Here we go with another week. There’s not a lot happening in the market right now, so mortgage rates are remaining relatively flat. We do have several chances for rates to move around this week as a string of inflation data is set to get released.
Our recommendation continues to be for borrowers to take action sooner rather than later. Read on for more details.
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Market Outlook 3.12.18 from Total Mortgage on Vimeo.
Where are mortgage rates going?
Inflation data could impact rates this week
On Friday, we got an unusually strong monthly jobs report for February. Financial market participants welcomed the positive data, and moved more into stocks and out of government bonds.
This caused the yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, up to 2.90%. It’s inched down a little to 2.89%, but that’s a very minor decline.
Today should be a relatively calm day in the markets, as there’s not much happening on the economic front other than a few Treasury Auctions. There’s definitely the potential for some market turbulence later on in the week, though, as we have several important economic reports out.
First up is the February Consumer Price Index reading tomorrow morning. The one drawback in the monthly jobs report on Friday was the weaker than expected average hourly earnings reading.
This puts some pressure on the CPI reading as investors look for signs of rising inflation. Analysts are calling for a rise of 0.2% from the previous month, so that’s the baseline investors will be looking for.
A reading above or below that mark will cause the greatest market reaction. If it comes in higher, we could see stocks and, subsequently, mortgage rates, go up. Vice versa if it comes in low.
After that, we’ve got more inflation data on Wednesday with the Producer Prices reading and the Retail Sales report. There are a few reports out on Thursday as well but nothing too major.
That brings us to Friday, where we’ll wrap up the week with the Industrial Production report. If you’ve been following current mortgage rates at all, you know that they’ve been on the rise.
Last week rates rose in the Freddie Mac Primary Mortgage Market Survey for the ninth consecutive week. We’ve seen the average rate on a 30-year fixed rate mortgage in the PMMS creep up over fifty basis points (one basis point = 0.01) since the start of the year.
That’s no small increase. It’s also not the end of the climb. According to many analysts, we will see the average rate on a 30-year fixed move another fifty basis points by the time 2019 comes around.
The ascent hasn’t been as rapid in recent weeks, but rates have continued to move higher nonetheless.
Rate/Float Recommendation
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With mortgage rates expected to continue rising throughout the year, the smart decision for many borrowers is to lock in a rate on a purchase or refinance sooner rather than later. The longer you wait, the greater the risk you’ll be paying more with a higher mortgage rate.
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Today’s economic data:
10-Yr Note Auction
Notable events this week:
Monday:
10-Yr Note Auction
Tuesday:
NFIB Small Business Optimism Index
Consumer Price Index
Wednesday:
PPI-FD
Retail Sales
Business Inventories
EIA Petroleum Status Report
Thursday:
Jobless Claims
Philadelphia Fed
Empire State Mfg Survey
Import and Export Prices
Housing Market Index
Friday:
Housing Starts
Industrial Production
Consumer Sentiment
JOLTS
*Terms and conditions apply.
Carter Wessman
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
The volume of mortgage applications fell during the last week of June as compared to the prior week which had contained an adjustment to account for the Juneteenth holiday. The Mortgage Bankers Association (MBA) reported a decline of 4.4 percent in its seasonally adjusted Market Composite Index. The change ended a three-week streak of volume gains. On an unadjusted basis, however, that index did move 6.0 percent higher.
The Refinance Index decreased 4 percent from the previous week and was 30 percent lower than the same week one year ago. The refinance share of applications ticked up to 27.4 percent from 27.2 percent.
The seasonally adjusted Purchase Index declined 5.0 percent but was 6.0 percent higher before adjustment. Applications were down 22 percent from the same week in 2022.
“Mortgage applications fell to their lowest level in a month last week as rates for most loan types increased. As mortgage-Treasury spreads remained wide, the 30-year fixed rate increased to 6.85 percent, the highest rate since the end of May,” according to Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications decreased for the first time in a month, as homebuyers remained sensitive to rate changes. Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country. However, the average loan size for a purchase application declined to $423,500 – its lowest level since January 2023. This was likely driven by reduced purchase activity in some high-price markets and more activity in some of the lower price tiers as buyers searched for more affordable options.”
The recent low of $423,500 cited by Kan for purchase loans was about $4,500 below the average a week earlier. Overall loan sizes declined from $384,200 to $378,800. The last time loan sizes rose was in mid-May.
Other Highlights from MBA/s Weekly Mortgage Applications Survey
The FHA share of total applications increased to 13.0 percent from 12.9 percent and the Veterans Administration’s share decreased to 11.7 percent from 12.2 percent. USDA applications were unchanged from the prior week at a 0.4 percent share.
The 6.85 percent average contract interest rate for conforming 30-year fixed-rate mortgages (FRM) represented a 10-basis point increase from the prior week. Points rose to 0.65 from 0.64.
The rate for jumbo 30-year FRM increased to 6.95 percent from 6.91 percent,with points slipping to 0.64 from 0.69.
FHA-backed 30-year FRM had a rate of 6.68 percent with 0.98 point. The prior week the rate was 6.63 percent with 1.08 points.
Fifteen-year FRM rates averaged 6.30 percent, up 7 basis points. Points increased to 0.91 from 0.69.
The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) dropped to 6.00 percent from 6.28 percent,with points increasing to 1.23 from 1.02.
The ARM share of activity increased to 6.2 percent from 6.1 percent.
The volume of mortgage applications fell during the last week of June as compared to the prior week which had contained an adjustment to account for the Juneteenth holiday. The Mortgage Bankers Association (MBA) reported a decline of 4.4 percent in its seasonally adjusted Market Composite Index. The change ended a three-week streak of volume gains. On an unadjusted basis, however, that index did move 6.0 percent higher.
The Refinance Index decreased 4 percent from the previous week and was 30 percent lower than the same week one year ago. The refinance share of applications ticked up to 27.4 percent from 27.2 percent.
The seasonally adjusted Purchase Index declined 5.0 percent but was 6.0 percent higher before adjustment. Applications were down 22 percent from the same week in 2022.
