What “The Market Pulse” Results Mean for Housing Industry

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CF Funding gives opinion on the latest Corelogic release.

On January 17th, Corelogic released its November MarketPulse report, providing statistics and predictions based on various housing and mortgage market indicators. The report focused on availability of credit for mortgage borrowers, amount of cash home sales, construction employment, home prices, and auto sales in relation to home sales.

The first issue addressed is whether or not mortgage credit availability is too tight. Of course, the issue is so important now as the Qualified Mortgage standards are being implemented, and mortgage rates are expected to rise this year. According to Mark Fleming, chief economist at CoreLogic, “Whether credit is too tight or too loose is an especially difficult question to answer because no one single measure of credit availability exists.” So how do we evaluate the state of credit availability?

For this study, a variety of factors were compared including credit worthiness, debt-to-income ratios, level of documentation, propensity of adjustable rate loans, and share of purchase-money loans. In order to determine a “normal” level of these factors, the study used statistics from the year preceding 2004. An abnormal level was based on the housing bubble time period. The results showed that low credit-score loans and loans with 0 or little documentation are very limited. Does this mean they are not possible? No, but there are less options.

However, the amount of loans with high loan-to-value ratios and high debt-to-income ratios were “very close to normal.” CF Funding finds this very encouraging, as it may reassure potential homebuyers that low down payments do not constitute the denial of an application.

The report also evaluated the amount of cash home sales, which have gone down from September 2012 to September 2013. 37.4 percent of home sales in the U.S. were cash sales, and 36 percent of Illinois home sales were cash. Last year they totaled 40.2 percent, and the least we have seen over the past few years is 25 percent, before the crash. CF Funding is happy to see this number decrease, as large amounts of cash buying over a long period of time can have a negative effect on home prices.

The Market Pulse also looked at correlations between home sales and auto sales. The results showed a high correlation between the two from about 1976 to 2003, followed by a loss of correlation as home sales rose quickly and then dropped drastically during the recession. As far as construction employment, they reported a strange trend over the past few years, as construction spending has risen (see “Residential Construction Spending Increases to Highest Since 2008″) yet total construction hires has decreased.

It appears they saved the best for last, as an increase in new home sales, decrease in distressed sales, and decrease in foreclosures concluded the report. These are all great signs for the housing industry! You can read more about increased home sales on our News Feedor view the CoreLogic Market Pulse here.

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Giorgio U Ferrero
CF Funding
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