Freddie Mac: Mortgage market soaring in 2016, will fall back in 2017

Ben Lane

Time to get while the getting’s good

Freddie Mac continues to believe that mortgage lending is on track for a big year this year, but now expects the market to tap the brakes in 2017.

Last month, Freddie Mac’s monthly outlook report showed the government-sponsored enterprises’ analysts were continuing to project that mortgage originations will top $2 trillion this year, which would be the first time originations have been that high since 2012.

Freddie Mac’s latest report reiterates that belief, but now the GSE is expecting originations to fall back in 2017, from $2 trillion this year to $1.65 trillion next year.

But it won’t be purchase mortgage originations that will drag down 2017’s origination total, as purchase and home improvement mortgage activity is actually expected to rise next year.

According to the Freddie Mac report, next year’s drop will be driven by a significant decline in refinances.

Freddie Mac’s current forecast shows that the GSE expects to see $1 trillion in refinance mortgage originations in 2016, but projects that 2017 refinance volume will fall about 41% to just under $600 billion.

The reason for the decline? Interest rates, which Freddie Mac expects interest rates to rise slightly throughout next year, albeit not by much. And as Freddie Mac notes, refinance activity is “rate sensitive,” so any upward movement in rates will likely calm mortgage refinance activity.

“Even if worldwide bond yields recover to the pre-Brexit status quo, mortgage interest rates are likely to remain low for an extended period,” Freddie Mac notes. “Expect a gradual rise in rates throughout the remainder of 2016 and into 2017, with the 30-year fixed-rate mortgage averaging 3.9% in the fourth quarter of 2017.”

Freddie Mac’s report shows that the GSE’s analysts are not expecting much of an increase in total home sales going forward, with a slight decline in seasonally adjusted sales in the fourth quarter.

Freddie Mac projects that next year, new home sales will rise, driven by increases in new single-family housing construction that will push total home sales slightly higher, to 6.16 million in 2017 compared to 6.04 million in 2016.

Additionally, forecasting house prices will grow at a 5.6% annual rate in 2016, moderating to 4.7% in 2017, Freddie Mac’s report shows.

“The economy and labor markets are looking better. We’re even seeing modest wage gains,” Freddie Mac’s chief economist, Sean Becketti, said.

“And Fed watchers are increasingly predicting a December rate hike as things improve. However, worldwide economic growth is weak and its prospects have gotten worse. This may all sound familiar because we’ve been here before… last year,” Becketti said.

“As the economy sputters along a little bit faster than stall speed, the U.S. housing market continues to be a bright spot, though there’s less room to run than in the prior few years,” Becketti concluded. “Unlike new home sales, existing home sales have nearly recovered back to prerecession norms. Regardless, we see new home sales improving some next year driven by increases in new single-family housing construction which will push total home sales slightly higher.”

America’s 20 Hottest Markets for Real Estate in August 2016

Much like that last glorious weekend at the beach before the humdrum schedule of school and work kicks in, August typically sees one last burst of home-buying activity before the busy summer real estate season comes to a close.

So it’s no surprise that with September around the corner, a preliminary analysis of our data here at® shows that we’re having the hottest August in a decade—in real estate terms, that is. (It was pretty darn hot weather, too.) Homes for sale are moving off the market 2% more quickly than this time last year, and prices are hitting new record highs.

And continuing a winning streak that’s as amazing to us as those of Michael PhelpsSimone Biles, and Usain Bolt put together, Vallejo, CA, remains atop the hot list for the fourth month in a row. It’s followed by the bull markets in Dallas, Denver, and good old San Francisco.

The median home on was listed for $250,000—8% higher than one year ago and virtually the same as last month—a record high for August. And it wasn’t the only new record.

“’s traffic growth has been particularly strong in August, even surpassing record highs set in July, making this an extended summer with unprecedented interest in buying,” our chief economist, Jonathan Smoke, said in a statement.

“With the school year starting now in most of the country, we’re seeing some drop-off in immediate buying interest,” he added. “The current conditions provide more opportunity for any frustrated buyers still in the market to face less competition as we close out the summer.”

Smoke and his team looked at the median number of days homes spent on the market to gauge the supply of homes for sale, and the number of listing views per market to arrive at a list of the 20 hottest real estate markets in the country—where homes are selling fast and there’s plenty of interest from buyers.