“Mortgage applications fell to their lowest level in a month last week as rates for most loan types increased. As mortgage-Treasury spreads remained wide, the 30-year fixed rate increased to 6.85 percent, the highest rate since the end of May,” according to Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications decreased for the first time in a month, as homebuyers remained sensitive to rate changes. Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country. However, the average loan size for a purchase application declined to $423,500 – its lowest level since January 2023. This was likely driven by reduced purchase activity in some high-price markets and more activity in some of the lower price tiers as buyers searched for more affordable options.”
The recent low of $423,500 cited by Kan for purchase loans was about $4,500 below the average a week earlier. Overall loan sizes declined from $384,200 to $378,800. The last time loan sizes rose was in mid-May.
Other Highlights from MBA/s Weekly Mortgage Applications Survey
The FHA share of total applications increased to 13.0 percent from 12.9 percent and the Veterans Administration’s share decreased to 11.7 percent from 12.2 percent. USDA applications were unchanged from the prior week at a 0.4 percent share.
The 6.85 percent average contract interest rate for conforming 30-year fixed-rate mortgages (FRM) represented a 10-basis point increase from the prior week. Points rose to 0.65 from 0.64.
The rate for jumbo 30-year FRM increased to 6.95 percent from 6.91 percent,with points slipping to 0.64 from 0.69.
FHA-backed 30-year FRM had a rate of 6.68 percent with 0.98 point. The prior week the rate was 6.63 percent with 1.08 points.
Fifteen-year FRM rates averaged 6.30 percent, up 7 basis points. Points increased to 0.91 from 0.69.
The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) dropped to 6.00 percent from 6.28 percent,with points increasing to 1.23 from 1.02.
The ARM share of activity increased to 6.2 percent from 6.1 percent.
High above the Las Vegas Strip, solar panels blanketed the roof of Mandalay Bay Convention Center — 26,000 of them, rippling across an area larger than 20 football fields.
From this vantage point, the sun-dappled Mandalay Bay and Delano hotels dominated the horizon, emerging like comically large golden scepters from the glittering black panels.Snow-tipped mountains rose to the west.
It was a cold winter morning in the Mojave Desert. But there was plenty of sunlight to supply the solar array.
“This is really an ideal location,” said Michael Gulich, vice president of sustainability at MGM Resorts International.
The same goes for the rest of Las Vegas and its sprawling suburbs.
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Sin City already has more solar panels per person than any major U.S. metropolis outside Hawaii, according to one analysis. And the city is bursting with single-family homes, warehouses and parking lots untouched by solar.
L.A. Times energy reporter Sammy Roth heads to the Las Vegas Valley, where giant solar fields are beginning to carpet the desert. But what is the environmental cost? (Video by Jessica Q. Chen, Maggie Beidelman / Los Angeles Times)
There’s enormous opportunity to lower household utility bills and cut climate pollution — without damaging wildlife habitat or disrupting treasured landscapes.
But that hasn’t stopped corporations from making plans to carpet the desert surrounding Las Vegas with dozens of giant solar fields — some of them designed to supply power to California. The Biden administration has fueled that growth, taking steps to encourage solar and wind energy development across vast stretches of public lands in Nevada and other Western states.
Those energy generators could imperil rare plants and slow-footed tortoises already threatened by rising temperatures.
They could also lessen the death and suffering from the worsening heat waves, fires, droughts and storms of the climate crisis.
Researchers have found there’s not nearly enough space on rooftops to supply all U.S. electricity — especially as more people drive electric cars. Even an analysis funded by rooftop solar advocates and installers found that the most cost-effective route to phasing out fossil fuels involves six times more power from big solar and wind farms than from smaller local solar systems.
But the exact balance has yet to be determined. And Nevada is ground zero for figuring it out.
The outcome could be determined, in part, by billionaire investor Warren Buffett.
The so-called Oracle of Omaha owns NV Energy, the monopoly utility that supplies electricity to most Nevadans. NV Energy and its investor-owned utility brethren across the country can earn huge amounts of money paving over public lands with solar and wind farms and building long-distance transmission lines to cities.
But by regulatory design, those companies don’t profit off rooftop solar. And in many cases, they’ve fought to limit rooftop solar — which can reduce the need for large-scale infrastructure and result in lower returns for investors.
Mike Troncoso remembers the exact date of Nevada’s rooftop solar reckoning.
It was Dec. 23, 2015, and he was working for SolarCity. The rooftop installer abruptly ceased operations in the Silver State after NV Energy helped persuade officials to slash a program that pays solar customers for energy they send to the power grid.
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“I was out in the field working, and we got a call: ‘Stop everything you’re doing, don’t finish the project, come to the warehouse,’” Troncoso said. “It was right before Christmas, and they said, ‘Hey, guys, unfortunately we’re getting shut down.’”
After a public outcry, Nevada lawmakers partly reversed the reductions to rooftop solar incentives. Since then, NV Energy and the rooftop solar industry have maintained an uneasy political ceasefire. Installations now exceed pre-2015 levels.
Today, Troncoso is Nevada branch manager for Sunrun, the nation’s largest rooftop solar installer. The company has enough work in the state to support a dozen crews, each named for a different casino. On a chilly winter morning before sunrise, they prepared for the day ahead — laying out steel rails, hooking up microinverters and loading panels onto powder-blue trucks.
But even if Sunrun’s business continues to grow, it won’t eliminate the need for large solar farms in the desert.
Some habitat destruction is unavoidable — at least if we want to break our fossil fuel addiction. The key questions are: How many big solar farms are needed, and where should they be built? Can they be engineered to coexist with animals and plants?
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And if not, should Americans be willing to sacrifice a few endangered species in the name of tackling climate change?
To answer those questions, Los Angeles Times journalists spent a week in southern Nevada, touring solar construction sites, hiking up sand dunes and off-roading through the Mojave. We spoke with NV Energy executives, conservation activists battling Buffett’s company and desert rats who don’t want to see their favorite off-highway vehicle trails cut off by solar farms.
Odds are, no one will get everything they want.
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The tortoise in the coal mine
Biologist Bre Moyle easily spotted the small yellow flag affixed to a scraggly creosote bush — one of many hardy plants sprouting from the caliche soil, surrounded by rows of gleaming steel trusses that would soon hoist solar panels toward the sky.
