NEW YORK – July 12, 2017 – As home prices rise, fewer homeowners are underwater, or owing more on their mortgage than their home is currently worth. In the first quarter of 2017, 350,000 borrowers regained equity, which dropped the total number of underwater owners to 1.8 million, according to the latest Mortgage Monitor Report from Black Knight Financial Services, a real estate data firm.

The population of underwater homeowners has dropped by nearly 1 million borrowers since last year – the first time the underwater population has dropped below 2 million since 2006.

"The steady upward trajectory of home prices continues to improve the equity positions of many homeowners," says Ben Graboske, Black Knight Data & Analytics executive vice president. "This is plainly visible in the number of borrowers who are underwater on their mortgages. … Over the past year, we've seen a 35 percent decline in the total underwater population, with a 16 percent decline in that population over the first three months of 2017 alone."

Negative equity has become more concentrated among a particular class of homeowner, however, Graboske notes. Nearly half of the remaining underwater borrowers live in the lowest 20 percent of homes in their markets.

"While the nation as a whole now has a negative equity rate of just 3.6 percent, among owners in that lowest price tier, it's over 8 percent," Graboske says. "In fact, these lowest-price-tier properties are more than twice as likely to be underwater as those in the next price tier up, and 6.5 times more likely to be underwater than those living in the top 20 percent of the market. This is the highest differential we've seen between high- and low-price tiers since we began tracking in 2005."

Overall, the drop in U.S. underwater homeowners has translated into a big increase in the number of owners with equity, which zoomed to record highs. More than 40 million Americans now have "tappable equity" available in their home – the largest population on record. Tappable equity is considered to be borrowers with at least 20 percent equity in their homes.

"This is the largest this population has ever been," Graboske says. "If home prices continue to rise at or near their current rate of appreciation, tappable equity will likely hit record highs by this summer."

Graboske notes that more than half of the nation's tappable equity is centered in the 10 largest metro areas. California, for example, contains nearly 40 percent of available equity.

"While the growth in tappable equity is obviously good news for both homeowners and lenders alike, it does represent some risk as well," Graboske notes. "Investors in mortgages and mortgage servicing rights – as well as others with a stake in the broader mortgage market – need to be prepared to account for a higher share of equity-driven prepayment risk, as well as an increased chance of borrowers adding on second liens that primary loan servicers and investors may not be aware of."

Source: "Monthly Mortgage Monitor/May 2017," Black Knight Financial Services (July 2017)

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WASHINGTON – June 16, 2017 – A diminished supply of available homes is swelling prices in large U.S. metro areas from New York to Miami to Los Angeles, squeezing out would-be buyers and pushing up rents as more people are forced to remain tenants.

The trend is pressuring Americans' budgets, with about one-third of households spending more than 30 percent of their gross income on housing as of 2015, according to a report being released Friday by Harvard University's Joint Center for Housing Studies.

Homeownership rates have stagnated in part because renters face heavier financial burdens and elevated hurdles to buying.

At the same time, the sparse inventory of properties is benefiting existing homeowners, many of whose home values have recovered from the housing bust a decade ago.

The tight supply of homes and a shortage of affordable rental housing have improved little in recent years for a variety of reasons. Among the key factors is that construction has yet to regain the pace of homebuilding that predated the bust.

"As the economy continues to recover, as income picks up as household formations pick up, it's not spurring a supply response," said Chris Herbert, managing director of Harvard's Joint Center for Housing Studies. "It's a worsening of the situation that was evident last year."

Here are some of the major findings documented in the report:

Housing affordability

The government considers people who spend over 30 percent of their incomes on housing to be "cost-burdened." Those who spend more than 50 percent are considered "severely" burdened.

About one-third of all households, or 38.9 million, were considered cost-burdened in 2015, down from 39.8 million households a year earlier. This was the fifth straight annual decline.

Still, roughly 16 percent of U.S. households, or about 18.8 million, paid more than half their incomes on housing in 2015. The share of renters paying more than they can afford varies from city to city. In Miami, for example, it's 35.4 percent. In El Paso, Texas, it's just 18.4 percent. Other cities where households were deemed to be cost-burdened include Daytona Beach, Florida; Riverside, California; and Honolulu.

