Home prices continue to lose steam
The double-digit annual gains on home prices have stopped, according to the latest S&P Core Logic Case-Shiller home price index. The prices on homes are still gaining but those gains have been consistently waning over the last six months. March home prices rose by just 3.7%, down from 3.9% in February.
Big cities like Seattle, which saw 13% rate gains a year ago, have now tanked to just 1.6% gains. Overall, the 20-city composite went from 6.7% to 2.7% annual gain over the last year. We are still seeing the same trends, however, as lower-end prices continue to see the biggest gains with high-end homes seeding the most price softening.
Chief Economist for the National Association of Realtors, Lawrence Yun, said, “Home price appreciation has been the strongest on the lower-end as inventory conditions have been consistently tight on homes priced under $250,000. Price conditions are soft on the upper-end, especially in high tax states like Connecticut, New York and Illinois.” He continued on saying, “The supply of inventory for homes priced under $250,000 stood at 3.3 months in April, and homes priced $1 million and above recorded an inventory of 8.9 months in April.”
Perhaps because of the lack of inventory on the lower end price points, pending home sales dropped from March to April by 1.5% according to the NAR. That is the 16th straight month of declines in pending home sales. Despite this stat, Yun believes that “it’s inevitable for sales to turn higher in a few months” because of steadily rising mortgage applications and consumer confidence.
A trend returns
Mortgage Real Estate Investment Trusts seem to be making a comeback. According to The Wall Street Journal, Mortgage REITs have “increased their mortgage-bond portfolios by almost 28% to $308 billion over the 12 months through March.” Mortgage REITs are simply groups that purchase mortgages or mortgage-backed securities to earn the income from interest on the investments.
As the Federal Reserve has started trimming its own bond holdings, REITs that are focused on home loans have become an important source of capital in the housing market. Although seen as a riskier due to perceived lack of oversight, mREITs saw a resurgence in 2018 raising $6.2 billion in equity. Analysts believe they’ll see that same positive revenue growth in 2019, especially with the push toward privatization of government sponsored enterprises Fannie Mae and Freddie Mac.
What’s interesting about the resurgence is some analysts are seeing banks take a step back from the mortgage market while still being the investors for the REITs. Chief Executive Officer for Annaly, Kevin Keyes, explained it simply, saying, “We’re doing the things they don’t want to do.”
About the Author: Movement Staff
The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement’s staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.
For more useful tips and mortgage information, contact Pam at Movement Mortgage today by visiting her website. You can also visit her at 7773 S. Suncoast Blvd., in Homosassa, Florida. Call her directly at (352) 634-0716.
Courtesy of Pam Cleary, Branch Manager, Movement Mortgage.
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