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Moyle leaned down for a closer look, gently pulling aside branches to reveal a football-sized hole in the ground. It was the entrance to a desert tortoise burrow — one of thousands catalogued by her employer, Primergy Solar, during construction of one of the nation’s largest solar farms on public lands outside Las Vegas.
“I wouldn’t stand on this side of it,” Moyle advised us. “If you walk back there, you could collapse it, potentially.”
I’d seen plenty of solar construction sites in my decade reporting on energy. But none like this.
Instead of tearing out every cactus and other plant and leveling the land flat — the “blade and grade” method — Primergy had left much of the native vegetation in place and installed trusses of different heights to match the ground’s natural contours. The company had temporarily relocated more than 1,600 plants to an on-site nursery, with plans to put them back later.
The Oakland-based developer also went to great lengths to safeguard desert tortoises — an iconic reptile protected under the federal Endangered Species Act, and the biggest environmental roadblock to building solar in the Mojave.
Desert tortoises are sensitive to global warming, residential sprawl and other human encroachment on their habitat. The U.S. Fish and Wildlife Service has estimated tortoise populations fell by more than one-third between 2004 and 2014.
Scientists consider much of the Primergy site high-quality tortoise habitat. It also straddles a connectivity corridor that could help the reptiles seek safer haven as hotter weather and more extreme droughts make their current homes increasingly unlivable.
Before Primergy started building, the company scoured the site and removed 167 tortoises, with plans to let them return and live among the solar panels once the heavy lifting is over. Two-thirds of the project site will be repopulated with tortoises.
Workers removed more tortoises during construction. As of January, the company knew of just two tortoises killed — one that may have been hit by a car, and another that may have been entombed in its burrow by roadwork, then eaten by a kit fox.
Primergy Vice President Thomas Regenhard acknowledged the company can’t build solar here without doing any harm to the ecosystem — or spurring opposition from conservation activists. But as he watched union construction workers lift panels onto trusses, he said Primergy is “making the best of the worst-case situation” for solar opponents.
“What we’re trying to do is make it the least impactful on the environment and natural resources,” he said. “What we’re also doing is we’re sharing that knowledge, so that these projects can be built in a better way moving forward.”
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The company isn’t saving tortoises out of the goodness of its profit-seeking heart.
The U.S. Bureau of Land Management conditioned its approval of the solar farm, called Gemini, on a long list of environmental protection measures — and only after some bureau staffers seemingly contemplated rejecting the project entirely.
Documents obtained under the Freedom of Information Act by the conservation group Defenders of Wildlife show the bureau’s Las Vegas field office drafted several versions of a “record of decision” that would have denied the permit application for Gemini. The drafts listed several objections, including harm to desert tortoises, loss of space for off-road vehicle drivers and disturbance of the Old Spanish National Historic Trail, which runs through the project site.
Separately, Primergy reached a legal settlement with conservationists — who challenged the project’s federal approval in court — in which the company agreed to additional steps to protect tortoises and a plant known as the three-corner milkvetch.
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The company estimates just 2.5% of the project site will be permanently disturbed — far less than the 33% allowed by Primergy’s federal permit. Regenhard is hopeful the lessons learned here will inform future solar development on public lands.
“This is something new. So we’re refining a lot of the processes,” he said. “We’re not perfect. We’re still learning.”
By the time construction wraps this fall, 1.8 million panels will cover nearly 4,000 football fields’ worth of land, just off the 15 Freeway. They’ll be able to produce 690 megawatts of power — as much as 115,000 typical home solar systems. And they’ll be paired with batteries, to store energy and help NV Energy customers keep running their air conditioners after sundown.
Unlike many solar fields, Gemini is close to the population it will serve — just a few dozen miles from the Strip. And the affected landscape is far from visually stunning, with none of the red-rock majesty found at nearby Valley of Fire State Park.
But desert tortoises don’t care if a place looks cool to humans. They care if it’s good tortoise habitat.
Moyle, Primergy’s environmental services manager, pointed to a small black structure at the bottom of a fence along the site’s edge — a shade shelter for tortoises. Workers installed them every 800 feet, so that if any relocated reptiles try to return to the solar farm too early, they don’t die pacing along the fence in the heat.
“They have a really, really good sense of direction,” Moyle said. “They know where their homes are. They want to come back.”
Primergy will study what happens when tortoises do come back. Will they benefit from the shade of the solar panels? Or will they struggle to survive on the industrialized landscape?
And looming over those uncertainties, a more existential query: With global warming beginning to devastate human and animal life around the world, should we really be slowing or stopping solar development to save a single type of reptile?
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Moyle was ready with an answer: Tortoises are a keystone species. If they’re doing well, it’s a good sign of a healthy ecosystem in which other desert creatures — such as burrowing owls, kit foxes and American badgers — are positioned to thrive, too.
And as the COVID-19 pandemic has demonstrated, human survival is inextricably linked with a healthy natural world.
“We take one thing out, we don’t know what sort of disastrous effect it’s going to have on everything else,” Moyle said.
We do, however, know the consequences of relying on fossil fuels: entire towns burning to the ground, Lake Mead three-quarters empty, elderly Americans baking to death in their overheated homes. With worse to come.
The shifting sands of time
A few miles south, another solar project was rising in the desert. This one looked different.
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A fleet of bulldozers, scrapers, excavators and graders was nearly done flattening the land — a beige moonscape devoid of cacti and creosote. The solar panel support trusses were all the same height, forming an eerily rigid silver sea.
When I asked Carl Glass — construction manager for DEPCOM Power, the contractor building this project for Buffett’s NV Energy — why workers couldn’t leave vegetation in place like at Gemini, he offered a simple answer: drainage. Allowing the land to retain its natural contours, he said, would make it difficult to move stormwater off the site during summer monsoons.
Safety was another consideration, said Dani Strain, NV Energy’s senior manager for the project. Blading and grading the land meant workers wouldn’t have to carry solar panels and equipment across ground studded with tripping hazards.
“It’s nicer for the environment not to do it,” Strain said. “But it creates other problems. You can’t have everything.”
This kind of solar project has typified development in the Mojave Desert.
