It issues new principles encouraging apartment companies and tenants to work together to "transition back to normalcy"
In anticipation of the eviction moratorium ending on June 30, The National Multifamily Housing Council (NMHC) has issued a new set of principles that calls for apartment firms to help renters recover from the pandemic. In a statement, the trade and advocacy group said that the principles were intended to halt evictions, create payment plans, and work with residents in need. NMHC argued that an eviction ban was no longer necessary and that “a continuation of the moratorium will only further exacerbate renters’ financial hardship as they continue to accrue insurmountable levels of debt.” The federal moratorium on evictions was put into place over a year ago and was intended as an emergency, short-term approach during the onset of the health crisis. The pandemic relief included more than $46 billion specifically for rental assistance, which has prevented rent payments from plummeting during the height of the pandemic, according to NMHC. Here are the principles:
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Around 77% of renters were able to make a full or partial rent payment by June 06, according to the National Multifamily Housing Council (NMHC)’s survey of 11.7 million units of professionally managed apartment units across the US.
The share of those who paid rent was down 3.8% from a year ago. However, NMHC noted that June 05 and 06 fell on a weekend and may not be compared directly to last year’s figures. “Today’s data is the most recent indicator of a strengthening economy, a recovering job market and robust demand in the apartment industry,” said NMHC president Doug Bibby. “Having weathered the worst of the pandemic, we can say with increasing confidence that the outlook for the multifamily sector is as positive as it has been in years.” While the June figures were encouraging, Bibby said that the rising costs of building materials are making it increasingly challenging to bring affordable apartment homes to the market. At the same time, more and more firms are having trouble finding labor, further delaying construction. On the bright side, rental assistance remains a top industry priority, according to Bibby, “Federal lawmakers should be applauded for passing legislation that resulted in almost $50 billion in rental assistance funds,” he said. “This comes as the industry continues to work alongside its residents to keep them stably housed, setting up payment plans and helping those in need secure rental assistance. However, a national eviction moratorium remains in effect. The continuation of this policy will ultimately only serve to place insurmountable levels of debt on already struggling households. We have much to look forward to, but these challenges are real and need to be dealt with urgently.” Fewer homeowners were able to take advantage of low rates last week as the share of refinance applications fell to their lowest level since April.
Overall mortgage loan application volume decreased 3.1% on a seasonally adjusted basis and down 13% on an unadjusted basis from last week, according to data from the Mortgage Bankers Association. MBA’s refinance index fell 5% week over week and was 27% lower than the same period a year ago. Meanwhile, the seasonally adjusted purchase index inched up 0.3%, and the unadjusted index was down 11%. “Most of the decline in mortgage rates came late last week, with the 30-year fixed-rate mortgage declining to 3.15%. This likely impacted refinance applications, which fell 5% for both conventional and government loans,” said Joel Kan, associate vice president of economic and industry forecasting at MBA. Of total applications, the refi share of mortgage activity shrank to 60.4% from 61.3% the prior week. The adjustable-rate mortgage (ARM) share of activity increased to 3.9% of total applications. Kan explained that the uptick in purchase applications was the result of Memorial Day this year being compared to a non-holiday week, as well as the surge in mortgage requests seen last May when pandemic-induced lockdowns started to lift. “The average loan size on a purchase application edged down to $407,000, below the record $418,000 set in February, but still far above 2020’s average of $353,900,” Kan said. “Home-price growth continues to accelerate, driven by favorable demographics, the recovering job market and economy, and housing demand far outpacing supply.” The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) dwindled from 3.17% to 3.15%, down to 0.34 points from 0.39 points (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The persisting trend of aggressive home price growth and shrinking supply of homes continues to put pressure on home affordability, according to Black Knight’s latest Mortgage Monitor Report.
