The Fannie Mae Home Purchase Sentiment Index decreased slightly in September, falling 0.3 points to 87.7, reversing August's increase.

The dip can be attributed to decreases in three of the six components, including the mortgage rate and household income components. The net share of Americans who said it is a good time to buy a home rose by 5 percentage points, while the net share who said it is a good time to sell a home remained unchanged.

However, the net share who expect mortgage rates to go down over the next 12 months fell 4 percentage points, and the net share of survey respondents who said their household income is significantly higher than it was 12 months ago decreased 3 percentage points. Respondents also expressed a more pessimistic view on job security, with the net share confident about not losing their job falling by 1 percentage point. Finally, the net share of respondents who said that home prices will go up in the next 12 months increased 1 percentage point.

"HPSI remains flat this month as perceptions of high home prices and expectations for rising mortgage rates continue to weigh on potential homebuyers," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "In September, the average 30-year fixed mortgage rate increased for the second consecutive month to 4.63 percent, its highest level since May 2011. In addition, the Federal Open Market Committee members' interest rate projections at the September meeting continued to point to four additional rate increases between now and the end of 2019. Still, downside risk to housing is limited by broader economic strength, which helped boost perceptions of current home buying conditions. For consumers who say now is a good time to buy, the share citing overall economic conditions as a reason rose to a survey high."

Some highlights from the report are as follows:

• The HPSI is down 0.6 points compared with the same time last year.
• The net share of Americans who say it is a good time to buy a home rose 5 percentage points from last month to 26%.
• The net share of those who say it is a good time to sell a home remained unchanged this month at 38%.
• The net share of those who say home prices will go up rose 1 percentage point to 39%, remaining below 40% for the third consecutive month for the first time since December 2016.
• The net share of Americans who say mortgage rates will go down over the next 12 months dropped 4 percentage points to -56%.
• The net share of Americans who say they are not concerned about losing their job fell 1 percentage point to 79%.
• The net share of those who say their household income is significantly higher than it was 12 months ago fell 3 percentage points to 19%.

A New (Interim) Top-Man at Fannie Mae

Fannie Mae named Hugh Frateras as interim chief executive officer. The appointment will be effective on Oct. 16, 2018, subject to final FHFA approval.

"I have great respect for Fannie Mae and the significant role it plays in our housing system," said Frater. “I look forward to working alongside the leadership team as we continue to look for new ways to serve our customers, implement our strategy and strengthen the company." He will succeed Timothy Mayopoulos, who announced his intention to depart in July 2018 and will leave the company on Oct. 15, 2018.

Frater has served on Fannie Mae's board since 2016. He has held a number of executive and management roles throughout his career. Frater currently serves as Vereit’s non-executive chairman of the board and as a director of ABR Reinsurance Capital Holdings. He previously led Berkadia Commercial Mortgage, a national commercial real estate company, which provides comprehensive capital solutions and investment sales advisory and research services for multifamily and commercial properties.

He served as chairman of Berkadia from April 2014 to December 2015, and he served as CEO of Berkadia from 2010 to April 2014.

M&A

• BancorpSouth Bank completed its merger with Icon Capital Corp., including subsidiary Icon Bank of Texas. Icon operates seven full-service banking offices in the Houston market, and two approved but unopened full-service banking offices will open as BancorpSouth offices in the next few months. BancorpSouth operates two full-service banking offices, as well as a mortgage loan production office, and a regional insurance office in the market.
• LoanLogics and Optimal Blue formed a strategic partnership aimed at delivering a real-time integration between LoanLogics’ LoanHD Correspondent Lending platform and Optimal Blue’s product eligibility and pricing platform. In conjunction with the partnership, Optimal Blue has acquired LoanLogics’ product, pricing, and eligibility technology business, LoanDecisions. Financial details were not disclosed.

VC Funding

• Cherre, a real estate data platform, closed a $9 million seed funding round led by Navitas Capital. Cherre provides large enterprises, insurance companies, banks and investors with a platform to collect, augment, and resolve property data in real-time from thousands of public, private, and internal sources, allowing them to evaluate investment and underwriting opportunities in a more more accurate and efficient manner than ever before. In addition to Navitas Capital, the funding round was also joined by Carthona Capital, iLookabout, Dreamit Ventures, and Red Swan Ventures. Pre-seed investors in Cherre included Recursive Ventures, Sarona Ventures, Wharton Angel Group, Harvard Angel Group, New York Angels and Angel Investor Forum.

The U.S. home prices in the third quarter were at the least affordable level since Q3 2008, a 10-year low, according to the Q3 2018 U.S. Home Affordability Report from Attom Data Solutions.

Nationwide, the home affordability index of 92 was down from an index of 95 in the previous quarter and an index of 102 in Q3 2017 to the lowest level since Q3 2008, when the index was 87. Among 440 U.S. counties analyzed in the report, 344 (78 percent) posted a Q3 2018 affordability index below 100, meaning homes were less affordable than the long-term affordability averages for the county, the highest percentage of counties below historic affordability averages since Q3 2008.

"Rising mortgage rates have pushed home prices to the least affordable level we've seen in 10 years, both nationally and at the local level," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "Close to one-third of the U.S. population now lives in counties where buying a median-priced home requires at least $100,000 in annual income based on our analysis of 440 counties with a combined population of 220 million.