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And it helps explain why the Center for Biological Diversity’s Patrick Donnelly has fought so hard to limit that development.
The morning after touring the solar construction sites, we joined Donnelly for a hike up Big Dune, a giant pile of sand covering five square miles and towering 500 feet above the desert floor, 90 miles northwest of Las Vegas. The sun was just beginning its ascent over the Mojave, bathing the sand in a smooth umber glow beneath pockets of wispy cloud.
On weekends, Donnelly said, the dune can be overrun by thousands of off-road vehicles. But on this day, it was quiet.
Energy companies have proposed more than a dozen solar farms on public lands surrounding Big Dune — some with overlapping footprints. Donnelly doesn’t oppose all of them. But he thinks federal agencies should limit solar to the least ecologically sensitive parts of Nevada, instead of letting companies pitch projects almost anywhere they choose.
“Developers are looking at this as low-hanging fruit,” he said. “The idea is, this is where California can build all of its solar.”
We trekked slowly up the dune, our bodies casting long shadows in the early morning light. When we took a breather and looked back down, a trail of footprints marked our path. Donnelly assured us a windy day would wipe them away.
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“This is why I live here, man,” he said. “It’s the most beautiful place on Earth, in my mind.”
Donnelly broke his back in a rock-climbing accident, so he used a walking stick to scale the dune. He lives not far from here, at the edge of Death Valley National Park, and works as the nonprofit Center for Biological Diversity’s Great Basin director.
As we resumed our journey, the wind blowing hard, I asked Donnelly to rank the top human threats to the Mojave. He was quick to answer: The climate crisis was No. 1, followed by housing sprawl, solar development and off-road vehicles.
“There’s no good solar project in the desert. But there’s less bad,” he said. “And we’re at a point now where we have to settle for less bad, because the alternatives are more bad: more coal, more gas, climate apocalypse.”
That hasn’t stopped Donnelly and his colleagues from fighting renewable energy projects they fear would wipe out entire species — even little-known plants and animals with tiny ranges, such as Tiehm’s buckwheat and the Dixie Valley toad.
“I’m not a religious guy,” Donnelly said. “But all God’s creatures great and small.”
After a steep stretch of sand, we stopped along a ridge with sweeping views. To our west were the Funeral Mountains, across the California state line in Death Valley National Park — and far beyond them Mt. Whitney, its snow-covered facade just barely visible. To our east was Highway 95, cutting across the Amargosa Valley en route from Las Vegas to Reno.
It’s along this highway that so many developers want to build.
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“We would be in a sea of solar right now,” Donnelly said.
Having heard plenty of rural residents say they don’t want to look at such a sea, I asked Donnelly if this was a bad spot for solar because it would ruin the glorious views. He told me he never makes that argument, “because honestly, views aren’t really the primary concern at this moment. The primary concern is stopping the biodiversity crisis and the climate crisis.”
“There are certain places where we shouldn’t put solar because it’s a wild and undisturbed landscape,” he said.
As far as he’s concerned, though, the Amargosa Valley isn’t one of those landscapes, what with Highway 95 running through it. The same goes for Dry Lake Valley, where NV Energy’s solar construction site is already surrounded by energy infrastructure.
What Donnelly would like to see is better planning.
He pointed to California, where state and federal officials spent eight years crafting a desert conservation plan that allows solar and wind farms across a few hundred thousand acres while setting aside millions more for protection. He thinks a similar process is crucial in Nevada, where four-fifths of the land area is owned by the federal government — more than any other state.
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If Donnelly had his way, regulators would put the kibosh on solar farms immediately adjacent to Big Dune. He’s worried they could alter the movement of sand across the desert floor, affecting several rare beetles that call the dune home.
But if the feds want to allow solar projects along the highway to the south, near the Area 51 Alien Center?
“Might not be the end the world,” Donnelly said.
He shot me a grin.
“You know, one thing I like to do …”
Without warning, he took off racing down the dune, carried by momentum and love for the desert. He laughed as he reached a natural stopping point, calling for us to join him. His voice sounded free and full of possibility.
Some solar panels on the horizon wouldn’t have changed that.
Shout it from the rooftops
Laura Cunningham and Kevin Emmerich were a match made in Mojave Desert heaven.
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Cunningham was a wildlife biologist, Emmerich a park ranger when they met nearly 30 years ago at Death Valley. She studied tortoises for government agencies and later a private contractor. He worked with bighorn sheep and gave interpretive talks. They got married, bought property along the Amargosa River and started their own conservation group, Basin and Range Watch.
And they’ve been fighting solar development ever since.
That’s how we ended up in the back of their SUV, pulling open a rickety cattle gate off Highway 95 and driving past wild burros on a dirt road through Nevada’s Bullfrog Hills, 100 miles northwest of Las Vegas.
They had told us Sarcobatus Flat was stunning, but I was still surprised by how stunning. I got my first look as we crested a ridge. The gently sloping valley spilled down toward Death Valley National Park, whose snowy mountain peaks towered over a landscape dotted with thousands of Joshua trees.
“Everything we’re looking at is proposed for solar development,” Cunningham said.
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Most environmentalists agree we need at least some large solar farms. Cunningham and Emmerich are different. They’re at the vanguard of a harder-core desert protection movement that sees all large-scale solar farms on public lands as bad news.
Why had so many companies converged on Sarcobatus Flat?
The main answer is transmission. NV Energy is seeking federal approval to build the 358-mile Greenlink West electric line, which would carry thousands of megawatts of renewable power between Reno and Las Vegas along the Highway 95 corridor.
The dirt road curved around a small hill, and suddenly we found ourselves on the valley floor, surrounded by Joshua trees. Some looked healthy; others had bark that had been chewed by rodents seeking water, a sign of drought stress. Scientists estimate the Joshua tree’s western subspecies could lose 90% of its range as the world gets hotter and droughts get more intense.
But asked whether climate change or solar posed a bigger threat to Sarcobatus Flat, Cunningham didn’t hesitate.
“Oh, solar development hands down,” she said.
Nearly 20 years ago, she said, she helped relocate desert tortoises to make way for a test track in California. One of them tried to return home, walking 20 miles before hitting a fence. It paced back and forth and eventually died of heat exhaustion.