Even with mortgage rates hovering at 3%, the share of median income needed to purchase the median-priced home has surpassed its five-year average of 20.1% and is trending up (20.5% as of the beginning of June). “In recent years, 20.5% has roughly been the tipping point at which appreciation begins to decelerate, but given the severity of inventory shortages, home prices have – at least for now – continued to sharply accelerate even in the face of tightening affordability,” said Ben Graboske, president of Black Knight Data and Analytics. The tight inventory of homes for sale has pushed home prices to appreciate at 14.8% on an annual basis in April. This marked the highest annual home price growth rate Black Knight has ever seen in the past 30 years. Single-family homes led the way, with prices up 15.6% from the same time last year – also an all-time high – while condo prices are up 10% year-over-year. “Driving this growth are two key elements: historically low-interest rates and – more acutely – the lack of available for-sale inventory,” Graboske said. “The total number of active listings was down 60% from the 2017 to 2019 average for April. It’s not getting any better, either.” Data from Black Knight’s Collateral Analytics group found that there was two months’ worth of single-family inventory nationwide in March – the lowest share on record. Inflow is also down, as there were 26% fewer newly listed properties in April than pre-pandemic seasonal levels. “The buydown of existing homes has buoyed lending and sales volumes, but the backlog of seasoned inventory has been nearly depleted at this point. Twelve months ago, newly listed properties accounted for just 27% of total active listings; as of April 2021, they now account for more than 75%, and the share is rising rapidly, “This has begun – and will likely continue – to create noticeable headwinds for both purchase lending and existing home sale volumes in coming months. It’s already pushing home prices higher and impacting affordability,” Black Knight said in the report. According to the Census Bureau, American mobility has been declining since the ‘80s. The annual mover rate, calculated as the percentage of people who change residence each year, has been steadily dropping since before the end of the Cold War and reached its lowest point just before the COVID-19 pandemic. Now, however, a new report from rental search platform Apartment List has shown the beginnings of an uptick in movement, driven by the rise of remote work and led by the economic class least likely to move pre-pandemic: wealthy Americans.
Rob Warnock, senior research associate at Apartment List, explained that for decades a higher income has been inversely proportional to the likelihood that someone moves. Since 2010, though, wealthier Americans have tended to move a little more frequently and in 2020 they led an overall bounce back in residential mobility. Warnock’s survey found more Americans are moving across the board - he explained to MPA why this is happening and what it means for the mortgage industry. “This has a lot to do with the reshuffling of the labor and housing markets in America as a result of the pandemic,” Warnock said. “The relationship between remote work, income and mobility are closely tied together. People with remote jobs tend to be higher earners, that unlocks the economic flexibility to find somewhere new to live but it gives them the physical flexibility to say ‘I don’t need to be living where I am now. What have I always wanted, because I have the means to go get it?’ It’s a pretty simple story and we see it playing out anecdotally.” Warnock admitted that while his survey is designed to be robust and give solid nationwide numbers, it’s not necessarily as unassailable as the census data he’s comparing it to. He’s waiting for the 2020 data to show what he expects is the case, that people started moving more in 2020. The preponderance of wealthy Americans in this trend, defined roughly as households earning between $100,000 and $150,000, appears largely as the result of the remote work boom. Remote workers tend to earn more than in-person workers as of now and often have different preferences regarding where they end up living and the amenities available to them. These aren’t necessarily the C-suite executives who will remain in job centers and urban cores. Rather, these are the well-paid tech workers who can do their jobs from anywhere. These wealthier, more mobile buyers are motivated by a range of factors, but Warnock noted that affordability plays an absolutely crucial role in their decision. Many of these higher-earning workers still saw homeownership as out of reach in a city like San Francisco, but possible in St. Louis or Boise. At the same time, many movers were motivated to live closer to family, and other were seeking more physical space and access to nature after a year spent locked down in tiny apartments. While this shift in mobility may have been sped up by the pandemic, Warnock doesn’t expect this to be a flash in the pan moment. Mobility driven by remote work, he said, will likely continue post pandemic with so many remote workers expecting to stay remote after this period ends. Well-heeled remote workers able to move freely, he explained, will be a likely feature of the housing and mortgage markets for years to come. Warnock thinks that’s good news for mortgage pros. “Think about the composition of people who are in the market to buy homes,” Warnock said. “If it is, in fact, shifting towards people who are higher earners, who are more geographically flexible, who are more eager to leave behind the market that they were never going to be able to afford, I would suspect that all that paints an optimistic picture for the mortgage industry.” For the second straight month, consumers reported a more pessimistic view of home buying conditions in May, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI).
