3 Positive Trends in Mortgage Lending: Report

Much has been made of the recent shift in the U.S. single-family housing market. With home prices up about 40% since the pandemic started, and mortgage interest rates roughly doubling in the last quarter, sales of existing homes in April fell to their slowest pace since before the pandemic. Meanwhile, mortgage applications slipped to their lowest level in 22 years the week ending June 3. But a new proprietary analysis by SitusAMC Insights finds significant reasons for optimism about the housing market.

Our latest white paper, “Single-Family Market Attractiveness: Balancing Present Strength Against Potential Problems,” looks at five dynamics to watch, including the key drivers of demand. The paper includes our Single-Family Current Momentum Heat Map, which gauges metro economic conditions and the near-term growth forecast for 82 U.S. metros. Here are three of the bright spots the paper reveals: 

Despite the recent rise in home prices, affordability remains well above levels recorded before the housing bubble burst in 2007. The current average affordability measure is 45% above that recorded in 2006, and no market is less affordable today compared to 16 years ago. 

The Current Momentum Heat Map shows major metro economies remain solid. The Map gauges economic conditions and the near-term growth forecast for 82 U.S. metros, on a scale of 1 (strongest) to 5 (weakest). The economic outlook for the vast majority of cities ranks either 1 or 2, with a few exceptions in California. This is not surprising, given robust employment, rising wages, strong home prices and abundant equity. 

Mortgage Lenders are likely to see burgeoning demand for adjustable-rate mortgages (ARMs). The 5/1 ARM rate at the end of April 2022 was approximately 1.5 percentage points below the 30-year fixed-rate mortgage. For the week ending April 29, the ARM share of mortgage applications was over 9% of total loans, twice the share of applications three months earlier. 

For more mortgage industry trends and insights, download the free white paper here. Learn more about SitusAMC's mortgage origination services here; our warehouse financing solutions here; and our secondary market solutions here.