Many of the nation's housing markets are stalling, report says
PNC Financial Services Group Inc. said total home loan production this year could be the lowest since the 1990s, and mortgage giant Freddie Mac declared that many of the nation's housing markets are stalling.
“It's going to be a real tough year in origination,” PNC CEO Bill Demchak said on Wednesday at an investor conference in New York.
“You're going to see it shake out a number of players at the margin because there is quite clearly much more capacity in the market right now than there is people who want mortgages.”
Freddie's “Multi-Market Market Index” (or MiMi), which sizes up homebuying activity and other factors, found that only 10 states and the District of Columbia fall in the “stable” range, as do four of the 50 metro areas included in the index — San Antonio, New Orleans, Austin and Houston. Pittsburgh was fifth, just outside the stable range.
The outlook for the rest of the housing market looks bleak.
“Less than half of the housing markets MiMi covers are showing an improving trend, whereas at this time last year, more than 90 percent of these same markets were headed in the right direction,” Frank Nothaft, Freddie's chief economist, said in a statement.
Wells Fargo & Co. and JPMorgan Chase & Co. are grappling for pieces of a shrinking mortgage market as demand for home loans declines and investors and cash buyers dominate some sales. First-quarter noninterest income from residential mortgages, which accounted for about a 10th of Pittsburgh-based PNC's noninterest earnings, fell 31 percent from a year earlier, the company said.
“It's never going to be a big driver of our earnings,” Demchak said about the nation's second-largest regional bank. “But it's an important product. If you tie that to where you think the future of retail goes and the need to have reasons for people to come visit you in physical space, mortgage has got to be part of that.”
Freddie's index draws from various data sources, including Freddie's own business with more than 2,000 mortgage lenders across the country, to assess the health of the single-family housing market.
Freddie labels a market “weak” when the MiMi value falls below a negative 2 or “elevated” when it ranks above 2. It does not factor in cash-only sales, which make up about 40 percent of home sales, or loans that do not meet Freddie Mac criteria. Pittsburgh's MiMi value was -2.23, an improvement from -2.56 a year ago.
The national value of the index stood at -3.06 points in March, with a three-month flat trend in housing activity. Freddie crunched numbers going back to 2001, and found that the all-time low was -4.49 in November 2010, during the depths of the housing crisis.
North Dakota was the highest-ranked “stable” state, with Wyoming, the District of Columbia, Alaska and Louisiana among the top of the list of 10 states that are considered to be in balance. Pennsylvania was 14th.
Bloomberg News and the Washington Post contributed to this report.