Product of the Environment
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.
Editor in Chief