Opinion, commentary, and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
It seems everywhere you look, people are praising the housing recovery that’s swept the nation so far in 2013. And can you blame them?
New construction starts were up 24% in the first half of 2013 when compared to the first half of 2012, according to the U.S. Census Bureau. With the exclusion of foreclosures and short sales, existing home sales rose 32% year-over-year in June, the National Association of Realtors reported. Plus, the delinquency + foreclosure rate dropped 14% year-over-year in June, according to data from Lender Processing Services' First Look report.
Those numbers seem to add up to a pretty solid recovery thus far. Yet, bubble talk still abounds, rising rates are stirring buyer’s apprehension and low inventory has many buyers frustrated.
But let’s imagine for a second that we avoid the bubble, rising rates don’t derail the recovery and a rise in inventory calms hesitant buyers. Are there still risks to the housing market for the remainder of 2013?
According to Trulia ($36.08 -1.59%) Chief Economist Jed Kolko, the answer is yes.
Post-bubble, mortgage credit became tight … very tight. While recent data suggests mortgage credit may be loosening a bit for borrowers that are most creditworthy, it’s still tight. It’s hopeful that new mortgage rules that will come into effect in 2014 will clarify which loans are considered risky and how banks will be on the hook legally and financially if they make these riskier loans. And hopefully this will create a willingness from banks to write mortgages deemed to be safer.
Millennials need to get up and out of their parents’ homes for this recovery to come full circle. Not only are Generation Y members not buying homes, they’re not even renting.
Shadow inventory is still significant, with the Census’ 2013 Q2 vacancy survey reporting that 5.6% of all housing units are vacant and off the market. This is up from 5.1% in 2009. Let’s hope owners decide prices rose enough to unload this hidden inventory.
With the Consumer Financial Protection Bureau’s qualified mortgage rules and the Fed’s bond-buying tapering in the first half, Washington will inevitably play a huge role in what happens in the second half of 2013.
However, according to Kolko, two bigger, messier housing "hot potatoes" are still being thrown around: the mortgage interest deduction, and the future of Fannie Mae and Freddie Mac.
"Banks, Millennials, the new shadow inventory, and Washington: they’ll all help shape which direction the housing market will go in the rest of 2013 and beyond," writes Kolko.
The mortgage industry is leveraging technology like never before, streamlining processes across the spectrum of lending, servicing, investing and real estate. The combination of regulatory pressure and consumer expectations have set a high standard for efficiency and transparency, requiring a significant investment of time, money and talent to hit the right notes for both.
Ironically, the monkey on the mortgage industry’s back for the past 10 years — increasing regulation — is the very thing that forced companies to find efficiencies in every part of the process, which serves them well as they look to engage tech-savvy consumers. Even as the enforcement of some of those regulations is now in question, the long-lasting benefits of investing in automation will stand.
Mortgage banks have traditionally been slow to embrace new technologies, and while the technology that has improved efficiency, security and customer experience in a multitude of other industries (transportation, education and retail, to name a few) is finding its way into the loan production process, a lot of opportunity still exists in other stages of the mortgage life cycle.