Solar farms, she said, pose a similar threat to tortoises. And at Sarcobatus Flat, they would cover a high-elevation area that could otherwise serve as a climate refuge for Joshua trees, giving them a relatively cool place to reproduce as the planet heats up.
“It makes no sense to me that we’re going to bulldoze them down and throw them into trash piles. It’s just crazy,” she said.
In Cunningham and Emmerich’s view, every sun-baked parking lot in L.A. and Vegas and Phoenix should have a solar canopy, every warehouse and single-family home a solar roof. It’s a common argument among desert defenders: Why sacrifice sensitive ecosystems when there’s an easy alternative for fighting climate change? Especially when rooftop solar can reduce strain on an overtaxed electric grid and — when paired with batteries — help people keep their lights on during blackouts?
The answer isn’t especially satisfying to conservationists.
For all the virtues of rooftop solar, it’s an expensive way to generate clean power — and keeping energy costs low is crucial to ensure that lower-income families can afford electric cars, another key climate solution. A recent report from investment bank Lazard pegged the cost of rooftop solar at 11.7 cents per kilowatt-hour on the low end, compared with 2.4 cents for utility solar.
Even when factoring in pricey long-distance electric lines, utility-scale solar is typically cheaper, several experts told me.
“It’s three to six times more expensive to put solar on your roof than to put it in a large-scale project,” said Jesse Jenkins, an energy systems researcher at Princeton University. “There may be some added value to having solar in the Los Angeles Basin instead of the middle of the Mojave Desert. But is it 300% to 600% more value? Probably not. It’s probably not even close.”
There’s a practical challenge, too.
The National Renewable Energy Laboratory has estimated U.S. rooftops could generate 1,432 terawatt-hours of electricity per year — just 13% of the power America will need to replace most of its coal, oil and gas, according to research led by Jenkins.
Add in parking lots and other areas within cities, and urban solar systems might conceivably supply one-quarter or even one-third of U.S. power, several experts told The Times — in an unlikely scenario where they’re installed in every suitable spot.
Energy researcher Chris Clack’s consulting firm has found that dramatic growth in rooftop and other small-scale solar installations could reduce the costs of slashing climate pollution by half a trillion dollars. But even Clack said rooftops alone won’t cut it.
“Realistically, 80% is going to end up being utility grid no matter what,” he said.
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All those industrial renewable energy projects will have to go somewhere.
Sarcobatus Flat may not be the answer. Federal officials classified all three solar proposals there as “low priority,” citing their proximity to Death Valley and potential harm to tortoise habitat. One developer withdrew its application last year.
Before leaving the area, Cunningham pointed to a wooden marker, one of at least half a dozen stretching out in a line. I walked over to take a closer look and discovered it was a mining claim for lithium — a main ingredient in electric-car batteries.
If solar development didn’t upend this valley, lithium extraction might.
On the beaten track
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The four-wheeler jerked violently as Erica Muxlow pressed her foot to the gas, sending us flying down a rough dirt road with no end in sight but the distant mountains. Five-point safety straps were the only things stopping us from flying out of our seats, the vehicle leaping through the air as we reached speeds of 40 mph, then 50 mph, the wind whipping our faces.
It was like riding Disneyland’s Matterhorn Bobsleds — just without the Yeti.
Ahead of us, Muxlow’s neighbor Jimmy Lewis led the way on an electric blue motorcycle, kicking up a stream of sand. He wanted us to see thousands of acres of public lands outside his adopted hometown of Pahrump, in Nevada’s Nye County, that could soon be blocked by solar projects — cutting off access to off-highway vehicle enthusiasts such as himself.
“You could build an apartment complex or a shopping mall here, and it would be the same thing to me,” he said.
To progressive-minded Angelenos or San Franciscans, preserving large chunks of public land for gas-guzzling, environmentally destructive dirt bikes might sound like a terrible reason not to build solar farms that would lessen the climate crisis.
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But here’s the reality: Rural Westerners such as Lewis will play a key role in determining how much clean energy gets built.
Not long before our Nevada trip, Nye County placed a six-month pause on new renewable energy projects, citing local concerns about loss of off-road vehicle trails. Similar fears have stymied development across the U.S., with rural residents attacking solar and wind farms as industrial intrusions on their way of life — and local governments throwing up roadblocks.
For Lewis, the conflict is deeply personal.
He moved here from Southern California more than a decade ago, trading life by the beach for a five-acre plot where he runs an off-roading school and test-drives motorcycles for manufacturers. His warehouse was packed with dozens of dirt bikes.
“This is my life. Motorcycles, motorcycles, motorcycles,” he said, laughing.
Lewis has worked to stir up opposition to three local solar farm proposals. So far, his efforts have been in vain.
One project is already under construction. Peering through a fence, we saw row after row of trusses, waiting for their photovoltaic panels. It’s called Yellow Pine, and it’s being built by Florida-based NextEra Energy to supply power to California.
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Lewis learned about Yellow Pine when he was riding one of his favorite trails and was surprised to find it cut off. He compared the experience to riding the best roller-coaster at a theme park, only to have it grind to a halt three-quarters of the way through.
“I don’t want my playground taken away from me,” he said.
“Me neither!” a voice called out from behind us.
We turned and were greeted by Shannon Salter, an activist who had previously spent nine months camping near the Yellow Pine site to protest the habitat destruction. She and Lewis had never met, but they quickly realized they had common cause.
“It’s the opposite of green!” Salter said.
“On my roof, not my backyard,” Lewis agreed.
Never mind that conservationists have long decried the ecological damage from desert off-roading. Salter and Lewis both cared about these lands. Neither wanted to see the solar industry lay claim to them. They talked about staying in touch.
It’s easy to imagine similar alliances forming across the West, the clean energy transition bringing together environmentalists and rural residents in a battle to defend their lifestyles, their landscapes and animals that can’t fight for themselves.
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It’s also easy to imagine major cities that badly need lots of solar and wind power — Los Angeles, Las Vegas, Phoenix — brushing off those complaints as insignificant compared with the climate emergency, or as fueled by right-wing misinformation.
But many of concerns raised by critics are legitimate. And their voices are only getting louder.