Ryan Welch of Santa Monica, California, is among those feeling stuck between rising rents and home prices. Welch, 32, pays about $1,500 a month for a rent-controlled one-bedroom apartment he shares with his wife. That works out to about a quarter of their monthly income, an affordable portion.

Welch, who works in advertising sales, would like a bigger place with more amenities. But he's reluctant to leave their apartment.

"I'm nervous to move to a place that's not rent-controlled," he said.

Saving to own a home, something he wants to do, has had to take a back seat to making payments on student loans and his car, among other expenses.

"I'd much rather buy, but I can't come up with the down payment," Welch said.

Home supply and prices

The availability of homes for sale has fallen short of demand. Last year, the typical new home for sale was on the market for just 3.3 months, according to the report — well below the average of 5.1 months dating to the 1980s.

All told, 1.65 million homes were on the market last year, the fewest in 16 years, the report said.

The supply is worse for lower-priced homes that would be affordable to typical first-time buyers. Builders have been constructing fewer homes for that segment of buyers.

Between 2004 and 2015, construction of single-family homes of less than 1,800 square feet fell to 136,000 from nearly 500,000, according to the report.

The trends helped drive national home prices 5.6 percent higher last year, above their housing boom peak. Prices remained nearly 15 percent below their peak, when adjusted for inflation.

"Builders are starting to turn more attention to the entry-level market," Herbert said. "My guess is we'll see some increase in our supply of smaller, more moderate-cost new housing on the single-family side."

Widening cost gap

One striking finding in the Harvard report is the gap in home values that's grown since 2000, well before the market hit its boom-era highs. When adjusted for inflation, home prices in markets along the East and West coasts have vaulted more than 40 percent since 2000. By contrast, values in the Midwest and South have declined.

Among the markets where prices remain well below their housing-boom peaks: Las Vegas, Chicago, Detroit and Tampa, Florida. By contrast, home values have risen far above their previous highs in Denver, San Francisco and Austin, among other markets.

"If you go back to say 1970 and you look at the differences in house prices across market areas, they were not nearly as extreme as they are now," Herbert said. "It's a function of income inequality and how much the differences in income have grown."

In addition, regulatory constraints and a shortage of available land limit construction in many areas.

Rental prices and supply

Even though apartment construction surged in the years after the housing bust, demand for rental housing has grown even more. The rental vacancy rate fell last year to 6.9 percent, its lowest level in three decades, according to the Harvard report. That's the seventh straight annual decline.

Much of the apartment construction in recent years has been made up of luxury developments catering to affluent renters rather than to households of modest means.

The number of rental units available for under $800 fell by 261,000 between 2005 and 2015, according to the report. By comparison, the number of rental units priced at $2,000 or more climbed by 1.5 million in the same period.

Homeownership rate

The nation's homeownership rate has been falling since peaking around 69 percent in 2004. Last year, it hit 63.4 percent, just above the low set in 1965. But the rate appears to be stabilizing, according to the report.

"Even if it is no longer falling, it's settling in at a rate that's low by historic standards," Herbert said.

The rate has grown notably worse for African-Americans, the report found. Homeownership among African-Americans is now at its lowest point since the 1960s and nearly 30 percentage points lower than the rate for whites, Herbert said.

Homebuilding up, but still low

Construction increased in 2016 for the seventh year in a row, adding 1.17 million homes and apartments. But that was still the lowest growth rate since 2011, the report noted.

Construction of single-family homes has been rising faster, up 9.4 percent last year to 781,600 units. Even so, residential construction still trails the 1.4-1.5 million annual rate that prevailed in the 1980s and 1990s, the report notes.

"We're still not yet at 1.2 million starts," Herbert said. "Back in the day, it would have been a bad year during a recession, and we're still trying to get back up there. We're certainly not back to normal in terms of supply."

NEW YORK – June 16, 2017 – Buyers may soon be able to bring less to closing. They were blamed for precipitating the housing crisis years ago, but major lenders are giving no- and low-downpayment loans another shot.

Several major lenders are reportedly offering loans with just 1 percent down. Navy Federal, the nation's largest credit union, offers its members zero-down mortgages in amounts up to $1 million. NASA Federal Credit Union markets zero-down mortgages as well.

