We’re Gonna Party Like It’s 1999

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We got some good news!  Home inventories may be down, but first time home buyers are up.

Sales this spring to first-time homebuyers were at their highest level since 1999. Woo-hoo!!!

First-time homebuyers made up about 57% of the purchase mortgage market, with almost 970,000 new loans. That’s good for business.

But, what happened to all the repeat buyers? Are these first-time homebuyers buying prior investment properties (flips) or new construction?

Fewer repeat/move-up buyers limit the homes available for more first-time home buyers who wish to enter the market, especially our good friends, the Millennials.

Even with builders moving toward more affordable units, the outlook through 2018 it still a shortage of homes.

Further, with more Millennials coming to the market, the definition of an affordable home is shifting. The average price of a new home today is running somewhere north of $325,000. For many, that is not considered to be ‘affordable’.

We are seeing a recent increase in home purchases by first-time buyers, but, can this trend continue? Will there continue to be sufficient stock available of new and existing homes for purchase and will any of these be in a price range that is affordable by those in the low to moderate income group?

Maybe the answers lie in some of these recent stories:

• Mortgage Applications Drop for Second Consecutive Week
• Harvey Could Reshape How & Where Americans Build Homes
• Southern CA Home Sales Drop Sharply
• Seattle Leads Nation in Home Price Growth for 10^th straight Month
• Purchase Mortgage Activity Hits Six Month Low

You can see by these headlines that things look challenging for mortgage lending. But, there are some bright spots. In the end, the markets will go by the way of supply and demand; that’s economics.

Lenders need to be prepared to play the game in whatever market they find themselves. That’s just business as usual.

With all these ups and downs, the good and bad, and the wrangling to increase homeownership, at the core is basic sound underwriting, loan quality, and legal compliance. No matter what the market and the challenge it presents, these things are paramount.

Let’s party like it’s 1999, but do so responsibly.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.