The Mortgage Lender Sentiment Survey follows up with those respondents that expect demand to fall in the first quarter with a question about the reason underlying this belief****. The top 5 answers do not sum to 100 percent because other answers were also given but not made publicly available. One-half or more of large institutions and mid-sized institutions believe demand will go down because mortgage rates are not favorable, the most cited reason. In contrast, 30 percent of small institutions hold the same expectation, equal to the percent of small institutions that have inventory and broader economic concerns.
Despite higher rates, new home sales contracts rose by 3.7 percent in January following a soft December reading. Also, sales of existing homes, both single-family and condos/co-ops, increased by 3.3 percent in January, reaching the fastest pace since February 2007. However, the National Association of Realtors’ Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts of existing homes, fell by 2.8 percent in January to its lowest level in a year. Results from the PHSI suggest some softness in sales of existing homes over the next month or two.
* To conduct this survey, FHFA asks a sample of mortgage lenders to report the terms and conditions on all single-family, fully amortized, purchase-money, nonfarm loans that they close during the last five business days of the month. The survey excludes FHA-insured and VA-guaranteed loans, multifamily loans, mobile home loans, and loans created by refinancing another mortgage.
** Specifically, the question is “Over the next three months, apart from normal seasonal variation, do you expect your firm’s consumer demand for single-family purchase mortgages to go up, go down, or stay the same?” Emphasis included by the survey.
*** Larger Institutions – Fannie Mae’s customers whose 2015 total industry loan origination volume was in the top 15% (above $631 million). Mid-sized Institutions – Fannie Mae’s customers whose 2015 total industry loan origination volume was in the next 20% (16%- 35%) (between $176 million to $631 million). Smaller Institutions Fannie Mae’s customers whose 2015 total industry loan origination volume was in the bottom 65% (less than $176 million).
**** Specifically, the question is “You mentioned that you expect your firm’s consumer demand for GSE eligible loans will go down over the next three months. Which of the following housing marketplace factors do you think will drive the demand down? Please select up to two of the most important reasons and rank them in order of importance. (Showing % rank 1)”