Not all the names on our hot list are familiar ones. New to this month’s list are Kennewick, WA, and Waco, TX. We’ve actually noted the surprising appeal of Waco before; Kennewick looks to be a charming inland town sitting on the bend of a river, equidistant from Portland and Seattle.

And Detroit was the biggest gainer, moving up four spots to crack the top 10. Check out the rest:

The hot list

20 Hottest Markets August Rank July Rank
Vallejo, CA 1 1
Dallas, TX 2 2
Denver, CO 3 3
San Francisco, CA 4 4
Stockton, CA 5 5
San Diego, CA 6 7
Columbus, OH 7 6
Waco, TX 8 New to list
Detroit, MI 9 13
Sacramento, CA 10 9
Fort Wayne, IN 11 14
Yuba City, CA 12 11
Modesto, CA 13 12
San Jose, CA 14 15
Fresno, CA 15 17
Colorado Springs, CO 16 16
Santa Cruz, CA 17 8
Kennewick, WA 18 New to list
Santa Rosa, CA 19 10
Nashville, TN 20 19

Buyers say they’re willing to pay extra for ‘smart’ homes

By Kenneth R. Harney Real EstateAugust 24

Could “smart-home” technology — features such as network-connected thermostats, security devices, appliances and lighting — help you sell your property faster and for more?

Probably so, according to recent consumer polling plus anecdotal reports from appraisers and realty agents. The key, though, is that the smart products need to be installed before you list your house, because most buyers don’t want to have to install them. They want things pretty much turnkey.

The latest in an ongoing series of research projects by Coldwell Banker Real Estate found that 71 percent of buyers in a sample of 1,250 American adults want a “move-in ready” house and that 57 percent of those buyers looking at older houses would consider them updated — and more appealing as move-in ready — if they have smart-home features already in place. Fifty-four percent say that if they had to choose between otherwise identical houses, one with smart technology, the other without, they’d buy the smart home. Sixty-one percent of millennials would favor smart-tech homes, as would 59 percent of parents with children living in the house.
A massive survey this year of nearly 22,000 home shoppers by John Burns Real Estate Consulting found that not only do prospective buyers rank smart technology high when they evaluate housing options, they’re also prepared to pay thousands of dollars for it. Sixty-five percent said they’d be willing to spend more for smart-home technology packages, and well over half would pay extra for interior and exterior security cameras, network-connected appliances, doorbells that send owners text alerts enabling them to check security cameras, smart air filtration vents and a variety of other high-tech items.

Appraisers are also acknowledging the value of smart-home technology and making what they call “adjustments” when they compare tech-enabled homes with similar but tech-deficient houses. “Absolutely,” Pat Turner, an appraiser in Richmond, Va., said in an interview. “Smart-home technology can definitely add to market value. If you have the data showing that houses with smart technology sell for more, then you’ve got to” acknowledge that fact in some way in the appraisal report, he said.

For example, if local builders show him that a house without significant smart technology sells for $200,000 but an otherwise similar higher-tech house sells for $206,000, this market data allows him to make dollar adjustments — up or down — on comparable houses.

Danny Hertzberg, a Coldwell Banker agent in Miami, says that from his perspective, “a majority” of active buyers in the market not only prefer smart home technology, “but they’re expecting it and asking for it.”

A few years ago, interest in home technology was confined primarily to the more-expensive segments of the market, Hertzberg said. “Now it’s at every price point, whether in the center city or in the suburbs,” new construction and renovations alike. Even in houses built in the 1920s and 1930s, sellers are incorporating smart-home packages into their renovations to appeal to today’s buyers. “It helps you stand out,” Hertzberg told me — it gives you an edge over competing properties — and it usually cuts the time needed to sell.

But here’s an issue that’s beginning to bubble up: Now that “smart home” has become a marketing buzzword, is it subject to the same sort of overuse and hyperbole as the term “green”? Precisely what constitutes a “smart home,” anyway? If you’ve got a Nest thermostat and some security gizmos, is that enough to make your place “smart”?

No way. This past spring, CNET, the online consumer technology news site, partnered with Coldwell Banker to develop an industry standard: A true smart home should be equipped with “network-connected products (via WiFi, Bluetooth or similar protocols) for controlling, automating and optimizing functions such as temperature, lighting, security, safety or entertainment, either remotely by a phone, tablet, computer or a separate system within the home itself.”

