The MarketPulse Volume 8, Issue

| The MarketPulse g January 2019 g Volume 8, Issue 1

The MarketPulse

JANUARY 2019

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Table of Contents | The MarketPulse g January 2019 g Volume 8, Issue 1

The MarketPulse Volume 8, Issue 1 January 2019 Data as of November 2018 (unless otherwise stated)

Housing Statistics

January 2019 HPI? YOY Chg HPI YOY Chg XD NegEq Share (Q3 2018)

Table of Contents

U.S. Economic Outlook: January 2019 Refinance Share in 2019................1 `Rate-and-Term' Refinance Supplanted by Rise in `Cash-Out'

Mortgage Delinquency Rates for All Loan Types Continue to Fall............2 Loans originated in 2015 and 2016 have performed the best

5.1%

4.7% California Home Sales Fall Year Over Year for Fourth Consecutive 4.1% Month in November ........................................................................................3

Slowdown has impacted high-end market, too, in recent months

Mega Loans: Mortgage Attributes of Wealthy Homeowners.....................5

Low interest rates and rising home values have driven refinance activity since 2013

In the News..................................................................................................................................... 6

10 Largest CBSA -- Loan Performance Insights Report July 2018............................................ 8

Home Price Index State-Level Detail -- Combined Single Family Including Distressed November 2018.............................................................................................................................. 8

Home Price Index........................................................................................................................... 9

Overview of Loan Performance................................................................................................... 9

CoreLogic HPI? Market Condition Overview............................................................................ 10 November 2018 November 2023 Forecast

Variable Descriptions................................................................................................................... 11

News Media Contact Alyson Austin alaustin@ 949.214.1414 (office)

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The MarketPulse g January 2019 g Volume 8, Issue 1 | Articles

U.S. Economic Outlook: January 2019 Refinance Share in 2019

`Rate-and-Term' Refinance Supplanted by Rise in `Cash-Out'

By Frank E. Nothaft

Using the CoreLogic TrueStandings data, we calculated the cumulative distribution of single-family mortgage debt outstanding by interest rate on the loan. Only 3 percent of the debt outstanding had a mortgage rate of 6 percent or higher, or only about $300 billion had a financial incentive to refinance to a lower rate. (Figure 1) Why haven't these homeow20n01e-0r4s refinanced already? Some

Refi Boom

may have insufficient home equity, a recent delinqu2e00n9-c13y, or a small loan balance: The

Refi Boom

average loan size was about $100,000 for these high-rate loans.

There do remain many homeowners who do have a financial incentive to refinance, albeit for other reasons. For instance, FHA borrowers with at least 20 percent home equity, good credit, and a mortgage rate near or slightly below today's market rates can refinance into a conventional mortgage without mortgage insurance, eliminating their insurance premiums. Between October 2016 and September 2018, about 500,000 FHA borrowers did exactly that.1 As another example, homeowners who are financing a major home improvement may choose to refinanc2e001r-a04ther than take a costlier second

Refi Boom

mortgage. In the CoreLogic public record data wR2ee0fi0B9fo-o1o3umnd that the cash-out share of new refinances exceeded 40 percent during the third quarter of 2018, the highest in 14 years, and we expect an even higher share this year.

Taken together, the consensus view is that the

nothaft: fig 1 refinance share of originations will decline to

about 25 percent of dollar lending this year.

Dr. Frank Nothaft

That will be the lowest four-quarter share in

Executive, Chief Economist,

25 years.2 (Figure 2) Nonetheless, increases in

Office of the Chief Economist

purchase lending will likely offset the decline in refinance to leave the dollar volume of originations in 2019 at about the same level as last year.

Frank Nothaft holds the title executive, chief economist for CoreLogic. He leads the Office of the Chief Economist and is responsible for analysis, commentary and forecasting trends in global real estate, insurance and mortgage markets.

FIGURE 1. "IN THE MONEY" TO REFINANCE FALLS AS RATES RISE Cumulative Share of Active Balance by Interest Rate

100%

3% of Active UPB Has a Rate > 6% ~ $300 Billion

80%

60%

40%

nothaft: fig 2

20%

0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Interest Rate on Mortgage Debt Outstanding in September 2018 Source: CoreLogic TrueStandings? Servicing

FIGURE 2. REFI SHARE PROJECTED TO FALL TO 25-YEAR LOW Refinance Share of Lending (percent, four-quarter moving average)

80%

70%

9%

10%

or higher

60%

50%

40%

1 We analyzed CoreLogic public records data to identify the number of FHA-to-conventional refinance originations during the two-year period.

2 Home Mortgage Disclosure Act data indicate that refinance comprised 23 percent of single-family originations from mid-1994 to mid-1995. The `consensus view' was formed by averaging the origination forecasts of the Mortgage Bankers Association, Fannie Mae and Freddie Mac.

30%

20%

23%

10%

0% 1990

1992-93 Boom

1995

1998 Boom

2000

2001-04 Boom

2005

2009-13 Boom

2009

2014

Source: Home Mortgage Disclosure Act (1990?2017); CoreLogic (2018); MBA, Fannie Mae and Freddie Mac projections (2019)

Forecast: 2019Q4

25%

2019

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Articles | The MarketPulse g January 2019 g Volume 8, Issue 1

Mortgage Delinquency Rates for All Loan Types Continue to Fall

Loans originated in 2015 and 2016 have performed the best

By Archana Pradhan

Archana Pradhan Economist

Archana Pradhan is an economist for CoreLogic in the Office of the Chief Economist and is responsible for analyzing housing and mortgage markets trends.

pradhan: fig 1

1 Serious delinquency is defined as 90 days or more past due or in foreclosure proceedings.

2 Based on CoreLogic public record data. 3 Texas, Florida and Puerto Rico were excluded in the comparison

of the national delinquency rate for yearly vintages to avoid the effects of the 2017 natural hazards. 4 The National Bureau of Economic Research has identified the January 2008 through June 2009 period as an economic recession, and recovery began July 2009; see . org/cycles.html.

