4 reasons the mortgage business may stay brisk this fall

October 3, 2016 | By and

Just coming off the “best summer for the housing market in a decade,” new data suggest the good times may continue to roll. Fannie Mae’s third quarter 2016 Mortgage Lender Sentiment Survey® found 28 percent of lenders said they expect their firm’s profit margin to increase over the next three months.

“More lenders, on net, reported a positive profit outlook for the third straight quarter, the first time that has happened since the survey’s inception,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “Their perception of profit outlook in the third quarter of this year is in stark contrast to the third quarter of 2015, when a sizable net share of lenders expected a deteriorating profit outlook over the next three months.”

Their optimism is shared by consumers who are finding employment and regaining confidence in the housing market.

With that in mind, here are four reasons the housing market will likely stay hot well into the fall.

  1. Strong Demand

The latest Realtors’ Confidence Index from the National Association of Realtors® (NAR) shows very strong buyer demand throughout the United States. Nationally, amid tight supply, half of properties that sold in August 2016 were on the market for 36 days or less compared to 47 days one year ago. Jonathan Smoke, chief economist at Realtor.com, says the strong job numbers released in September support demand for housing.

More: Can Higher Education Help Boost Homeownership?

  1. Increasing Supply…Soon

The supply of unsold inventory was 4.6 months in June, according to NAR. A “normal” unsold inventory supply is typically between six and seven months, Duncan says.

But as builders regain confidence in the market, new construction of single-family homes is projected to continue to increase over the next two years, reaching historic levels by 2017. August’s new home sales numbers show that many buyers who have not been able to find their dream home within the existing inventory have turned to new construction to fulfill their needs.

  1. Faster Time to Close

According to Ellie Mae’s Origination and Insight Report released in August, the time to close refis dropped from 48 to 46 days, and the time to close all loans remained steady at 44 days.

More: A Housing Economist Shares What He Expects For the Rest of 2016

  1. Homes are Still a Good Investment

CoreLogic says 548,000 U.S. homeowners regained equity in Q2 2016 compared with the previous quarter, increasing the percentage of homes with positive equity to 92.9 percent of all mortgaged properties, or approximately 47.2 million homes. Nationwide, home equity grew year over year by $646 billion, representing an increase of 9.9 percent in Q2 2016 compared with Q2 2015.

“We see home prices rising another 5 percent in the coming year,” says Anand Nallathambi, president and CEO of CoreLogic.

 

Estimates, forecasts, and other views expressed in this article should not be construed as indicating Fannie Mae’s expected results, are based on a number of assumptions, and may change without notice. How this information affects Fannie Mae will depend on many factors. Neither Fannie Mae nor its Economic & Strategic Research (ESR) group guarantees that the information in this article is accurate, current, or suitable for any particular purpose. Changes in the assumptions or underlying information could produce materially different results. The ESR group’s views expressed in this article speak only as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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