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Altos: the worst is past us; Homebuyer credit scores are way up! 😍

By June 7, 2021 No Comments

Altos Research: We are “past the worst” of the current housing crisis

The price of lumber in the U.S. has tripled during the coronavirus pandemic, adding thousands of dollars to the cost of a new house

Framing lumber was priced at $1,200 per thousand board feet as of late April, a 250% increase from the year-ago period when the price was about $350, according to an analysis from the National Association of Home Builders (NAHB). For house hunters, that adds an average of nearly $36,000 to the price of a home, the trade group said. 

“Right now I can't tell anybody how much a house is going to cost,” Alicia Huey, a homebuilder in Alabama, told CBS News correspondent Mireya Villarreal.

But there is good news on the horizon as Mike Simonsen the CEO, Altos Research says the worst of the market is behind us.

“On to the data… in this week's video, I'll show you some of the signs that we are now past the craziest of the pandemicmarket distortions, and settling into a “new normal”,” Simonsen said in an email  “This means that while the market is still super hot, normal seasonal behavior is happening right on schedule.” 

For example, median home price ticked down this week to $399,000 from $399,900 last week – the first downtick since the start of the year. This is absolutely normal for June and a really healthy sign for the market. Inventory also continued to (slowly) climb this week, as did the percent of homes taking a price reduction, just as we would expect at this time of year. 

“These are signals that the hot market isn’t lurching further into bubble territory.”

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Homebuyer credit scores keep getting better!

The typical credit score for mortgage borrowers rose to 788 in the first quarter, a record high, the Federal Reserve Bank of New York said in a quarterly report. That’s the highest level in at least two decades. During the era of loose lending that ledto the Great Recession, the median credit score of mortgage borrowers fell as low as 707.

Meanwhile, only a quarter of borrowers who landed home loans during the January-through-March period had credit scores of less than 742. Just 10% had credit scores below 688, according to the New York Fed’s data.

The numbers have been skewed upward in part by the large share of mortgage refinancings in 2020 and 2021. People who already own homes generally have higher credit scores than first-time buyers.

What’s more, mortgage lenders grew more risk-averse during the coronavirus pandemic. In the early months of the recession, mortgage brokers described being required to complete near-obsessive verifications of borrowers’ employment and incomes.

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Credit card balances are down but Americans don’t want more mortgage debt

Flush with stimmy money, America's credit card balances are going down — way down. According to the latest Household Debt and Credit Report from the Federal Reserve Bank of New York, credit card balances underwent asharp decline in the first quarter of 2021. In fact, balances saw the second-largest decrease in the history of the data, which goes back to 1999. 

However, the Fannie Mae Home Purchase Sentiment Index remained relatively flat in May, increasing by 1.0 points to 80.0. Four of the HPSI’s six components increased month over month, most notably the components related to personal finance, as consumers reported a much greater sense of job security and improved household income compared to the same time last year. 

Yet, for the second consecutive month, consumers also reported a significantly more pessimistic view of homebuying conditions; on net, that component fell to an all-time survey low, with only 35% of respondents believing it’s a good time to buy a home, down from 53% in March. Year over year, the HPSI is up 12.5 points.

“The HPSI remained relatively flat in May, although some of its underlying components shifted significantly, with consumers feeling substantially more positive about their jobs and income, while at the same time showing even greater pessimism about homebuying conditions compared to last month,” said Doug Duncan, Senior Vice President and Chief Economist. 

“The ‘good time to buy’ component fell further — hitting another all-time survey low – as consumers appear to be acutely aware of higher home prices and the low supply of homes, the two reasons cited most frequently for that particular sentiment,” Duncan added. “However, despite the challenging buying conditions, consumers do appear more intent to purchase on their next move, a preference that may be supported by the expectation of continued low mortgage rates, as well as the elevated savings rate during the pandemic, which may have allowed many to afford a down payment.”

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