The CoreLogic Loan Performance Insights Report analyzes mortgage performance for all home loans. Based on this report, the serious delinquency rate for September 2018 was 1.5 percent, representing a 0.4 percentage point decline compared with September 2017.1 Declining unemployment rates and rising home prices have helped to reduce this delinquency rate. This blog explores trends in the default experience over time by loan type and examines how product mix or loan vintage contributes to the national delinquency rate.

As of September 2018, the serious delinquency rates for Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and conventional loans

FIGURE 1. SERIOUS DELINQUENCY RATE BY LOAN TYPES

10%

pradhan: fig 2

8%

6%

4%

2%

0% Sep-07

Jul-09

Source: CoreLogic, September 2018

May-11

Mar-13

Jan-15

Nov-16

3.7%

1.9% 1.1% Sep-18

were 3.7, 1.9 and 1.1 percent, respectively (Figure 1). The serious delinquency rate dropped significantly for all loan types in September 2018 compared with September 2017. These rates represent an 11-year low.

CoreLogic data shows the serious delinquency rate for FHA loans is more than three times higher than the serious delinquency rate for conventional loans. Part of this trend could be the rise in FHA to conventional refinancing since 2013. This refinancing has transferred a large number of current FHA loans into the conventional servicing book and left higher-risk FHA loans outstanding. FHA to conventional refinances accounted for about 10 percent of all refinances in 2017 compared to 2 percent in 2012.2 In 2016 and 2017, about 550,000 borrowers refinanced from an FHA loan to a conventional loan. By FHA to conventional refinancing, borrowers with good credit history and at least 20 percent home equity can eliminate their mortgage insurance premium.

A closer look reveals that today's delinquency rates are influenced by older loans. The bulk of conventional loans that were seriously delinquent were originated between 2003 and 2009 (Figure 2). About 67 percent

Continued on page 6

FIGURE 2. SERIOUS DELINQUENCY SHARE BY LOAN VINTAGE

100%

Conventional Loans

100%

FHA Loans

100%

VA Loans

80%

80%

80%

60%

60%

60%

40%

40%

40%

20%

20%

20%

0% Jan09

Jun11

Nov13

Pre 2003

2003-2009

Source: CoreLogic, September 2018

Apr16

Sep18

2010-2018

0% Jan09

Jun11

Pre 2003

Nov13 2003-2009

Apr16

Sep18

2010-2018

0% Jan09

Jun11 Pre 2003

Nov13ContinuAperd16 on paSgeep178

2003-2009 2010-2018

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The MarketPulse g January 2019 g Volume 8, Issue 1 | Articles

California Home Sales Fall Year Over Year for Fourth Consecutive Month in November

Slowdown has impacted high-end market, too, in recent months

By Andrew LePage

Length of Stay

Golden State home sales fell on a yearover-year basis for the fourth consecutive month in November, with declines across the price spectrum--including $1 million-plus deals-- and all major regions of the state. With inventory higher and some potential buyers priced out or simply unwilling to buy, the annual growth rate for the state's median sale price in November was less than half the year-earlier level.

An estimated1 33,654 new and existing houses and condos sold statewide in November 2018 (Figure 1), down 12.2 percent from October 2018 and down 12.1 percent from November 2017, CoreLogic public records data show. Sales typically fall between October and November and since 2000 the average change between those two months is a decline of 9.4 percent. Sales have fallen year over year in six out of the last seven months, including annual declines of 9.2 percent last June, 7.0 percent in August, 17.2 percent in September and 6.2 percent in October.

November period fell 3.8 percent from the same period in 2017, while multi-million-dollar sales fell 4.5 percent over the same period.

The sales slowdown, which began during the

lepage: fig 1 heart of the 2018 Spring-Summer homebuying

season, reflects then-rising mortgage rates that worsened affordability, as well as a shift in buyer psychology that left some wouldbe buyers waiting to see if the market was nearing a peak, after which buying conditions might improve. In recent months, stock market volatility could have contributed to the high-end pullback. Market corrections can spook high-end buyers and leave

Andrew LePage

Research Analyst

Andrew LePage joined CoreLogic in 2015 as a research analyst working in the Office of the Chief Economist. Previously, Andrew was an analyst and writer for DQNews, a partner of DataQuick (acquired by CoreLogic in 2014). Andrew provided real estate data and trend analysis to journalists and issued a variety of housing market reports to the news media on behalf of DataQuick. Prior to that he was a staff writer at the Sacramento Bee newspaper covering residential real estate topics in the capital region and across California. He continues to monitor California's housing market for CoreLogic in two monthly data briefs detailing trends in Southern California and the San Francisco Bay Area.

Continued on page 4

FIGURE 1. CALIFORNIA TOTAL NOVEMBER HOME SALES FOR EACH YEAR

70,000 60,000

lepage: fig 2

50,000 40,000

November sales below $500,000 fell

30,000

16.9 percent year over year, while sales of $500,000 or more declined 8.4 percent and

20,000

$1 million-plus deals fell 9.6 percent compared 10,000

with November 2017. Sales of $1 million or more during the September-through-

0 2000

2002

Source: CoreLogic public records

2004

2006

2008

2010

2012

2014

2016

2018

FIGURE 2. CALIFORNIA MONTHLY MEDIAN SALE PRICE

$600,000

May-07: $486,500

$500,000

Length of Stay

$400,000 $300,000

Nov-18: $490,000

$200,000

$100,000

$0 2000

2002

Source: CoreLogic public records

2004

2006

2008

2010

2012

2014

2016

2018

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