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Number Crunched: Is Industry Data Adding Up?

Phil Hall
Jul 24, 2014

The acclaimed writer and futurist Alvin Toffler once remarked, “You can use all the quantitative data you can get, but you still have to distrust it and use your own intelligence and judgment.” Of course, Toffler was not talking about surplus amount of data relating to the housing industry and the mortgage market. However, the excess quantity of data servings sometimes creates a contradictory picture, creating both confusion and bemusement across the industry. Consider a few different data reports issued during the week. This morning, Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) for the week ending July 24 found that 30-year fixed-rate mortgage (FRM) averaged 4.13 percent with an average 0.6 point, unchanged from last week. A year ago at this time, the 30-year FRM averaged 4.31 percent. The 15-year FRM this week averaged 3.26 percent with an average 0.6 point, up from last week when it averaged 3.23 percent. A year ago at this time, the 15-year FRM averaged 3.39 percent. Freddie Mac also reported the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.99 percent this week with an average 0.5 point, up from last week when it averaged 2.97 percent. A year ago, the five-year ARM averaged 3.16 percent. The one-year Treasury-indexed ARM averaged 2.39 percent this week with an average 0.4 point, unchanged from last week. At this time last year, the one-year ARM averaged 2.65 percent. Yesterday, Freddie Mac released its Multi-Indicator Market Index, which found most housing markets remain stalled largely due to weak home purchase mortgage applications. The Index value stood at -2.64 points, indicating a weak housing market overall, but on a year-over-year basis, Freddie Mac insisted the U.S. housing market has improved by 0.86 points and that the current data should not be seen as a harbinger of worst things to come. “We remain cautiously optimistic the housing recovery will continue, albeit slowly, until we see more tightening in the labor markets to give personal incomes a much needed jolt," said Freddie Mac Chief Economist Frank Nothaft. Also being released today was the somewhat depressing news that June’s new home sales were at a seasonally adjusted annual rate of 406,000, 11.5 percent below the June 2013 estimate of 459,000. Even worse, the annual rate for May had an abrupt revision from the originally announced figure of 504,000 to a new lower rate of 442,000. Neither the U.S. Census Bureau nor the U.S. Department of Housing & Urban Development (HUD), the entities releasing this data, explained why May’s numbers were so drastically revised. Other data released during the week also gave mixed signals. On Monday, Zillow reported that U.S. home values climbed 6.3 percent year-over-year in the second quarter, the slowest annual pace of appreciation recorded so far this year. However, Zillow also reported that home values on a national average remained 11.3 percent below their 2007 peak, while home values in half of the nation's 100 largest metro areas will not reach their pre-recession peak levels again until three years from now. "In dozens of markets, homeowners that bought at the peak of the market in 2006 or 2007 will have to wait until 2017 or later to get back to the breakeven point on their home, a lost decade in which they will have built up no home equity,” said Zillow Chief Economist Dr. Stan Humphries. “This is reflected in stubbornly high negative equity and effective negative equity rates, with more than a third of Americans with a mortgage lacking enough equity to realistically list their home for sale and buy another." In a separate report, the FNC Residential Price Index rose one percent from April to May. According to the Oxford, Miss.-based FNC Inc., this data indicates that U.S. home prices are rising at a fast pace. FNC also found that on a year-over-year basis, the rate of home price appreciation across the nation slowed by one to two percent when compared to the first quarter. And in yet another report–the Weekly Mortgage Rates Radar—the average rate for conforming 30-year fixed-rate mortgages rose by a single basis point (0.01 percent) to 4.21 percent. Conforming 5/1 Hybrid ARM rates increased by two basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.15 percent. "Mortgage rates continue to hang around low levels, but for every bright spot of economic news, there seems to be a countervailing force on rates, keeping them down" said Keith Gumbinger, vice president of the Riverdale, N.J.-based "Better news on jobs, housing, and a recent pattern of solid growth are being offset by troubles in the middle east and the Ukraine, giving investors ample reason to stash cash in the safety of U.S. markets." So, what should we industry make of these seemingly inconsistent numbers? Logan Mohtashami, an Irvine, Calif.-based senior loan manager at AMC Lending Group and a financial blogger at, combines the various data sources to create his own understanding of the market. “I look at everyone and kind of come up with my own resources,” he explained. “I look at the MBA for mortgage applications, the Census Bureau for new home sales and the National Association of Realtors for existing home sales. I look at Zillow, CoreLogic, Trulia and I put everything together in order to get a trend. You shouldn’t look for precision–you should look for a trend. If you take the aggregate whole, you can get an idea of what is happening.” “The data is fine,” observed Dr. Peter Morici, an economist and professor at the University of Maryland’s Smith School of Business. “But the new home market is not functioning well because of barriers to first-time homebuyers–student debt, lower incomes among twenty-somethings, and tougher mortgage requirements. Houses are awfully expensive for young people these days, and their prospects for upward mobility are not great.” Heidi Frigano, ‎executive vice president of marketing and business development for Levittown, N.Y.-based United Northern Mortgage Bankers Ltd., cautioned that sometimes the data gets crunched when media outlets reporting the numbers decide to skewer stories one way or the other. “I see contradictions all day long in the news feeds,” Frigano said. “One feed says the housing market dropped, while another says that it increased four percent. It depends on what side of the fence you’re on.” And, of course, the housing market is actually a collection of regional and local markets, many of which are ebbing and flowing at their own pace. “The stuff I focus on is what is local to me,” said Bill Gassett, a real estate agent at Hopkinton, Mass.-based RE/MAX Executive Realty. “I see all of the national reports and sometimes what I hear nationally applies to me–but sometimes it doesn’t.” Gassett added that his market is not tilting to one extreme or another. “I wouldn’t say it’s a booming sellers’ market and I wouldn’t say it’s a buyer’s market, by any means,” Gassett said. “It is a healthy middle-of-the-road market. It is almost like supply and demand are meeting one another.”
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