Monitoring key national housing and economic indicators – like those from Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) – is important in identifying potential economic changes and mortgage market trends. One such change is the forecast of total home sales. Economists are looking for a bump up in total home sales in 2018 at a rate around 3%, which compares favorably to 2017’s 1.8% growth. New home sales are pegged as the driver of this increase, even as home price increases are anticipated to mirror 2017’s. Prognosticators also expect 2018 gross domestic product (GDP) to be near 2017 levels, continuing to be elevated above the 1.8% GDP the economy achieved in 2016.

Employment in February rose by 313,000, which was better than most analysts predicted, leaving the US unemployment rate unchanged at 4.1%. The unemployment rate looks to stay strong over the next few years, remaining just under 4% through 2019, based on these economists’ forecasts.

Forecasters also project consumer price increases to remain near 2% on an annual basis in 2018 and 2019, indicating inflation will continue to be held in check. The growth of the Personal Consumption Expenditures (PCE) Price Index has remained low, below the Federal Reserve Board’s 2% annual target in recent years. The Fed has said it will continue to monitor inflation, hoping for stabilization around its 2% long-run objective. This measure could continue to influence the Fed’s monetary policy.

Mortgage rates for 30-year, fixed-rate loans have been on the move in 2018, reaching 4.4% in February, up from 4.0% at the end of 2017. Forecasts show modest increases in the 30-year, fixed-rate mortgage, with economists projecting an average rate of 4.6% in 2018 and 5.0% in 2019.

Overall 1- to 4-family mortgage originations look to be around $1.7 trillion in 2018 and 2019.

(click image to see full report)

 

Detroit Housing

Detroit’s housing and mortgage market trends are unlike most in the country. The city not only endured the financial crisis and Great Recession that followed, but also its bankruptcy in 2013. So where does Detroit’s housing market stand today and what are its mortgage market trends? We can get a sense based on reviewing some key economic variables.

Let’s first consider the employment picture. Detroit’s unemployment rate in December 2017 was 8.7%, 4.6 percentage points above the national unemployment rate of 4.1%. While Detroit’s unemployment rate has certainly trended in the right direction over the past few years – from just over 20% in the summer of 2013 – the city still lags the US by a considerable margin. However, there is hope that the auto industry will provide additional jobs to the city as Fiat Chrysler announced in January it will invest $1 billion in a truck plant in metro Detroit.

While jobs are important, the amount of income needed for housing is also a consideration. GOBankingRates conducted a study last year of major US cities to determine income levels needed to live comfortably in each city. For Detroit, they concluded that annual income level is $42,161. The problem is the city’s median household income is just $25,764, leaving a gap of more than $16,000 to enjoy all the city offers.

High unemployment rates and low income are among the factors that contribute to low homeownership in Detroit. Based on the 2011-2015 American Community Survey 5-year estimates, Detroit’s homeownership rate is less than 50%. This also significantly lags the most recent US homeownership rate of 64%.

While these metrics certainly provide challenges for Detroit’s housing market, there may be some positive signs for the city. With the increase in home prices permeating throughout the country, for those who do purchase homes in Detroit, the cost on average is relatively low.

In addition, it also reported the number of residential sales in Detroit increased 16% from 2016, outpacing Michigan, which was essentially flat year over year in terms of sales.

Finally, there are several borrower assistance mortgage programs in Detroit created to try to help bolster housing in the city. It’s apparent this important US city is putting a lot of effort into lifting the status of housing.

Other Notable Events

Please check back this summer for my next quarterly update of Mortgage Market Trends.

 

Leighton Hunley

Leighton Hunley - MGIC Product Development: Analytics Manager

Leighton Hunley joined MGIC in 2015 and is responsible for informing senior management and the sales team of mortgage insurance activity. Focusing on the front-end of the mortgage insurance business, Leighton leads a team of analysts to provide reporting on an array of metrics including volume trends and business segmentations, market share, mortgage insurance growth opportunities, special deals, and other competitor and market intelligence. Leighton previously served as a Financial Consultant at Milliman, Inc. for 13 years providing services to lenders, insurance companies, investment banks, and start-up finance companies.

Leighton holds an MBA from the University of Wisconsin – Milwaukee with a focus on Financial Strategy and a BBA from the University of Wisconsin – Madison.

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