The baseline requirements: It’s got to have either a smart security feature that controls access or monitors the property, or a smart temperature feature. It should also have at least two features from this list: smart refrigerators/washers/dryers; smart TVs and streaming services; smart HVAC system, fans or vents; smart outdoor plant sensors and watering systems; smart fire/carbon monoxide detectors and night lights; smart security locks, alarm systems or cameras; smart thermostats.
Now you know.

Why is home ownership declining? There’s one big reason

It’s getting harder and harder to grab a piece of the American Dream.

Newly released figures from, an online rental marketplace, show that while home prices have recovered and foreclosures rates have fallen since the Great Recession. homeownership rates have eroded.


In a report released today, Apartment List analyzed the change in homeownership rates across the United States from 2007 through 2016, and rates fell in 57 of the 70 metropolitan areas that were studied.

Some of the biggest drops occurred in Orlando (-14.2 percent); Jacksonville, Florida (-11.3 percent); and New Orleans (-6.5 percent). But Southern California also saw declines.


In 2007, an average of 52.3 percent of residents in the greater Los Angeles area owned homes. That percentage has since fallen to 47.8 percent. Riverside saw a similar decline, dropping from 66.6 percent in 2007 to 62.5 percent in 2016.

San Diego posted an even bigger decline. Its homeownership rate fell from 59.6 percent in 2007 to 51.5 percent this year.

On a bigger scale, figures from the Census Bureau show that last year’s U.S. homeownership rate of 63.7 percent was the lowest since before 1985.


Economist Robert Kleinhenz, executive director of research for Beacon Economics in Los Angeles, noted several factors that have prevented Southern Californians from owning homes. Much of the downturn, he said, can be tied to the Great Recession.

“Many people were in foreclosure and it took time for their credit to heal,” Kleinhenz said. “Others lost their jobs or their homes, so that makes for a slow recovery. The supply of new homes is also well below average and lending standards are still tight.”

Mel Wilson, broker and owner of Mel Wilson & Associates Realtors in Northridge, said buyers who make offers on homes listed below the median price for a neighborhood are having a tough time of it because those listings typically attract multiple offers, so they get shut out.


“Inventory is so tight,” he said. “In a normal market, you’d have an inventory of about six months, but today we have about one to one and a half months.”

And banks are partial to borrowers with higher FICO scores. Those are the credit scores most lenders use to determine your credit risk and the interest rate you’ll be charged. Every consumer has three FICO scores, one for each of the three credit bureaus — Experian, TransUnion and Equifax. Each score is based on information the credit bureau keeps on file about a specific consumer.

“You have to have a FICO score of 650 or above to purchase a home,” Wilson said. “And they have to verify everything, including the source of your funds for the down payment. And they’ll want to go back as far as three years to substantiate where your income is coming from.”

Kleinhenz said credit is still hard to get for many would-be homeowners.

“We’ve gotten here by enabling households that couldn’t afford homes to get mortgage loans,” he said. “The homeownership rate in California peaked at 60.2 percent in 2006, but that should not be our target moving forward because we achieved that under circumstances where people shouldn’t have gotten loans.”

A more realistic number, he said, would be in the mid-to-high 50 percent range. Kleinhenz also noted that declining rates of homeownership have put pressure on the rental market for apartments.

“We have historically been slow to add multi-family units here in Los Angeles and more generally in Southern California,” he said. “It makes for a very challenging time right now for someone who is trying to find a place to live — whether it’s renting or owning a home.”

Wilson said apartment rents are high in his area.

“They’ve gone up substantially over the last couple of years,” he said. “It’s hard to find a one-bedroom unit in the San Fernando Valley for less than $1,400 a month.”

Recent figures from price tracker CoreLogic show home prices are high as well. Southern California’s median price for June was $464,000, up 5 percent from $442,000 a year earlier.

The Apartment List report also shows that the median monthly cost to rent an apartment in the U.S. rose 3.7 percent between 2007 and 2014, while median owner costs for people with homes fell 13 percent.


Wilson said California is about 165,000 units short of the number of homes that are needed to meet the current demand, and builders are facing challenges in getting more homes built.

“It takes two to three years from the time you acquire land to the time when you have someone moving into a home,” he said. “And there’s a lot of ‘not in my backyard’ going on when they go through the permitting and entitlement process. People don’t want more congestion and development in their region.”

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