As night fell over the Mojave, Lewis shared his idea that any city buying electricity from a desert solar farm should be required to install a certain amount of rooftop solar back home first — on government buildings, at least. It only seemed fair.
“Some people see the desert as just a wasteland,” Lewis said. “I think it’s beautiful.”
The view from Black Mountain
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So how do we build enough renewable energy to replace fossil fuels without destroying too many ecosystems, or stoking too much political opposition from rural towns, or moving too slowly to save the planet?
Few people could do more to ease those tensions than Buffett.
Our conversation kept returning to the legendary investor as we hiked Black Mountain, just outside Vegas, on our last morning in the Silver State. We were joined by Jaina Moan, director of external affairs for the Nature Conservancy’s Nevada chapter. She had promised a view of massive solar fields from the peak — but only after a 3.5-mile trek with 2,000 feet of elevation gain.
“It’ll be a little StairMaster at the end,” she warned us.
The homes and hotels and casinos of the Las Vegas Valley retreated behind us as we climbed, looking ever smaller and more insignificant against the vast open desert. It was an illusion that will prove increasingly difficult to maintain as Sin City and its suburbs continue their march into the Mojave. Nevada politicians from both parties are pushing for legislation that would let federal officials auction off additional public lands for residential and commercial development.
Vegas and other Western cities could limit the need for more suburbs — and sprawling solar farms — by growing smarter, Moan said. Urban areas could embrace density, to help people drive fewer miles and reduce the demand for new power supplies to fuel electric vehicles. They could invest in electric buses and trains — and use less water, which would save a lot of energy.
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“As our spaces become more crowded, we’re going to have to come up with more creative ideas,” Moan said.
That’s where Buffett could make things easier.
The billionaire’s Berkshire Hathaway company owns electric utilities that serve millions of people, from California to Nevada to Illinois. Those utilities, Moan said, could buck the industry trend of urging policymakers to reduce financial incentives for rooftop solar and instead encourage the technology — along with other small-scale clean energy solutions, such as local microgrids.
That would limit the need for big solar farms — at least somewhat.
Berkshire and other energy giants could also build solar on lands already altered by humans, such as abandoned mines, toxic Superfund sites, reservoirs, landfills, agricultural areas, highway corridors and canals that carry water to farms and cities.
The costs are typically higher than building on undisturbed public lands. And in many cases there are technical challenges yet to be resolved. But those kinds of “creative solutions” could at least lessen the loss of biodiversity, Moan said.
“There’s money to be made there, and there’s good to be done,” she said.
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It’s hard to know what Buffett thinks. A Berkshire spokesperson declined my request to interview him.
Tony Sanchez, NV Energy’s executive vice president for business development and external relations, was more forthcoming.
“The problem for us with rooftop solar,” he said, is that it’s “not controlled at all by us.” As a result, NV Energy can’t decide when and how rooftop solar power is used — and can’t rely on that power to help balance supply and demand on the grid.
Over time, Sanchez predicted, a lot more rooftop solar will get built. But he couldn’t say how much.
Rooftop solar faces a similarly uncertain future in California, where state officials voted last year to slash incentive payments, calling them an unfair subsidy. Industry leaders have warned of a dramatic decline in installations.
As we neared the top of Black Mountain, the solar farms on the other side came into view. They stretched across the Eldorado Valley far below — black rectangles that could help save life on Earth while also destroying bits and pieces of it.
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Moan believes the key to balancing clean energy and conservation is “go slow to go fast.” Government agencies, she said, should work with conservation activists, small-town residents and Native American tribes to study and map out the best places for clean energy, then reward companies that agree to build in those areas with faster approvals. Solar and wind development would slow down in the short term but speed up in the long run, with quicker environmental reviews and less risk of lawsuits.
It’s a tantalizing concept — but I confessed to Moan that I worried it would backfire.
What if the sparring factions couldn’t agree on the best spots to build solar and wind farms, and instead wasted years arguing? Or what if they did manage to hammer out some compromises, only for a handful of unhappy people or groups to take them to court, gumming up the works? Couldn’t “go slow to go fast” end up becoming “go slow to go slow”?
In other words, should we really bet our collective future on human beings working together, rather than fighting?
Moan was sympathetic to my fears. She also didn’t see another way forward.
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“We really need to think holistically about saving everything,” she said.
The sad truth is, not everything can be saved. Not if we want to keep the world livable for people and animals alike.
Some beloved landscapes will be left unrecognizable. Some families will be stuck paying high energy bills to monopoly utilities, even as some utility investors make less money. Some tortoises will probably die, pacing along fences in the heat.
The alternative is worse.
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With the news this month that the housing market hit a milestone by showing the first year-over-year price decline in recent memory, homeowners who’d considered finally selling their home this year are finding themselves discouraged yet again.
What happened, they might wonder, to the not-so-distant glory days of frantic bidding wars and over-ask offers? Plenty of frustrated owners seem worried that the window for a fast and lucrative home sale might be shutting fast.
But here’s the reality: The U.S. housing market is no monolith. Although it’s true that many of the hottest markets of the past few years have seen prices fall in the wake of higher mortgage interest rates that broadly dampened home shoppers’ buying power, there are still cities where buyers continue to snatch up homes quickly and where sellers are getting their full asking price—or more.
This is why the Realtor.com® data team dug in to find the U.S. real estate markets that most favor sellers. (Sorry, buyers!)
The best places for sellers generally have persistently low housing inventory, strong demand from buyers, and often—but not always—lower prices that have room to swell. These are generally affordable metropolitan areas in the Northeast with a few in the Midwest.
Three of the metros on our list—Hartford, CT, Worcester, MA, and Providence, RI—are so close, you could tour homes in all of them in a single day. Our ranking also has one spot in the South and a somewhat bizarre outlier in California—more on that later.
To figure out if an area is a buyer’s or seller’s market, Pamela Ermen likes to track the change in the number of closed sales per month, compared with the change in the number of new listings per month.
“When sales are going up and inventory is going down, that’s a real seller’s market,” says Ermen, a Virginia Beach–based Realtor® at Re/Max and a speaker and coach at Real Estate Guidance.
