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Issue 19 / June 2013

FHA Changes Make Impact on First-Time Homebuyers

Demand from first-time homebuyers is leveling due to changes in FHA mortgage requirements, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. After three months of increases, the first-time homebuyer share of home purchases declined in April, as first-time homebuyers accounted for 35.8% of home purchases, based on the threemonth moving average-down from 36.1% in March. In early April, the FHA increased its annual mortgage insurance premiums, and the federal government is taking other steps to reduce losses from FHA mortgages. These changes primarily affect first-time homebuyers, who are particularly reliant on FHA financing. In April, 46.6% of homes purchased by first-time homebuyers were funded with FHA mortgages, based on the three-month moving average, well beyond the share of other financing options.

Lower-Priced Properties Pushing Down Prices on Non-Distressed Homes

Average home prices for non-distressed properties declined for three consecutive months through April, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The decline in prices appears to be due to an increase in lower-priced properties available for sale, not a weakening in overall home values. Lower-priced homes are increasingly coming out of rental inventory, as indicated by survey statistics, and being sold as non-distressed properties. The average sales price for non-distressed properties was $266,000 in April, based on the three-month moving average, down from a peak of $284,000 in January.

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Increase in Housing Inventory

According to J.P. Morgan U.S. Fixed Income Strategy research, housing inventory increased in March for the second straight month, up 1.6% to 1.93 million, representing a 4.6-month supply at the current sales pace. Despite this seasonal increase in inventory, market conditions continued to broadly favor sellers, with net demand up to 2.7 million in March. This is 700,000 higher than a year ago and 1.6 million higher than two years ago. Meanwhile, distressed sales accounted for 21% of sales in March (13% foreclosures and 8% short sales), down from 25% the prior month. All cash sales were 30% of transactions (down from 32% in February), and investors bought 19% of homes (down from 22%).

NELSON DASILVA Mortgage Banker 2169 SUMMER Street STAMFORD, CT 06905 nelson.dasilva@chase.com

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