Peak perspective, rate retreat & leapin’ limits



The latest Real House Price Index (RHPI) from First American Financial Corporation shows some interesting ups and downs. Though home prices are up 15.3% year-over-year from August 2018, First American says U.S. home prices average 37% below the 2006 pre-recession peak. First American Chief Economist Mark Fleming puts the numbers in perspective, saying, “Without stronger household income growth, rising mortgage rates will continue to impede consumer house-buying power, reducing affordability.” The RHPI uses incomes and mortgage rates to inflate or deflate unadjusted house prices to capture the true cost of housing.


Mortgage interest rates trended downward in the week ending November 22 according to Freddie Mac. The Primary Mortgage Market Survey (PMMS) reported the largest weekly drop since January 2015. Freddie Mac has tracked mortgage rate data since 1971.


The Federal Housing Finance Agency (FHFA) announced the third increase in conforming loan limits in three years this week in compliance with the Housing and Economic Recovery Act (HERA). HERA requires annual adjustment of baseline conforming loan limits for Fannie Mae and Freddie Mac to reflect changes in home prices. In most of the U.S., the 2019 maximum conforming loan limit for one-unit properties will be $484,350, an increase from $453,100 in 2018.


This year finds builder confidence is at its lowest level since 8/16, while housing starts and building permits were highest in January and March, respectively. The most recent peaks for existing and pending home sales occurred in 11/17 and 4/16. Prices are rising noticeably slower, inventories are increasing, and affordability is near a decade low, according to economist Elliot Eisenberg, PhD. However, with solid household formation, incomes up and job growth holding strong, Eisenberg predicts, “Housing won’t cause the next recession. It’ll be something else.”

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