortgage rates

Where Is House-buying Power The Strongest?

By Mark Fleming on February 14, 2018

Whether you plan to buy a modest studio or a four-bedroom penthouse, how much you can afford to borrow primarily rests on two main factors: income and interest rates. Income growth seems to be increasing, thus increasing affordability. However, the near certainty of future rate hikes will likely be a drag on affordability.

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Topics: Interest Rates, Federal Reserve, affordability, insider, mortgage rates

Two Reasons Why The Housing Reservoir Is Running Dangerously Low

By Mark Fleming on January 26, 2018

It’s been just over five years since house prices reached their trough and the housing market bottomed out. In the years following that low point, there has been a lot of discussion about how to increase demand and, specifically, why young adults today didn’t want to buy homes. I believed that the lack of desire among millennials was not a generational shift of interest away from homeownership toward perennial renting, but a matter of timing and lifestyle choices. The desire to become a homeowner simply emerged later in life than with prior generations.

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Topics: affordability, insider, mortgage rates

Housing Market Potential Little Changed, But Will The Supply Shortage Continue In 2018?

By Mark Fleming on January 23, 2018

First American’s proprietary Potential Home Sales model examines December 2017 data and includes analysis from First American Chief Economist Mark Fleming on how the real estate market is performing versus its potential.

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Topics: Interest Rates, Homeownership, Potential Home Sales, mortgage rates

Tightening Supply Squeezes Market Potential

By Mark Fleming on December 19, 2017

First American’s proprietary Potential Home Sales model examines November 2017 data and includes analysis from First American Chief Economist Mark Fleming on how the real estate market is performing versus its potential.

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Topics: Interest Rates, Homeownership, Potential Home Sales, mortgage rates

Best Cities To Maximize Borrowing Power For First-Time Home Buyers

By Mark Fleming on December 11, 2017

It’s a near certainty that the Federal Open Market Committee (FOMC) will raise the short-term Federal Funds rate this week. The CME group estimates the probability of a 25 basis-point increase at 90.2 percent. Some may fret about how this will impact the housing market, but they are missing the point on mortgage rates and affordability for first-time home buyers.

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Topics: Interest Rates, Federal Reserve, affordability, insider, mortgage rates