The latest National Housing Market Index (NHMI), curated by AEI International Center on Housing Risk and based on home sales count, stood at 113 in for the third quarter—up from 110 in Q3 2015. The Q3 2016 NHMI covers over 21 million home purchase transactions dating back to the fourth quarter of 2012.
Volume has risen by 6.6 percent over the past two years, and strong demand accounted as the primary growth factor in the institutional financed loan market. According to the report, purchase loan volume has equaled 1.1 million loans, which is up 3.9 percent from 2015. The report also stated that loan volume is up 24.5 percent compared to 2013. However, cash sales have continued to spiral downward, with purchase transactions without financing totaling 440,000, which is down 1.4 percent from 2015.
Mark Fleming, Chief Economist at First American, and Ed Pinto, Co-Director of AEI’s International Center on Housing Risk, said, “Volume by non-institutionalized lenders remained unchanged from four quarters ago totaling 55,000 sales. These transactions have remained remarkably flat at around 4 percent of all transactions over the past three years.”
Purchase loans also saw an increase in the latest index. The number of purchase loans came in at 124 in Q3, which is four higher compared to Q3 2015. The report cited the GSEs as the source of all of the growth in volume. With national primary owner purchase loan demand growing at a rate about five times faster than second home and investor demand, number of Primary Owner Purchase Loans increased to 127, which is an increase of five compared to Q3 2015.
With loans with government backing or government guarantee account for over 80 percent of the mortgage market, the report stated that the private market mostly focused on higher price segment, and government agencies occupy the mid- and lower price range. AEI noticed a shift in market share from large banks to nonbanks when filing for GSE loans, but not for FHA loans. For GSE purchase loans, large bank share remained at about 30 percent in Q3, which is down from 51 percent from Q1 in 2013. For FHA loans, large banks lost more market share, falling below 20 percent down from 63 percent down in 2012.
Fleming and Pinto cited solid job gains, low mortgage rates, and high and growing leverage to the growth of the national seller’s market. This, combined with the plentiful availability of highly leveraged agency guaranteed lending, is helping fuel continued high growth in real home prices.