We’re in the home stretch of homebuying season in a purchase-heavy year. Let’s meet by the water cooler for a refresher on national factors and forecasts. Then we’ll step through one state that’s seen a lot during the last 12 months. And then it’s back to your desk, more informed and better-positioned for success on mortgage market trends.

Mortgage-Market-Trends-Q2-2018

Forecasts from Fannie Mae July 2018, Freddie Mac July 2018 and MBA July 2018

 

Some takeaways from housing and economic forecasts produced by Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA):

It appears single-family housing starts will continue their streak of year-over-year increases in 2018 and 2019. This makes sense, given the well-documented housing shortages throughout the country. However, this year-over-year growth in single-family housing starts has been diminishing rather consistently since 2015, when it spiked to roughly 10%, and the construction industry is being challenged by labor shortages and rising material costs.1

It will be interesting to see whether any of these 2019 home price predictions comes true. If home prices do cool off somewhat, a recent study by Freddie Mac offers a silver lining, concluding that rising home prices are a major contributing factor to today’s historically low homeownership rate among young adults.2

Amid intense media focus and uncertainty surrounding international trade relations, these recent forecasts predict the following about the US economy overall: GDP will expand by more than 2% in 2019, albeit at a slower rate than we experienced this year and last year. The Consumer Price Index (CPI) growth rate, one indicator of inflation, is expected to climb 40 to 50 basis points in 2018 compared to 2017, but then retreat by almost as much in 2019 – likely featuring multiple Federal Funds Rate increases.3 Finally, while tariffs have the potential to create a mixture of winners and losers across the US economy, at this point, forecasters do not expect the unemployment rate in 2019 to rise or fall significantly compared to 2018.

Indeed, Texas is Big

I couldn’t help but notice Texas has popped up in a variety of important # housing and #economic storylines. Here are a few examples:

Gulf Coast: Hurricane Harvey struck Aug. 25, 2017, and left its mark on more than 280,000 homes.4 Recently, Realtor.com reported new listings in areas most affected by Harvey are selling at an extremely rapid pace.5 The Houston Chronicle describes a transformed residential landscape in the most affected neighborhoods: a juxtaposition of newly elevated homes – both previously existing (raised) and new construction – interspersed among homes that remain at the level they were before the storm. Many of the lower-elevation homes are vacant, and many are formerly owner-occupied homes that have been rehabbed and are now rentals.6 Recently, CoreLogic® reported the mortgage delinquency rate in the state of Texas – in April 2018 – decreased year-over-year for the first time since Harvey.7

Oil Country: Boom. According to a Reuters article published in May, wages, housing costs and development have surged in the West Texas oil patch. It began in 2016 when oil prices perked up. Thanks to technological advances in drilling, the oil price threshold is much lower than it used to be for producers to turn a profit.8

Growth: Economically, the Dallas Fed district – which includes Texas and parts of Louisiana and New Mexico – was singled out as having exceptional growth in economic activity during late April and early May, relative to the other 11 districts.1

The top 5 were San Antonio, Phoenix, Dallas, Fort Worth and Los Angeles, based on population gains between 2016 and 2017.9

Trade: Given the uncertainty surrounding international trade relations, it’s worth noting Texas is a big exporter. In 2018 through May, Texas leads all states in total exports with $127 billion. The next closest state is California with $74 billion. In 2017, Texas was the origin state on 17% of US exports. Around 45% of Texas’ 2017 exports went to Mexico or Canada while 6% went to China.10

Other Insights

1. [The Federal Reserve’s Beige Book National Summary, May 30, 2018]
2. [FreddieMac.com/finance, “Locked Out? Are Rising Housing Costs Barring Young Adults from Buying their First Homes?” Freddie Mac’s Economic Housing and Research group, June 28, 2018]
3. [EyeOnHousing.org, Michael Neal, June 13, 2018]
4. [Realtor.com/research, “Housing in Houston: 9 months after Hurricane Harvey” Danielle Hale, June 4, 2018 https://www.realtor.com/research/housing-houston-9-months-hurricane-harvey/]
5. [HoustonChronicle.com/business, “Harvey ushered in a new reality for Houston real estate” Nancy Sarnoff https://www.houstonchronicle.com/business/article/Harvey-ushered-in-a-new-reality-for-local-real-12866924.php]
6. [HoustonChronicle.com/business, “Harvey ushered in a new reality for Houston real estate” Nancy Sarnoff https://www.houstonchronicle.com/business/article/Harvey-ushered-in-a-new-reality-for-local-real-12866924.php]
7. [CoreLogic.com/blog, “Texas Records First Year-Over-Year Decrease in Overall Delinquency Rate Since Hurricane Harvey” Molly Boesel, July 10, 2018 https://www.corelogic.com/blog/2018/07/texas-records-first-year-over-year-decrease-in-overall-delinquency-rate-since-hurricane-harvey.aspx CoreLogic® is a registered service mark of CoreLogic Solutions, LLC.]
8. [Reuters.com, “Boom in West Texas oil patch lifts wages, prices” Ann Saphir, May 1, 2018 https://www.reuters.com/article/us-usa-oil-record-economy-analysis/boom-in-west-texas-oil-patch-lifts-wages-prices-idUSKBN1I22TF]
9. [US Census Bureau, “Census Bureau Reveals Fastest-Growing Large Cities” May 24, 2018 press release number CB18-78 https://www.census.gov/newsroom/press-releases/2018/estimates-cities.html]
10. [US Census Bureau, “Origin of Movement Exports, Origin state-based” report; “Total US Exports (Origin of Movement) from Texas” report]

Tim Riemer

Tim Riemer – MGIC Product Development: Program Manager

As a member of MGIC’s Business Intelligence (BI) Team, Tim Riemer plays a lead role in mortgage market surveillance and analysis which informs product development efforts. His 16 years in the residential mortgage industry consist of 12 years with MGIC in Marketing and Product Development, plus 4 years as an originator in southeast Wisconsin and northeast Illinois. Tim holds a BS in Finance and Economics from the University of Wisconsin – La Crosse.

Tags: , ,