Mortgage Matters: Freddie Mac Portfolio Up In September

“The general condition of the economy is excellent, it simply has not lifted home sales this year. Home prices are still rising, so people who are purchasing are still seeing wealth gains…”

Brian Barker

Freddie Mac reported that its total mortgage portfolio increased at an annualized rate of 2.3 percent in September. The portfolio balance at the end of the period was $2.151 trillion compared to $2.147 trillion at the end of August and $2.057 trillion a year earlier.

Purchases and Issuances totaled $31.296 billion, bringing the 2018 year-to-date total to $286.6 billion, Sales were ($1.474) billion and Liquidations ($25.739) billion in September and totaled ($16.916) and ($215.003) billion respectively so far this year. The annualized growth rate for 2018 through the end of September was 3.4 percent and the annualized liquidations rate was (13.7) percent.

Single-family refinance-loan purchase and guarantee volume was $6.5 billion in September compared to $6.9 billion the prior month. The refinance share of total single-family mortgage portfolio purchases or issuances was 27 percent, up from 23 percent in August.

The Mortgage Related Investments Portfolio had an ending balance of $227.804 billion, a decrease of $6.7 billion in the aggregate unpaid principal balance compared to August. The annualized growth rate for the year to date as of September was (13.5) percent.

Freddie Mac had purchases of $27.607 billion for the month and $212.057 billion thus far in 2018. Liquidations were ($2.907) billion and Sales were ($27.607) billion and, for the year thus far, ($26.368) billion and ($211.340) billion respectively.

The ending balance of the Mortgage Related Investments Portfolio was composed of $121.636 billion in Mortgage Related Securities, Mortgage Loans valued at $96.505 billion, Non-Agency, non-Freddie Mac Mortgage-Related Securities at $5.268 billion; and Agency non-Freddie Mac Mortgage related securities of $4.395 billion.

Mortgage related securities and other guarantee commitments increased at an annualized rate of 5.0 percent in September.

Freddie Mac’s single-family delinquency rate was unchanged from August at 0.73 percent and was down 13 basis points from the rate the previous September. The rate for credit-enhanced Primary Mortgage Insurance loans declined by 1 basis point month-over-month and the non-credit enhanced rate increased by 2 basis points to .89 percent and 0.88 percent respectively.

The multi-family delinquency rate was 0.01 percent, unchanged from the prior five months. The rate in September 2017 was 0.03 percent.

A Positive Housing Report!

The National Association of Realtors® (NAR) just issued the first positive pending home sales report in months. Pending sales, a leading indicator for existing home sales, rose slightly in a month which saw declining sales of existing homes and a fairly devastating report on sales of newly constructed ones.

NAR’s Pending Home Sales Index, a measure of newly signed contracts for existing home purchases, rose 0.5 percent to 104.6 in September from 104.1 in August, driven by increases in both the West and Midwest. The Index has now increased in only two of the last six reports.

While the September uptick was hopeful for upcoming sales numbers, pending sales are generally expected to turn into closed transactions within the next two months, the PHSI is down 1.0 percent September 2017, the ninth straight month of annual declines.

Analysts polled by Econoday had expected the index to remain unchanged from August. Their predictions ranged from an 0.5% decline to a half percentage point increase. Lawrence Yun, NAR chief economist, called the monthly increase “a good, stabilizing trend.” He says despite the continued year-over-year declines, “This shows that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right.”

He continues to point to the lack of inventory of moderately priced homes and falling affordability as factors restraining the housing market but looked back to recent history to show the housing climate is still favorable. “When compared to the year 2000, when the housing market was considered very healthy, and home sales figures were roughly equivalent, the affordability conditions were much lower compared to now,” he said. ‘So even though affordability has been falling recently, the demand for housing should remain steady.”

While the economy, is thriving it has yet to have a substantial impact on the real estate market, but Yun thinks that may be about to change. “The general condition of the economy is excellent, it simply has not lifted home sales this year. Home prices are still rising, so people who are purchasing are still seeing wealth gains.”

He addressed recent discussions regarding how high home prices and rising mortgage rates may be making renting a better financial decision than buying, countering that homeownership is still the path to long-term financial health. “Excluding periods of subprime lending, homeownership has consistently led to wealth gains,” said Yun. “If people are willing to purchase a home within their budget, they will likely continue to accumulate equity.”

Source: Jann Swansons
[divide icon_position=”left” width=”short” color=”#”]

Brian Barker,
BBVA Compass
A Corridor News Contributor