Still, sellers who focus solely on low inventory can wrongly conclude that they can list their home at a higher price than an agent might advise. That can lead to their property languishing on the market not receiving strong offers. Meanwhile, buyers who focus only on the number of sales going down might wrongly think there’s less competition. That might result in heartache when they find out the hard way that many homes are still getting multiple offers.
To find true seller-friendly places, the Realtor.com data team looked at the May 2023 listing data for the 100 largest metropolitan areas. Then we ranked each based on the number of days that the median listing is on the market, combined with the portion of listings that have had the price reduced. These metrics tell us where homes are selling faster than average and with fewer sellers having to reduce their price to make the sale.
We selected just one metro area per state to ensure geographical diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Here’s where sellers can expect the market to be most tilted in their favor this summer.
Median list price: $265,000 Median days on the market: 13 Listings with a price reduction: 1 in 17
Rochester, on the western edge of New York along the southern shore of Lake Ontario, not only is at the top of our seller’s saviors list—it’s also in a class of its own. Rochester had both the lowest number of days on the market and the lowest portion of listings with a price reduction. But this is nothing new for the so-called Flower City.
The metro area has become a mainstay of the Realtor.com hottest real estate markets list. It’s also where sellers are usually still getting their asking price, and where buyers can find one of the largest selections of homes for less than $200,000. Plus, home prices are well below the national median list price of $441,500 in May.
These affordable homes have made the area appealing to locals, out-of-towners, and investors.
“If you’re priced right in our market, you can expect to still sell in about one week,” says Jenna May, a local real estate agent at Keller Williams Realty.
When the market was at its pandemic peak in 2022, and even before anyone had heard of COVID-19, Rochester was still leading the nation in the low number of days on the market. Demand here for homes is high and seems destined to stay that way.
“There are people who are offering $80,000 over listing price and not getting the home,” says May. “It’s that competitive.”
Median list price: $424,925 Median days on the market: 19 Listings with a price reduction: 1 in 14
The capital city of Connecticut is also no stranger to the Realtor.com list of the nation’s hottest real estate markets. Hartford is the largest population hub in the state, with 1.2 million residents.
It also boasts home prices that are about 5% below the national median.
“The Northeast has been well undervalued compared with other markets—and not just for years, but for decades,” says Lisa Barrall-Matt, a senior broker at Berkshire Hathaway in West Hartford.
Homes in the Hartford area have been priced $100,000 less than comparable homes in other markets, Barrall-Matt says, for so long that she began to take it for granted.
Now, she’s feeling vindicated: “I used to say, ‘Why aren’t prices higher?’ Now I’m saying, ‘Where’s the ceiling?’”
Median list price: $622,500 Median days on the market: 24 Listings with a price reduction: 1 in 13
Portland became a popular pandemic destination for Northeasterners looking for a scenic, coastal city with some great restaurants, entertainment, and a brewery scene. The area has a rich history, having a Native American presence dating more than 10,000 years before becoming an early Colonial settlement.
The above-average prices in this artsy city on Casco Bay aren’t keeping sellers from enjoying quick sales. In fact, few listings are getting marked down. The demand for housing here is just so strong. Portland has been featured on our list of the best places to retire in 2022, and it has one of the last year’s hottest neighborhoods: Windham, just on the northwestern edge of Portland proper.
Prices in Portland have grown significantly faster during the pandemic—from May 2019 to now—than they did in most of the country. Where prices rose about 40% nationally, prices in Portland have grown by about 62%. Just since this time last year, prices rose 17%.
A newer four-bedroom home in South Portland that’s within walking distance of Fore River is listed for $650,000, close to the area average.
Median list price: $517,450 Median days on the market: 19 Listings with a price reduction: 1 in 10
Worcester, about 40 miles west of Boston, was nicknamed the “Heart of the Commonwealth” because of its central location in Massachusetts.
This medium-sized metro has a name that’s fun to say, like “rooster” but with a W. But it simply doesn’t have enough homes to match the high interest from potential buyers, according to Nick McNeil, a local Realtor with the Lux Group.
“The amount of demand and the absolute lack of inventory is nuts,” he says. “And there’s not much room for new construction in this area, with tight regulations on what can be built.”
Until there’s some kind of change in the supply and demand dynamic in the area, McNeil says, it’s going to be hard for buyers, and relatively easy for sellers—as long as they’re not also trying to buy.
“The best situation you can be in is if you can sell now,” he says.
Median list price: $384,250 Median days on the market: 25 Listings with a price reduction: 1 in 10
Amid the rolling hills of Eastern Pennsylvania’s Lehigh Valley, about 60 miles northwest of Philadelphia, Allentown has a few things going for sellers right now. The portion of homes with a price reduction is about half the national average, and homes are selling about 40% faster.
Like some other places on this list, the homes in this historic steel town are priced below the national average. But local incomes are a bit higher than average, offering buyers more affordability. That’s helping the real estate market to remain competitive as buyers seek out deals.
Allentown offers a mix of urban, suburban, and rural lifestyles, making it broadly attractive for buyers.
What’s especially notable about the area is the price growth over the past several years. Allentown metro prices have risen by 78% since before the pandemic, ahead of all the other places on this list.
For about the local median price in Allentown, buyers can find a five-bedroom bungalow in the Hamilton Park neighborhood west of downtown Allentown.
Median list price: $374,950 Median days on the market: 29 Listings with a price reduction: 1 in 11
Perched on the western shore of Lake Michigan in southeastern Wisconsin, Milwaukee is known for its breweries, including Miller and Pabst. It’s also where Harley-Davidson was founded. And it’s been a staple of housing affordability for some time.
However, prices have been rising in Milwaukee’s metro area: They rose by around 11% compared with this time last year.
The median number of days on the market is below the average now, just like it was before the pandemic. The same goes for the portion of listings with a price reduction. This is all very good news for home sellers hoping for a quick, profitable sale.
For $375,000, a buyer can get a large, four-bedroom home just 5 minutes from hiking trails, a golf course, and a dog park, all along the shoreline.
Median list price: $386,973 Median days on the market: 29 Listings with a price reduction: 1 in 9
The Virginia Beach metro area, a popular vacation spot for beach, maritime history, and seafood lovers, is another place where incomes are higher than average and home prices are lower.