U.S. Census net migration data shows negative net migration in more than two-thirds of those highest-priced markets, while more than three-quarters of markets requiring annual income less than $100,000 to buy a home posted positive net migration, indicating that home affordability is at least one factor driving recent migration patterns."

The report calculates an affordability index based on percentage of income needed to buy a median-priced home relative to historic averages, with an index above 100 indicating median home prices are more affordable than the historic average, and an index below 100 indicating median home prices are less affordable than the historic average.

Home prices in 69 counties require income of $100,000 or more
Prospective homebuyers would need to make $100,000 or more to buy a median-priced home in 69 of the 440 counties analyzed in the report (16 percent), assuming a 3 percent down payment and a maximum front-end debt-to-income ratio of 28 percent.

This list of 69 counties was led by the five California Bay Area counties of San Mateo ($377,210 annual income needed to buy a median-priced home), San Francisco ($366,582), Santa Clara ($327,284), Marin ($311,827), and Alameda ($237,760). Following those five California counties were Westchester County, New York ($228,937) and Kings County (Brooklyn), New York ($221,993).

Other counties where prospective homebuyers would need to make $100,000 or more to buy a median-priced home included counties in Southern California, Washington, D.C., Boston, Seattle and Hawaii.

"Several years of well-above-average home price growth has severely impacted housing affordability in the Seattle region, driven largely by our strong economy and rising incomes that have continued to cause prices to appreciate," said Matthew Gardner, chief economist with Windermere Real Estate, covering the Seattle market, where the 7 percent year-over-year home price appreciation in King County in Q3 2018 was the slowest annual appreciation in three years. "That said, I believe we have reached an inflection point and growth in home values is likely to slow until incomes can catch up."

Home prices rising faster than wages in 86 percent of local markets
Nationwide, the median home price of $250,000 in Q3 2018 was up 6 percent from a year ago, twice the annual growth of 3 percent in average wages. U.S. median home prices have increased 76 percent since bottoming out in Q1 2012 while average weekly wages have increased 17 percent over the same period. Meanwhile the average 30-year fixed mortgage rate is up 15 percent since Q1 2012 and up 17 percent just over the past year, according to the Freddie Mac Primary Mortgage Market Survey.

"As most buyers budget based on monthly payments, the median buyer is now able to bid significantly less than before," said Tendayi Kapfidze, chief economist at LendingTree, estimating that homebuyers are able to borrow 10 percent less than a year ago because of the rise in interest rates. "This means at each price point the number of buyers is falling, reducing demand. This has had immediate effects on the number of houses sold and will over time reduce the pace of home price increases. This is not cause for alarm however. Home prices have been outpacing incomes since 2012 at a pace that is unsustainable, and a period of consolidation is healthy for the housing market."

Annual home price appreciation outpaced average weekly wage growth in 378 of the 440 counties analyzed in the report (86 percent), including Los Angeles County, California; Cook County (Chicago), Illinois; Harris County (Houston), Texas; Maricopa County (Phoenix), Arizona; Miami-Dade County, Florida; and Dallas County, Texas.

Counties in Denver, Dallas, Grand Rapids least affordable relative to long-term averages
Among 128 counties with a population of 500,000 or more, those with the lowest affordability indexes  — least affordable relative to their long-term affordability averages — were Denver County, Colorado(70); Arapahoe County, Colorado in the Denver metro area (73); Tarrant County, Texas in the Dallas-Fort Worth metro area (74); Kent County (Grand Rapids), Michigan (74); and Jefferson County, Colorado in the Denver metro area (75).

Other counties with a population of at least 500,000 and a Q3 2018 affordability index below 80 included counties in the Detroit, Michigan; Nashville, Tennessee; Atlanta, Georgia; and McAllen, Texas metro areas.

Among the 128 counties with a population of 500,000 or more, those with the highest affordability indexes — most affordable relative to their long-term affordability averages — were Bristol County, Massachusetts in the Providence, Rhode Island metro area (117); Suffolk County (Long Island), New York(113); Camden County, New Jersey, in the Philadelphia metro area (113); Lake County, Illinois in the Chicago metro area (111); and Jefferson County (Birmingham), Alabama (110).

Highest share of income needed to buy a home in Brooklyn
Nationwide an average wage earner would need to spend 37.0 percent of his or her income to buy a median-priced home in Q3 2018, above the historic average of 34.1 percent.

Counties with median home prices requiring the highest share of average wage earner income were Kings County (Brooklyn), New York (134.8 percent); Marin County, California in the San Francisco metro area (126.0 percent); Santa Cruz County, California (120.7 percent); San Luis Obispo County, California(100.5 percent); and Maui County, Hawaii (99.7 percent).

Counties with median home prices requiring the lowest share of average wage earner income were Clayton County, Georgia in the Atlanta metro area (15.6 percent); Wayne County (Detroit), Michigan(15.8 percent); Allen County (Lima), Ohio (16.2 percent); Saint Lawrence County, New York, in the Ogdensburg-Massena metro area (16.9 percent); and Rock Island County, Illinois in the Quad Cities metro area (18.7 percent).