Although the index inched up by one point to 80 month over month, the share of consumers who believe it is a good time to buy a home fell from 54% in April to just 35% in May. The uptick in the overall sentiment, Fannie Mae chief economist Doug Duncan (pictured) said, was spurred by improvements in components related to personal finance, “with consumers feeling substantially more positive about their jobs and income.” The net share of consumers who said they are not concerned about losing their job in the next 12 months grew 11 percentage points to 87%. Meanwhile, those who said their household income is significantly higher than it was 12 months ago increased 12 percentage points to 29% in May. “The ‘good time to buy’ component fell further – hitting another all-time survey low – as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment,” Duncan said. However, despite the challenging housing market conditions, Duncan said that homebuyers are more determined than ever. “Consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment,” he said. The number of respondents who anticipate mortgage rates to go down in the next 12 months increased from 2% to 6%, while home price expectations dropped from 45% to 47% in May. The net share of consumers who said it is a good time to sell a home rose 1% month over month to 67%. The share of mortgages in forbearance was down for the 13th straight week, as forbearance exits continue to move at a slower pace, according to the Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey.
As of May 23, forbearance rates inched down to 4.18% of servicers’ portfolio volume, a one-basis-point drop from the previous week. MBA estimated that 2.1 million homeowners are currently in forbearance plans. “Forbearance re-entries increased to almost 5.6%, as more homeowners who had canceled forbearance needed assistance again,” said Mike Fratantoni, senior vice president and chief economist at MBA. “There was also an increase in the share of PLS and portfolio loans in forbearance, while the share for Fannie Mae, Freddie Mac, and Ginnie Mae loans decreased.” The share of Fannie Mae and Freddie Mac loans in forbearance dwindled two basis points to 2.19%. Forbearance share for Ginnie Mae loans was down four basis points to 5.55%, while the percentage for portfolio loans and private-label securities (PLS) jumped 11 basis points to 8.37%. The forbearance percentage for independent mortgage bank servicers decreased two basis points to 4.36%, and the share for depository servicers edged down one basis points to 4.34%. “Housing market data continues to paint a picture of strong demand and constrained supply. The resulting rapid growth in home equity will benefit homeowners, whether they choose to retain or sell their properties,” Fratantoni said. Regardless of age, most buyers rely on real estate agents or brokers when purchasing a home. And despite the internet increasingly becoming a tool in the home-buying process, many buyers continue to seek the help of professional agents in finding the right property and negotiating the price and terms of a sale. For this reason, it is vital for real estate agents and brokers to have a deep understanding of the needs and preferences of the different groups of home buyers.
