Forecast Calls for Purchase and HELOC Growth

CoreLogic’s December 2016 U.S. Housing Economic Outlook displayed an increase in home and rent prices, and a rise in purchase and HELOC originations. The report also examined the factors that will contribute to the approximately 2.25 percent growth the economy will experience in the new year, which are rising mortgage rates, constant vacancy rates, price appreciation, a decrease in refinance originations, and low credit risk.

Mortgage rates for single-family and multifamily loans are expected to rise, with fixed-rates averaging over 4 percent, which is approximately a 0.5 percentage point increase from 2016. HELOCs will experience an increase this month and in 2017 due to the expected Fed rate hike later this month, according to CoreLogic.

Rental property rates will remain constant, as the market will see low vacancy rates and a decline in homeownership. Because single-family building is stagnant, various markets will experience a lack of housing inventory and will cause home-price and rent appreciation to grow at a gradual pace. The CoreLogic Home Price Index is expected to rise approximately 5 percent in 2017, despite several neighborhoods experiencing double-digit growth and declines. Last year, CoreLogic’s Repeat Rent Index increased 3.3 percent last year through October, and as developers complete new rental properties, the price of rent is expected to grow to 3 percent.

With higher mortgage rates reducing incentives to refinance, refinance originations will decrease in the new year due to higher purchase-money volume and second liens, which will be HELOCS on single-family homes or mezzanine debt on multifamily homes, according to CoreLogic.

New loans continue to have relatively low credit risk. CoreLogic’s Housing Credit Index found that new single-family originations during the first half of 2016 had lower risk attributes than those made 15 years ago. However, switching to a higher purchase share of new lending in 2017 will raise the idea of heightened fraud risk, though risk attributes may continue to look advantageous.