Page 48 - July-August 2018 GSE Report Flip Book

FANNIE MAE AND FREDDIE MAC JJUALN. U- ARUYG. 22001188
interest rates and growing incomes mean homebuyers can afford to borrow more and buy more, which drives price appreciation.
Similarly, the Case Shiller Home Price Index rose in June at an annualized rate of 6.3%. Barclays analysts wrote:
The S&P CoreLogic Case-Shiller 20-city Home Price Index rose by 0.11% in June, a touch less than our and consensus expectations (0.20%). This took the annual rate of price appreciation to 6.3%, two-tenths lower from May, but well within the 5.5-6.5% range recorded over the past year. The data remain consistent with a healthy pace of price appreciation....
Pending home sales remain sluggish with contract signings again falling in July, according to the National Association of Realtors. “Today’s weakness suggests that home sales will continue to stagnate in the months ahead,” said Danielle Hale, chief economist for realtor.com. “While data from realtor.com show that inventory has started to pick up in certain high-priced markets even resulting in an increase in price cuts in some markets, these markets are generally higher- cost housing markets and the greatest inventory pick-up has been in higher price tiers. Because inventory relief hasn’t come in the price tiers where it’s most demanded by buyers—affordable, entry-level homes--this influx of houses for sale hasn’t translated into additional home sales. Solving this mismatch in price between buyer demand and homes for sale is the key challenge facing the housing market.” (DailyDose.com, 08/29/18)
Economists predicted that the Trump administration’s tax cuts would depress home prices, particularly in high cost, high tax metro areas. However, nine months later, these warnings have not materialized. While the housing market is showing several weaknesses, particularly in home construction, home prices across the country continue to climb. “We thought that there would be some impact, but the market is saying, so far, there is not an impact,” said Lawrence Yun, chief economist for the National Association of Realtors.
With home prices surging, private mortgage insurance rose 14% in the second quarter of 2018 from the year ago period, hitting a new post-crisis peak, according to Moody’s Investor Services. “The PMIs reported strong results in the second quarter of 2018, reflecting growth in new production, earned premiums from high-quality recent vintage business and lower incurred losses,” wrote Moody’s. “Although mortgage rates have begun trending higher and housing affordability lower, we believe credit fundamentals will remain positive for the sector, and likely drive healthy performance through the second half of the year.”
“For the past several years, home sellers held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition and a fast-moving market,” said Zillow Senior Economist Aaron Terrazas. “Conditions are starting to show signs of easing up, but the effects of years of
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