Prod­uct of the En­vi­ron­ment

National Mortgage News - - Editor’s Note -

the home buy­ing sea­son is in full swing. But what was ex­pected to be a vi­brant turn­ing point for both the hous­ing mar­ket and mort­gage lenders has so far failed to ma­te­ri­al­ize.

That’s be­cause a short­age of in­ven­tory is hold­ing back both home sales and mort­gage orig­i­na­tions, leav­ing lenders search­ing for ways to re­place lost vol­ume.

So far in 2017, sin­gle-fam­ily hous­ing starts are on an an­nual rate of less than 800,000, which would mark the 10th con­sec­u­tive year that builders have started fewer than 1 mil­lion homes. That’s the longest run of an­nual hous­ing starts be­low 1 mil­lion that the Cen­sus Bu­reau has on record, sur­pass­ing a seven-year-long run that be­gan in 1964. In other words, the in­ven­tory short­age didn’t hap­pen overnight.

The in­ven­tory prob­lem spans across both new con­struc­tion and ex­ist­ing home sales. Ris­ing home prices would typ­i­cally en­tice more home­own­ers to put their prop­er­ties on the mar­ket, but it’s dif­fer­ent this time. Home­own­ers who took ad­van­tage of his­tor­i­cally low rates a few years ago are now re­luc­tant to give that up. And those who do get into the mar­ket for a home are find­ing they might fare bet­ter by rent­ing out their old home.

At the same time, ris­ing prices are call­ing ap­praisal val­ues into ques­tion, strain­ing af­ford­abil­ity, and caus­ing home sales to fall through.

And it’s not just an in­ven­tory short­age that’s keep­ing lend­ing sub­dued. Ris­ing in­ter­est rates have put a damper on re­fi­nance ac­tiv­ity — so much so that refi vol­ume was at a 10-year low dur­ing the first quar­ter, ac­cord­ing to At­tom Data So­lu­tions. While it’s un­likely that in­ter­est rates will fall again, you never know. But it’s hard to imag­ine any lender would bank their fu­ture on it.

Chances are you al­ready know all of this. And you’re try­ing to fig­ure out what to do about it. As this month’s cover story ex­plains, lenders are em­ploy­ing a num­ber of dif­fer­ent strate­gies to sur­vive the in­ven­tory short­age. From work­ing with builders to help fi­nance new con­struc­tion to ex­pand­ing prod­uct of­fer­ings to help more first­time home­buy­ers en­ter the mar­ket and en­cour­age ex­ist­ing home­own­ers to move up, ev­ery­thing’s on the ta­ble.

Ul­ti­mately, the lenders that are the most cre­ative prob­lem solvers and are proac­tive in lever­ag­ing ev­ery tool at their dis­posal will come out on top.

Austin Kil­gore

Edi­tor in Chief

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