To gather insights on similarities and differences across generations, the National Association of Realtors (NAR) analyzed survey responses from a representative sample of 8,212 Americans who bought a primary residence home between July 2019 and July 2020. The buyers were divided according to age groups, each showing distinct characteristics. Below is a breakdown of the different characteristics and preferences of each generation of home buyers, according to NAR’s generational trends report. Gen Z (ages 18 to 21) This generation of buyers is new to this year’s report and comprises a sample that is too small (2%) to show unique characteristics. However, NAR’s survey indicates that homeownership is important to this age group. The association expects a larger sample of Gen Z in future reports. Younger Millennials (ages 22 to 30) Combined, millennials account for the largest percentage of home buyers during the survey period at 37%. However, the generation was divided into two groups because of their distinct characteristics. Younger millennials represent 14% of the total number of buyers and have the highest number of first timers at 82%. The group also has the highest portion of unmarried couples at 20%. Over a quarter, or 28%, of young millennial buyers are also likely to move from a family member’s home after buying a house, which is the largest among all age groups. Older Millennials (ages 31 to 40) As a separate group, older millennials comprise 23% of the entire home buyer population – the second biggest. Of this number, almost half, or 48%, are first-time buyers and 69% are married couples, which is the highest among all age brackets. Older millennials are also the most-educated age group, with 79% holding at least a bachelor’s degree. Millennials are likely at the point in their lives where their focus is on their professional careers. Because of this, they prefer to purchase a home in urban areas, where lifestyle amenities are easily accessible. According to the survey, “convenience to their jobs” and commuting costs are the top factors these groups consider when a buying a house. Gen X (ages 41 to 55) Gen Xers make up the largest generational group of buyers at 24%. As many are likely at the prime of their professional careers, they are also the highest-earning age group with a median income of $113,000. They also purchased the second-most expensive homes, averaging $305,000. Gen Xers are the most likely generation to have children under the age of 18 at 61%. Because of this, they prefer homes with bigger spaces, which explains why they bought the largest houses with areas averaging 2,100 square feet. The age group is also the most likely to purchase a multi-generational home at 18%. Younger Baby Boomers (ages 56 to 65) Across all home buyers during the survey period, 18% was made up by younger baby boomers. They have the most diverse reasons for buying a home among all generations, with the desire to own a home, be closer to family and friends, and live in a better area topping the list. This group is the most likely to purchase a new home for the amenities of new construction communities. Older Baby Boomers (ages 66 to 74) Representing 14% of recent home buyers, older baby boomers are the most likely age group to a buy a newly built home at 19%. They also move the furthest distance from their old residence to their new homes at a median of 35 miles. This generation have the highest number of buyers who are single females (22%) and military veterans (30%). Both groups of baby boomers expect to stay in their homes an average period of 20 years, the longest among all generations. The Silent Generation (ages 75 to 95) Excluding Gen Z, this generation make up the smallest share of buyers at 5%. As most of these buyers are likely to have retired or scaled back their work demands, they have the lowest median household incomes. Many are also downsizing and prefer to be closer to family and friends. This age group is also the least likely to compromise on their home search. How do buyers finance their home purchase? An overwhelming majority, or 87%, of buyers financed their purchase during the period, with the share decreasing as the age group gets older. Most younger buyers relied on their own savings for the deposit, while older buyers typically use proceeds from the sale of their previous homes as down payment. However, more than a quarter, or 28%, of younger millennials used a gift or loan from family or friends to buy a home – more than any other generation. For most respondents, having debt was the biggest hindrance on their ability to save for a deposit. This delayed their home-buying plans by a median of three years and mostly came from student loans. High rental cost was the next biggest barrier. More than two-fifths of younger millennials reported having a median student loan balance of $25,000, while 37% of older millennials have a median of $33,000. Only 21% of Gen Xers reported having student loan debt, but they have a higher median balance of $35,000, which could have been accumulated from their children’s educational loans, in addition to their personal student debt. To save for their home purchase, the survey showed that most respondents cut back spending on luxury or non-essential items, entertainment, clothing, and vacations. On June 30 of this year, the federal forbearance program is set to end. While it’s been extended a few times before, it appears that given the pace of recovery a blanket forbearance program probably won’t be renewed again. Current data puts somewhere between two million and 2.5 million loans in forbearance programs, representing 4-5% of all mortgages. While the pace of economic recovery has seen that number decline significantly, we could very quickly start running into a group of borrowers facing far more chronic financial issues who can’t be brought out of forbearance as easily.
