Shorter-term mortgages are on the rise, rising rates and equity may mean more HELOCs and short sales may fall of the cliff.
That’s just some of the depth analysis of housing trends in April’s MarketPulse report from the economists at CoreLogic’s (CLGX).
CoreLogic chief economist Mark Fleming and his expert team also analyze the rise in U.S. construction employment.
Some of the key findings include:
1) Rise of short-terms
In 2006, 86.2% of all refinance originations were 30-year terms. In 2013, the share of refinance originations with a new 30-year term dropped to 60.1%.
Because of this trend, the share of shorter-term mortgages has been rising. In 2013, 15-year loan terms accounted for 27.3% of all refinance mortgage originations, up from 26.7% in 2012 and boosted from 8.8% in 2007.
Other repayment options are entering the mortgage market as well; in 2007, 3.9% of all refinance originations were 20-year terms, and in 2013, the market share for these loans more than doubled to 8%.
2) Return of the HELOCs
As borrowers regain their equity and interest rates continue to increase over the next few ?years, the incentive to stay in one’s existing home and finance home improvements though home equity lines of credit will likely increase relative to purchasing a new home or refinancing with cash out. This is good news for the home improvement industry and mortgage lenders who focus on home equity lending, as both will benefit from the resurgent consumer demand.
3) Short sales down
Although home price appreciation and other factors have contributed to the decline in short sales, the expiration of the Mortgage Forgiveness Debt Relief Act could be having an impact. Since the act expired on Dec. 31, 2013, CoreLogic data shows that borrowers are likely thinking twice about pursuing a short sale without the tax exemption.
4) No, it was not the cold (mostly)
(We’ve been saying it for months at HousingWire. Here’s the data.)
Although colder weather is a substantiated factor, clearly, the monthly change in housing starts is not entirely attributable to the colder-than-average temperatures.
Past severe winters that have affected housing starts negatively were followed by a rebound after temperatures began to rise again. This analysis indicates there should be a rebound again this spring, but it will not be sufficient to counteract the current weakness in the market, which can’t be blamed on the weather.
5) Construction employment
According to a Bureau of Labor Statistics report released in early March, nationwide construction employment increased 2.6% year over year in February and has been increasing on a year-over-year basis since June 2011. Although these year-over-year increases look tepid, they are strong when compared to the period of double-digit decreases in construction employment from January 2009 to March 2010.
The full MarketPulse report can be read or downloaded here.