Home Prices’ Upward Trend Continues … But for How Long?

The Federal Housing Finance Agency reports that home prices rose 0.2% in November 2019 and increased 4.9% year-over-year. 

The Mountain Region’s 0.1% monthly decline was the only drop in home prices across the nine regions tracked. The East-North-Central Region—including the states of Michigan, Wisconsin, Illinois, Indiana, and Ohio—posted the largest increase at 0.8%. 

Average home prices across the nation rose to $281,2000 from October’s $280,600. The Mountain Region was the most expensive at $385,000 and was followed by the Pacific’s $325,100.

Despite seeing an increase, the East-North Central Region was the most affordable with an average home price of $233,500—an increase from October’s $231,700.

The FHFA also reports that the pace of growth from 2018 to 2019 is lacking when compared to prior years’ data. Home prices rose 6% from November 2017 to 2018, but grew just 4.9% over the past year. Home-price growth over the past year fell when compared to 2017-2018. 

The largest decline was recorded in the East-South-Central Region. Home prices rose 7.2% from November 2017 to November 2018, but just 5.4% over the past year. 

Ellie Mae revealed in its December Origination Insight Report that interest rates rose to 3.99% in December, which is coupled with purchase loans accounting for 54% of all loans closed in the month. 

The number of loans closed in December is up from November’s 51% and 2019’s low of 49%. 

“As we closed out 2019, we saw interest rates continue to rise to 3.99 percent, still well below the 2019 high of 5.01 percent in January. This drove the increase in purchase percentages back up to 54 percent of closed loans, still well below the 2019 high of 69 percent in June,” said Jonathan Corr, President and CEO of Ellie Mae. “While we believe that seasonality played a part in the slowing of refinances, we believe that we will continue to see purchase percentages pick up in 2020 as refinance demand normalizes.”

Ellie Mae states that the time to close all loans rose to 48 days in December—up from 45 days in November. 

Additionally, Freddie Mac’s latest Primary Mortgage Market Survey revealed mortgage rates fell to their lowest levels in three months, falling to 3.6% for the week ending on January 23.

However, First American Financial Corporation said falling mortgage rates could have a negative impact on the market. 

“Falling mortgage rates can help incentivize homeowners to sell their home and purchase a different home, but persistently low mortgage rates can have the opposite effect,” said Mark Fleming, Chief Economist at First American. “The decades-long decline in the 30-year, fixed mortgage rate, dropping from a high of 18 percent in 1981 to a low of nearly 3%in 2012, to just below 4%, has helped prod the housing market. This long-run decline increased affordability and encouraged existing homeowners to move.”

First American’s reading of potential existing-home sales increased 1.7% month-over-month to a 5.3 million seasonally adjusted rate.