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It’s a Good Thursday in Housing

Phil Hall
Feb 23, 2017

The latest housing news is mostly positive, with a few surprises sprinkled into the new home price appreciation data.
Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) found the 30-year fixed-rate mortgage (FRM) averaged 4.16 percent for the week ending Feb. 23, up from last week when it averaged 4.15 percent, while the 15-year FRM this week averaged 3.37 percent, up from last week when it averaged 3.35 percent. But the five-year Treasury-indexed hybrid adjustable-rate (ARM) mortgage averaged 3.16 percent this week, down from last week when it averaged 3.18 percent.
“In a short week following President’s Day, the 10-year Treasury yield fell about eight basis points,” said Freddie Mac Chief Economist Sean Becketti. “However, the 30-year mortgage rate rose one basis point to 4.16 percent. This week's survey once again displays the disconnect between mortgage rates and Treasury yields, a result of continued uncertainty.”
For those in search of upward movement in the housing market, Zillow reported that home values during January recorded a 7.2 percent year-over-year increase. Last month’s Zillow Home Value Index of $195,300 was less than one percent below the peak value reached in April 2007
Among the major metro markets, Zillow reported that Nashville, Portland and Tampa experienced the fastest year-over-year home value growth, all appreciating by more than 10 percent. In a dramatic year-over-year shift, San Francisco and San Jose went from being among the top 10 fastest appreciating housing markets at this time last year to being among the slowest appreciating today.
"We spend a lot of time focusing on the West Coast, but power-house markets exist throughout the country," said Zillow Chief Economist Svenja Gudell. "Florida and Texas home values have grown quite a bit over the past several years, stealing the spotlight from slower moving markets like San Francisco, San Jose and Los Angeles. Slowdowns in the Bay Area, in particular, are driven by the fact that these markets are so expensive that many people can no longer realistically afford to buy there, limiting demand and reducing pressure on home values. Despite recent increases in the national pace of home value appreciation, I expect a nationwide slowdown in 2017 as some headwinds begin blowing in, including increasing mortgage rates and worsening affordability."
On the rental side of the industry, Zillow found rents across the nation are up 1.4 percent since last January, to a Zillow Rent Index of $1,404 per month. Seattle, Portland and Sacramento recorded the greatest year-over-year rent appreciation.
Another study on pricing came from the Federal Housing Finance Agency (FHFA), which determined home prices rose 1.5 percent in the fourth quarter of 2016. On a year-over-year basis, home prices rose 6.2 percent from the fourth quarter of 2015 to the fourth quarter of 2016, with 46 states and the District of Columbia reporting pricing increases.
“Although interest rates rose sharply during the fourth quarter, our data show no signs of a home price slowdown,” said FHFA Deputy Chief Economist Andrew Leventis. “Although it will certainly take more time for the full effects of the elevated interest rates to be felt, there is no evidence of a normalization in the unusually low inventories of homes available for sale, which has been the primary force behind the extraordinary price gains.”
And in other news, Black Knight Financial Services (BKFS) found prepayment speeds declined by 30 percent in January to the lowest level since February 2016. Last month also saw a 17 percent year-over-year decline in delinquencies, while the 70,400 foreclosure starts during the month represented a nearly 18 percent increase from December 2016 and the highest number of starts since March 2016. On a year-over-year measurement, foreclosure starts were down by 2.09 percent.
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