Mortgage Credit Availability Improves in August
If you want to be approved for a mortgage, you have to qualify. Which means, if you have too much debt, too little income, or bad credit, you may not be able to get a loan. Put simply, you have to have your finances in order, if you hope to borrow hundreds of thousands of dollars. But the standards lenders use to determine whether or not you’re qualified aren’t fixed. Sometimes they’re more lenient than others. That’s why the Mortgage Bankers Association (MBA) tracks mortgage credit availability.
Their monthly index determines whether access to credit is loosening or tightening. Any increase means potential borrowers will have an easier time getting approved for a mortgage, while a decline means standards have gotten stricter. In August, the index increased 3.9 percent. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says availability increased across the board. “Credit availability increased in August, driven by significant activity across all indexes,” Kan said. “Of note, jumbo credit availability increased 9 percent to its highest level since March 2020.” Conforming credit availability was up 5.1 percent.
More Americans Say It’s a Good Time to Buy
Fannie Mae’s Home Purchase Sentiment Index is based on a monthly survey gauging Americans’ feelings about the housing market and overall economy. It asks respondents for their opinions about buying and selling a home, mortgage rates, home prices, their jobs and financial situation. In August, the index was largely unchanged from the month before. However, the share of participants who said they felt it was a good time to buy a home was up 7 percent. It was the first increase in buying optimism since March.
Mark Palim, Fannie Mae’s vice president and deputy chief economist, says buyers expect conditions to improve in the months ahead. “The ‘good time to buy’ component, while still near a survey low, did tick up for the first time since March, perhaps owing in part to the favorable mortgage rate environment and growing expectations that home price growth will begin to moderate over the next twelve months,” Palim said. Overall, 32 percent of respondents said they thought it was a good time to buy, while 73 percent said it was a good time to sell.
Homeowners See Big 2nd Quarter Equity Gains
Equity is the difference between what you owe on your house and what it’s worth. So, when home prices are growing, equity is too. And with the recent spike in home prices, equity has surged. According to Black Knight’s most recent Mortgage Monitor Report, tappable equity – the amount available for homeowners to borrow against while still retaining at least 20 percent equity in their homes – grew 37 percent over year-before levels during the second quarter of this year.
Ben Graboske, Black Knight’s president, says homeowners have made big gains. “This is by far the strongest growth we’ve ever seen and equates to some $173,000 in equity available to the average mortgage holder, a $20,000 increase in just three months,” Graboske said. According to the report, tappable equity hit a record high at the end of the first quarter, reaching $8.1 trillion. During the second quarter, it added an additional $1 trillion to that total.
Hourly Earning Gains and Unemployment Declines
While many employment sectors are still reporting fewer workers than pre pandemic numbers, there remains hope in declining unemployment as well as a strong year-over-year gain in hourly earnings. The record number of job openings in July failed to translate into a strong August jobs report, which was much weaker than expected. The Delta variant concerns continue to weigh heavily on the service sector, which may also suggest a general slowdown in the pace of recovery overall.
As enhanced unemployment benefits begin to disappear there may be some accelerated gains in certain sectors. A sluggish supply chain recovery also continues to influence inflationary pressure. Further, continuing COVID-related health concerns, combined with uncertain school re-openings, may keep the labor market tight, limiting the pace of payroll growth and putting further upward pressure on wages.