Numbers Count: Weekly mortgage data highlights

Wendy Cutrufelli
Posted by Wendy Cutrufelli
Mortgage Banking

Numbers do count to us as bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.

The numbers: Follow the FICO scores

Sign - house for sale with "sold" sticker on front lawn of beige suburban houseA third of mortgage loans that closed in April went to borrowers who had an average FICO score under 700, compared to 23% of loans a year ago, according to the latest Origination Insight Report from Ellie Mae. Also, the average FICO score of closed loans was 726 in April, compared to 738 a year ago.

What counts: There’s been a fair amount of talk about tight underwriting standards holding back the housing market this year. It seems clear rapid home price appreciation and the jump in interest rates that began last spring did combine with cautious underwriting by banks to slow home sales — in addition to the harsh winter. While there’s more to underwriting than FICO scores, Ellie Mae’s report shows banks are easing underwriting standards, moving down the credit score scale to provide loans to borrowers who might not have qualified a year ago.

Ellie Mae’s data show this gradual shift has been ongoing for two years, and as the economy strengthens, I would expect it to continue — helping more prospective buyers to potentially qualify for mortgages.

A final reminder: Don’t get completely hung up on FICO scores or your specific score. Ellie Mae’s report is an indication of easing underwriting conditions. When you are ready to start the home-buying application process, remember that other factors besides your FICO score can weigh in your favor.

The numbers: Home appreciation slows

Home price appreciation slowed significantly in March, according to the Case-Shiller Home Price Indices released May 27. The National Index rose 0.2% in the first quarter, and the 20-City Composite Home Price Index rose 0.9% in March compared to February. The National Index was up 10.3% from a year ago, and the 20-City Composite Index was up 12.4%.

What counts: Slowing home price appreciation is good news for prospective buyers for at least two reasons. First, with prices no longer skyrocketing, buyers are generally able to search for homes at a more leisurely — or, at least, less frantic — pace.

Second, the slowing appreciation may push some investors and speculators out of the market. In fact, San Francisco Federal Reserve research released May 19 concluded that investors buying to convert single-family homes to rentals may be retreating from distressed markets where sharp price appreciation has made the buy-and-rent strategy less profitable. This could mean people looking to buy a home to live in may face less competition.

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