“The reality is that many there are many borrowers that will be financially distressed for an extended period of time as local segments of the economy – both in terms of geography and market sector – are forced to transform themselves in a post-COVID world,” said Andrew Wang (pictured), CEO of tech-driven servicing firm Valon. “This latent population of chronically distressed loans will likely number well over one million, several times the steady state seen pre-COVID. “More significant at a national level, we expect this long tail to force transformational change among mortgage companies, particularly servicers, as they are forced to adapt to a new, dynamic paradigm. The ability to apply a flexible framework will be key as there will definitely not be a ‘one size fits all’ solution.” Wang explained that while these households will challenge the mortgage industry, and servicers in particular, they are unlikely to drive a real crisis in the housing or mortgage markets. He explained that we find ourselves in a very different crisis from 2008 as the primary issue is not inherent in credit. Despite that outlook he expects “plenty of mess” and large local variance between harder hit markets. Wang expects that the policy solutions and support from the Biden administration will likely come in a more targeted fashion, giving time to particularly hard-hit parts of the job market to recover. Debt forgiveness, Wang said, is unlikely as Biden will pursue more targeted measures to prevent a wave of distressed borrowers crashing into the market all at once. He expects that in this environment, servicers will be kept on a short leash by the federal government, due in part to a negative reputation earned in the 2008 crisis. “We have yet to see how servicers have reformed their practices in a distressed environment at scale,” Wang said, “and this will certainly be a high-stakes and potentially existential test for the servicing industry.” Wang believes that this current environment requires dynamic and flexible servicing, integrating new technology, borrower education, and customer support programs. He said that much of the industry is constrained by its older tech and organizational structures, contrasted now against a tech-literate and demanding borrower class. Wang, whose own company operates with more of a fintech philosophy, believes that the addition of regulatory pressure on servicers could cause more trouble as they try to integrate new regulations at a time when they need to upgrade their tech and take a more flexible and nimble approach. While servicers will be shouldering the biggest burden in a post-forbearance market, Wang explained that originators will be facing challenges of their own, notably in underwriting. The forbearance credit reporting requirements introduced in the CARES Act will give lenders relatively less signal from credit reports in the years following the end of forbearance. Therefore assets, equity and income will play a larger role in the underwriting process. However, Wang sees a financing world post-COVID where mortgage lending and structured debt play an even bigger role in the economy. “While mortgage underwriting will get more complex, mortgage lending will likely become an even more important segment of consumer debt as unsecured debt tightens relatively more than secured debt,” Wang said. “Depending on the overall path of financial markets at large (which will be influenced in part by the post-forbearance effects), HELOCs and second mortgages could become more prominent in a high-rate environment, while reduced rates could trigger a renewed refi wave. “The more significant impacts will be the ones from COVID generally. Experience from lockdowns should be a forcing function to loosen restrictions on fully electronic or remote closes, driving additional efficiencies. Similarly, signs point to fewer restrictions on licensed branch requirements for loan officers, which could lead to broader coverage of more areas, particularly underserved markets. Governments, some of which were unable to provide key services like tax certs due to office closures, will be forced to continue to modernize and digitize their services.” After two straight weeks of increases, mortgage applications dropped 4.2% for the week ending May 21, 2021, according to the Mortgage Bankers Association‘s weekly mortgage applications survey.
“Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. Kan noted that refinances decreased as well — by 7%, and 9% lower year over year — driven by declines in both conventional and government refinance activity. “And purchase applications increased for the second time in three weeks, rebounding after a rather weak April with mostly weekly declines,” he said. “While purchase activity was around 4% lower than a year ago, the comparison is to last spring’s large upswing in activity as pandemic-related lockdowns lifted.” After hovering below 3% for a month, the average 30-year fixed mortgage rate according to the Freddie Mac PMMS popped back up six basis points to exactly 3% last week. Rates climbed north of 3% over the first few months of 2021, but crested at 3.2% in March before descending again. The refinance share of activity decreased to 61.4% of total mortgage applications from 63.3% the previous week. The FHA share of total mortgage applications decreased to 9.1% from 9.2% the week prior. The VA share of total applications decreased to 11.2% from 12%. Here is a more detailed breakdown of this week’s mortgage applications data:
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