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Fannie said it will immediately begin accepting applications for fixed-rate 97% loan-to-value financing of borrowers with FICO scores as low as 620. Freddie, meanwhile, took a more cautious approach, delaying the start of the program, requiring credit counseling, and in some cases only allowing FICO scores as low as 660.
December 8
WASHINGTON The housing market started off on a strong note in the New Year thanks to refinancing demand and even heightened interest in purchase mortgages. But sustained growth in 2015 will likely depend on whether the supply of new homes keeps up with demand, and so far that is still an open question.
"There is pent up demand for homes" but "at this stage of the recovery inventories should be rising," said Lawrence Yun, chief economist at the National Association of Realtors.
Overall, mortgage and housing industry insiders are cautiously optimistic about the housing outlook. Lenders are encouraged by recent regulatory moves to lower premiums on Federal Housing Administration loans and the introduction of 3% down payment products by Fannie Mae and Freddie Mac, which both might attract first-time buyers.They are also cheered by the improving economy, a stronger jobs market and higher consumer confidence.
A dip in interest rates sparked a surprising jump in refinancing in January and the first part of February, said Tom Wind, executive vice president at EverBank in Jacksonville, Fla. He noted that the start of 2015 significantly outpaced early last year.
"Last year, the first quarter was horrendous. We couldn't find anybody that wanted a mortgage," Wind said.
However, many remain guarded because they see a housing market that is still recovering and the best they can look for is steady improvement and growth.
Homebuilders, particularly small builders, are still having problems ramping up construction to improve supply. Yun said he is concerned low inventories will force home prices up, which could choke off demand. "The only way to take the pressure off the supply situation is to build more homes," Yun said in an interview.
Yet some optimists still believe housing will emerge stronger than expected this year.
"I think we are at a spot where we will blow through the national forecasts," said Paul Anastos, president of Mortgage Master, based in Walpole, Mass.
Still, the inventory issue is unlikely to be resolved anytime soon. Builders are still facing shortages of skilled labor and developed land for building lots.
"The demand is there. It's just the inventory that is dampening sales," said Brian Koss, executive vice president of Mortgage Network, based in Danvers, Mass.
Historically, an inventory of 300,000 new homes was considered a good number. Today the inventory is around 200,000, according to National Association of Home Builders senior economist Robert Denk.
In general, most experts are projecting only modest gains in housing starts, home sales and loan originations.
NAHB is forecasting a total of 800,000 housing starts in 2015. The group also expects new home sales to rise to 572,000 this year, up from 30% from 2014. But in more normal times, annual single-family housing starts would be around 1.2 million. Preliminary 2014 estimates put single family starts at 647,000 units.
Lenders One chief executive Jeffrey McGuiness said he expects purchase mortgage originations to maintain a steady to upward rate. Members of the St. Louis-based mortgage banking cooperative originated $200 billion in loans last year.
"We are expecting a modest increase of 7% to 10% in originations" in 2015, McGuiness said.
He said some markets "are very healthy right now," but there are other "significant markets that are still inventory challenged and thawing out.
"I don't feel we have turned the corner on the really healthy [real estate] market," McGuiness said in an interview. "It is really patchy in terms of purchase activity."
Re/Max co-founder and chief executive Dave Liniger said positive signs in the market include fewer underwater borrowers and appraisals being more readily accepted by buyers and sellers.
"January and February have taken off pretty well," he said. "Foot traffic at open houses has increased in the past three months."
But he is not looking for a gangbuster year either. "We are predicting a slow and steady recovery," Liniger said.
Koss said builders are two or three years behind the curve, especially on the condo side. "New construction hasn't happened as fast as we would have thought," he said in an interview.
Meanwhile, lenders are still struggling to bring more first time and millennial buyers into the housing market.
Rich Sharga, executive vice president of Auction.com, based in Irvine, Calif., said while positive job numbers, wage growth and lower down payment programs should help, there is still very little inventory in the entry level market.
"It is just a question of when those buyers will be ready to take the plunge and when the inventory of first-time homes will be available to them," he said.
But Frank Nothaft, chief economist for CoreLogic, was more upbeat about housing's prospects this year.
"I think we are going to be surprised how good a year 2015 turns out to be," Nothaft said, noting that lower down payment products and lenders easing up on credit scores will attract more first time buyers.
