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US housing data shows signs of market shift

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A combination of findings detailed in recent housing market reports in major metropolitan markets, as well as nationally, has some analysts predicting more favorable conditions for buyers in the coming months. Jeff Lazerson, president of MortgageGrader.com and author of a syndicated column on housing finance, wrote that a series of signals have emerged in recent reports on mortgage defaults, loan applications and other macroeconomic indicators that point to a shift in the residential market nationally.

“Both startling and subtle evidence is emerging that our housing market is changing course,” Lazerson wrote. The overall effect of these converging trends, according to Lazerson’s estimate, is that the U.S. housing market is beginning to see slower sales and price growth, developments that generally favor buyers.

As evidence of his prediction that sales figures may have hit their peak, Lazerson recounts the findings of several recent state and nationwide market reports:

  • Mortgage default growth: According to a July 10 report on mortgage default and foreclosure trends from ATTOM Data Solutions cited by Lazerson, the number of foreclosure starts increased on an annual basis in 22 states in the first half of the year. Based on figures from 219 major metro areas surveyed by ATTOM, 40 percent of large urban areas also saw an uptick in foreclosure starts — defined as the number of “notice of default” filings, generally considered the first stage of the foreclosure process. However, the total nationwide figure for foreclosure starts during the first six months of 2018 was 8 percent lower than the same time last year, ATTOM reported.
  • Lagging housing confidence: For the purchase market, Lazerson points to the latest Home Purchase Sentiment Index release from Fannie Mae, which fell 1.6 points in June following record-high readings in April and May. The HPSI is based on regular surveys of U.S. consumers and their views of the current state of the housing market. The number of HPSI respondents who considered it “a good time to buy a home” recorded no monthly change in June, while slightly more reported concerns about their household income or losing their job in the near future.
  • Evolving macroeconomic trends: A few overarching trends in housing finance and the broader economy also imply a dip in residential market activity, according to Lazerson. Some of these have been persistent, such as the labor shortage and growth of construction costs that continues to cap new building activity. This was notably reflected in the Mortgage Bankers Association’s latest Builder Applications Survey, which found new applications for new construction homes down 8.8 percent annually in June. Even more broadly, macroeconomic indicators like the 10-year Treasury rate and recent stock market performance, both sending bearish signals, point to a potential slowdown on the horizon for the entire economy.

The takeaway from these insights shouldn’t be one of doom and gloom, Lazerson writes, but could serve as a word of caution to someone hoping to make quick work of a home purchase in the coming months.

“In this current market, I see many buyers playing a fools game by way overbidding based upon actual closed comparable sales,” he explained. “You’ve got to get rid of that ‘got to have it no matter what’ mentality. Be patient. Be prudent. Be clear what your bottom line offer will be before you bid.”

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