A recent reduction in mortgage insurance premiums on government loans has apparently had a significant impact, with home lending executives reporting an increase in demand. Also improving was the outlook for home prices, credit conditions and profit margins.
Among senior mortgage executives, 62 percent expect that U.S. home prices will increase during the next 12 months.
That was a significant improvement from three months earlier, when just 47 percent projected that home prices would rise.
Many of the new optimists had previously seen no change in home prices ahead, with that share falling from half to a third.
The share who believe prices will fall remained relatively steady
at 3 percent.
Fannie Mae reported the findings in its Mortgage Lenders Sentiment Survey Q1 2015.
The report noted that there wasn’t much change from the previous report among consumers, with 46 percent predicting an increase, 41 percent who expect no change and 6 percent who anticipate home prices will fall.
The share of mortgage executives who said it remains difficult to get a home loan fell to 71 percent from 86 percent in the last report. Those who see today’s credit conditions as currently easy jumped to a 28 percent share from 13 percent.
Among consumers, those who see mortgage credit conditions as easy climbed to 54 percent from 48 percent in the fourth-quarter 2014.
On loans that are eligible for acquisition by the government-sponsored enterprises, 52 percent said that demand for purchase financing increased over the past three months, an increase from 42 percent in the previous survey. No change in demand was reported by 36 percent, off slightly from the previous report. Those who saw a decline in demand fell to 11 percent from a fifth.
An even more dramatic improvement was seen in anticipated demand over the next three months, with the share who see an increase ahead in GSE loan demand soaring to 71 percent from 17 percent in the previous survey. The share who see no change in demand ahead tumbled to just over a quarter from 62 percent, and the share who expect demand to decline dropped to just 3 percent from 17 percent.
Non-GSE eligible loans saw similar shares and changes as on GSE loans. The outlook for this group changed similarly to the outlook for GSE loans, though not as dramatically.
But on government mortgages, the share who said demand increased soared to 45 percent from 29 percent, while a decline was experienced by 13 percent versus 30 percent. Unchanged demand was cited by 42 percent, almost the same as the prior period.
Executives who expect an increase in government mortgage demand
skyrocketed to a two-thirds share from just 16 percent in the prior survey, while those who see no change in demand ahead tumbled to less than a third from 57 percent. While more than a quarter expected a decrease in demand previously, that share now stands at only 3 percent.
The improvement in government demand came as the Federal Housing Administration reduced its mortgage insurance premiums in January.
More than three-quarters of those surveyed said that credit standards on GSE loans hadn’t changed over the past three months, a slightly wider share than in the previous report. An easing was reported by 16 percent, up from 12 percent, and just 7 percent noted tightening, down from 13 percent.
On non-GSE loans, the latest shares were almost identical to GSE loans.
The report indicated that the share of executives at larger institutions indicating that credit conditions on non-GSE loans had eased rose to 21 percent from 13 percent. But at mid-sized firms, the share fell to 13 percent from 22 percent. Just 14 percent of small institutions noted an easing, down from 18 percent.
Credit standards on government mortgages hadn’t changed since the last survey, according to 77 percent of executives, up from 70 percent. Another 14 percent indicated that conditions eased, slightly less than in December, and 8 percent said credit standards on government loans had tightened, falling from a 13 percent share.
Over the next three months, most executives expect no changes for credit conditions on all three types of mortgages.
An increase in profit margins over the next three months was forecasted by 41 percent of executives. This share soared from just 13 percent in the last survey. At the same time, the share who see a decline in upcoming profit margins fell from nearly a third to just 10 percent.
