Thanks for all the feedback and questions about our industry forecast earlier this month. We’ve heard many different perspectives from industry participants about the recently announced HECM changes and how it affects our customers and business volumes. Forecasting is always a guessing game (hopefully an educated one) but by far the most interesting part is the sharing of opinions that inevitably follows once a number is thrown onto the table.
As we dive deeper into August’s year to date results, an interesting city stands out this month, similar to how Baltimore bucked the trend earlier this year. Many areas of the country are still fighting their way back from low volumes in the past year, but Philadelphia has recovered faster than many others. It’s the only city in our top 10 this year that is growing year to date (+4.3%). Check out the chart below:
Not only is Philly up year over year, but it’s also trending higher. The difference is more notable year over year when comparing each month:
So what changed? Another familiar story from Baltimore: Refinances.
Non-refinance endorsements were down 11.4% from 2009 through August. There are at least two easy thoughts from this. First, we’ve seen a few times now that the best performing markets in 2010 are those where refinance is driving a significant portion of volume. That might be a good or bad thing, depending on your perspective.
Given that we’ve only addressed a small portion of our potential target market so far (see our sample report on this page for a reference check), we tend to see refinance similar to getting addicted to cough syrup. It probably feels great for a while, but sooner or later someone is going to take it away. Given continued home value issues and concern in the secondary market over refinances taking away the incentive for paying well for these loans, you should enjoy refis when you run into them but don’t count on them to make your 2011 numbers.
Now, let’s keep in mind that this is all happening before any of the HECM Saver and changed principal limits took effect. So this doesn’t say much about what will happen to the refinance volume with those changes. It probably says more about Philadelphia’s housing market than anything else, as Zillow shows a relatively healthy market.
Second, and as you might expect given the overall industry volume is down 38% year to date, refinances are much more of a localized phenomenon than an industry trend. Check out our refinance table in the left column (gray) of page 2. Refinances are down 45% year to date nationally.
The bigger story here is that non-refinance originations are down only 11% compared to 38% nationally. Proof yet again that it matters where you market. If you want to get these numbers for your markets to target your marketing where the return is highest, check out our services for reverse mortgage marketing and sales professionals.
Click on the image below to view the full Industry Trends report for this month.