Quicken Loans, the third highest volume lender, offers 1 percent downpayment options, as does United Wholesale Mortgage. And the Department of Veterans Affairs has offered zero-down loans to eligible borrowers for many years.

Also, Movement Mortgage, a large national lender, has introduced a financing option that provides eligible first-time buyers with a non-repayable grant of up to 3 percent. As such, applicants can qualify for a 97 percent loan-to-value ratio conventional mortgage, which is basically zero from the buyers and 3 percent from Movement. For example, on a $300,000 home purchase, a borrower could invest zero personal funds with Movement providing $9,000 down. The loan also allows sellers to contribute toward the buyer's closing costs.

So far, the delinquency rates on these low- to zero-down payment loans have been minimal, according to lenders. Quicken Loans says its 1 percent down loans have a delinquency rate of less than one-quarter of 1 percent. United Wholesale Mortgages told The Washington Post that it has had zero delinquencies from the borrowers on its 1-percent down loan since debuting it last summer.

For Movement's new loan product, the lender will originate the loans and then sell them to Fannie Mae, which remains under federal conservatorship. Fannie officials released the following a statement:

"(We're) committed to working with our customers to increase affordable, sustainable lending to creditworthy borrowers. We continue to work with a number of lenders to launch (test programs) that require 97 percent loan-to-value ratios for all loans we acquire." They add that there "is no commitment beyond the pilots," which are "focused on reaching more low- to-moderate income borrowers through responsible yet creative solutions."

During the housing crisis, zero-down loans were among the biggest losses for lenders, investors and borrowers. However, housing experts say the latest versions are different from years ago. Applicants must now demonstrate an ability to repay what's owed. They also must have stellar credit histories and scores, and lenders require a lot more documentation to prove borrowers are in good standing.

Also, many of the programs are charging higher interest rates. For example, Movement's rate for its zero-down payment option in mid-June was 4.5 percent to 4.625 percent, compared with 4 percent for its standard fixed-rate mortgages.

Some critics say that the borrowers who really could benefit from such options aren't able to qualify for them. Paul Skeens, president of Colonial Mortgage Corp. in Waldorf, Md., told The Washington Post that "it seems like people without excellent credit scores and three months of [bank] reserves don't qualify."

Source: "No Down Payment? No Problem, Say Lenders Eager to Finance Home Purchases," The Washington Post (June 14, 2017)

CHICAGO – June 16, 2017 – More than two-thirds of Americans believe that owning a home is an essential part of the American dream, according to a new survey of more than 11,300 registered voters released by the National Association of Home Builders (NAHB).

"Americans continue to place a high priority on homeownership and work hard to achieve this goal for their families," says NAHB Chairman Granger MacDonald.

Other recent surveys also have shown a high desire for homeownership, despite the homeownership rate remaining stalled near a historical low of 64 percent. About 80 percent of millennials recently surveyed by rental website Apartment List say they hope to one day buy a home.

However, being able to afford one is the main obstacle holding them back, millennials say. Thirty-six percent of the 24,000 millennial renters born between 1982 and 2004 surveyed said they'll likely need to wait more than five years before they'll have saved enough to buy. More than two-thirds of survey respondents say they don't even have $1,000 in down-payment savings.

Source: National Association of Home Builders and "Wannabe Buyers Aren't Saving Enough," Realtor® Magazine online

WASHINGTON (AP) – June 15, 2017 – Long-term U.S. mortgage rates edged up this week as the benchmark 30-year rate bounced back from a seven-month low.

Mortgage buyer Freddie Mac said Thursday that the average 30-year, fixed-rate mortgage rose to 3.91 this week from 3.89 percent last week. The rate stood at 3.54 percent a year ago and averaged a record low 3.65 percent in 2016.

The rate on the 15-year mortgage rose to 3.18 percent from 3.16 percent.

Freddie Mac chief economist Sean Becketti said this week's higher rates might not last. Freddie Mac surveyed mortgage lenders before the government reported Wednesday that U.S. consumer prices fell in May, causing a drop in the yield on 10-year Treasury notes, which often influences mortgage rates.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fees on 30-year and on 15-year mortgages were both unchanged at 0.5 point.

Rates adjustable five-year loans rose to 3.15 percent from 3.11 percent last week. The fee was unchanged at 0.5 point.