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Housing Trends: A Statewide Market Retrospective of Peak, Crash and Climb

A Closer Look at the CoreLogic Special Report

The housing market has gone through historical fluctuations over the past 12 years. The latest Special Report from CoreLogic chronicles the housing price index (HPI), beginning with the pre-crash peak years, through the market correction during the recession, up to December 2017.

During this period, the U.S. economy lost over 8.7 million jobs and the housing market fell 33 percent. As the market has largely recovered and housing prices are increasing throughout the country, now is a good time to look back and evaluate how the market reacted, changed and improved.

The national HPI peaked in April 2006, reaching its maximum decline in March 2011 before returning to peak in October 2017. Of all 50 states, Nevada experienced the biggest drop during the recession, with a 60 percent decline in home prices (Figure 1). Even after a 93 percent increase from its trough-to-current home price level, Nevada’s growth rate is still 23 percent below its pre-recession peak, and 9 percent of mortgaged properties are still underwater. This is one of the highest negative equity levels in the country, exceeded only by Louisiana which fell by just 9 percent during the crash.

During the recession, both Arizona and Florida prices dropped considerably to 51 percent and 50 percent below their respective peaks, and as of December 2017 they remained 16 percent below their peak price. Meanwhile, California experienced a 42 percent decline in home prices. Homes in this market have since recovered and now stand 2 percent higher than they did before the recession.

North Dakota had a shallow 2 percent peak-to-trough price decline during the recession, and with the energy boom, home prices have risen 48 percent above the prior peak in July 2008. While Nebraska and Iowa have experienced less significant growth rates, the numbers in these states tell a similar tale. Home prices in Nebraska dropped only 5 percent from the July 2006 peak, and have since experienced a healthy 27 percent increase from the lowest home price level. Iowa home prices also dropped by 5 percent from their peak and now stand 15 percent above the prior peak in 2006. However, the equity gain in these states is still below the national average of $14,888, standing at $7,720 for Iowa, $8,344 for North Dakota and $8,054 for Nebraska from the third quarter of 2016 to the third quarter of 2017.

Recovery has varied from state to state, and certain states are still not back to their respective pre-recession price levels. The West Coast states experienced significant price dips, but have since rebounded, while energy boom states in the middle of the country experienced comparably shallow drops and prices have risen considerably. To read more, download the free report, Evaluating the Housing Market Since the Great Recession.

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Mortgage Performance: PLRMBS Issuance Resurgence

A Closer Look at the Private Label Lending Product

While issuance volumes are nowhere near pre-crisis levels, the Private Label Residential Mortgage Backed Securities (PLRMBS) market has continued to provide access to funding for mortgage loans that don’t conform to the current tight credit markets. We observe a cycle starting in 2009 where a limited number of PLRMBS issues have made it to market through 144A rule offerings with deal volumes by vintage and origination amounts by vintage both peaking in 2017 (as of December 2017 remittance).

Median Home Price and Out/In Application Ratio for 2017

Median Home Price and Out/In Application Ratio for 2017

The collateral reveals the overwhelming tendency is to issue BC/Subprime deals that tend to revolve around NPL/RPL loans. These deals could include NPL/RPL portfolios being securitized from GSE auction purchases as well. Likewise, we see several legacy PLRMBS deals being called and the remaining outstanding loans re-securitized into new 144A issues. In more recent vintages starting in 2014, we’re starting to also see the emergence of a limited number of non-QM loans being included to some deals.

Issuer wise, the diversification has been significant. No less than 55 firms from 2009 to date have issued into the PLRMBS segment. However, roughly 50% of all deals issued during this time have been issued by only 5 issuers: Bayview, Sequoia, Credit Suisse, JPMorgan and Towd Point. 

Median Home Price and Out/In Application Ratio for 2017

Median Home Price and Out/In Application Ratio for 2017

While the deal volumes are not comparable to pre-crisis there has been a slow but gradual resurgence the last few years. If 2015 to the present is any indication, we can expect a continued growth trend and have already reached $50B in closing balances for 2017. Going into 2018, there should be continued interest in securitizing NPL /RPL loans and further defining the evolving non-QM credit box. The question mark is with respect to the public side and whether or not we’ll see issuance under Reg AB II.

In our next installment, we’ll take a look at the traits and relative performance on the book of issued PLMBS deals between 2009 to date.

© 2018 CoreLogic, Inc. All rights reserved.

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Videos: U.S. Housing Policy Outlook February 2018

115th Congress Second Session

Alyson Austin, principal communications for CoreLogic, sits down with Global Head of Public Policy and Industry Relations, Stuart Pratt, to discuss the Second Session of the 115th United States Congress and what might happen in 2018. The questions range from whether Congress will be able to accomplish GSE Reform to what banking related bills, if any, might pass this year.

© 2018 CoreLogic, Inc. All rights reserved.

CoreLogic.com

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