Last year, sellers could count on getting multiple offers, usually leading to potential buyers bidding up the price, says Virginia Beach–based Realtor Ermen. Now, it’s not as easy to figure out that pricing sweet spot. If the home is listed too high, that’s when there’s eventually pressure to reduce the price.
In the month of May, even with a low number of price reductions, Erman says, “90% of price reductions were made before the listing hit the average time on market.”
That indicates sellers are getting antsy, and probably would have been better off pricing the home lower to begin with. But homes that are priced to sell are still moving briskly.
Median list price: $1,530,000 Median days on the market: 25 Listings with a price reduction: 1 in 9
San Jose is the oddball on this list.
Nestled in the heart of Silicon Valley, it is one of the most expensive real estate markets in the nation. Homes in this San Francisco Bay Area hot spot cost more than triple the national average, which means real estate attracts a very specific buyer.
Because San Jose is a global technology hub, its population is very diverse, and not just racially or ethnically. Roughly 40% of residents were born outside of the U.S., according to the U.S. Census Bureau. Most significantly, many residents have tons of money to spend, whether they’re high-salaried tech employees or they have had an entrepreneurial startup windfall.
Local real estate agents will tell you that San Jose is simply insulated from many of the market dynamics because the clientele is so wealthy. If they’re making an all-cash purchase, they don’t have to worry about higher mortgage rates. And that’s a big boon for sellers.
Median list price: $539,950 Median days on the market: 31 Listings with a price reduction: 1 in 10
Providence, home to Brown University and the Rhode Island School of Design, is a bustling town filled with older homes. About 50 miles southwest of Boston, it’s one of the medium-sized, Northeastern metros on our list that are enjoying especially strong housing markets right now.
Providence prices are significantly above the national average, but compared with nearby Boston, where the median list price is north of $850,000, Providence is a downright bargain.
Plus, it’s got a lot going for it. It boasts beautiful scenery along the Seekonk River, a thriving arts scene, and good jobs. The headquarters for CVS is located in nearby Woonsocket.
In Providence, for $550,000, a little above the local average, buyers can find a midcentury two-bedroom home with classic brick construction about 15 minutes from downtown.
Median list price: $229,950 Median days on the market: 31 Listings with a price reduction: 1 in 9
Home prices in this Rust Belt city, which has struggled in more recent years, are still dramatically lower than the national average—about 45% less expensive. And with the focus of buyers on affordability, it’s no wonder that Toledo has taken off.
In the past year, median list prices in Toledo have risen by 25% (10% per square foot), which is quite a bit higher than before the pandemic.
For less than the median list price in Toledo, buyers can get a massive, six-bedroom home in Toledo’s Old West End neighborhood, just northwest of downtown.
MUMBAI: The share of residential housing loans in total advances has increased over the last eleven years to 14.2 per cent in March 2023 from 8.6 per cent in March 2012, as per the Reserve Bank’s latest Financial Stability Report (FSR).
It also said the housing sector is witnessing a healthy growth with sales growing by 21.6 per cent in the fourth quarter (January-March) of 2022-23. In addition to rising sales, new launches also maintained healthy growth, reflecting strength in demand by end-users.
The share of residential housing loans in total loans has increased over the last eleven years to 14.2 per cent in March 2023 from 8.6 per cent in March 2012, the report said.
During this period, the share of commercial real estate (CRE) in total loans has hovered between 2.0-2.9 per cent.
“Total exposure of the banking system to real estate stood at 16.5 per cent of total loans in March 2023. Given the secured nature of these loans and loan to value (LTV) ratio regulations, loan defaults remain less than 2 per cent,” it said. Pradeep Aggarwal, Founder and Chairman, Signature Global (India), said historically, Indians have shown a preference for avoiding loans, and if they do take one, their inclination is to repay it as quickly as possible.
“This approach is particularly evident when it comes to home loans, as buyers seek to clear their debts promptly. Home ownership is viewed as a source of pride and accomplishment, and individuals are motivated to avoid loan defaults and the potential loss of their homes. As a result, the non-performing asset (NPA) rate in the home loan segment remains low,” he said.
Additionally, the regulations and guidelines set by the Reserve Bank of India (RBI) pertaining to home loans play a crucial role in maintaining this low NPA rate,” Aggarwal added.
Executive chairman of Andromeda Sales V Swaminathan said the residential housing segment has experienced notable growth in demand, thanks to factors such as the implementation of RERA (Real Estate Regulation and Development Act), and the impact of the pandemic. Consequently, the share of home loans in the overall retail loan portfolio has increased. “Home loans are secured loans, often involving the borrower’s equity as down payment.
Due to the potential risk of losing their equity in case of default, borrowers generally prioritize early repayment of their home loans. As a result, the non-performing asset (NPA) rate in the home loan segment remains low,” he added. According to an RBI data, housing (including priority sector housing) loan outstanding in March 2023 was Rs 19,36,428 crore, up 15 per cent year-on-year.
The FSR further said the all-India house price index (HPI) recorded its highest increase over the last seventeen quarters (4.6 per cent y-o-y) in the fourth quarter of 2022-23.
On a sequential (q-o-q) basis, HPI has been rising over the last one year and inched up further by 0.6 per cent during January-March. It also said that during the fourth quarter of 2022-23, house sales grew by 21.6 per cent and new launches also maintained healthy growth, reflecting strength in demand by end-users as well as investors.
The rise in unsold inventory resulted in an uptick in the inventory overhang in January-March of 2022-23, it said. It noted that with strong demand for houses in the post-pandemic period, the house price gap (actual less trend) is closing after a period of around three years. A positive house price gap is an early warning of concentration of credit and vulnerability in the housing market.
As per the RBI’s ‘Basic Statistical Return on Credit by Scheduled Commercial Banks in India – March 2023’, the share of loans bearing over 9 per cent interest rate rose to 56.1 per cent in March 2023, in tandem with the monetary tightening measures starting May 2022.
The Reserve Bank started raising interest in May 2022 to rein in inflation in the wake of global supply disruptions, following the Russia-Ukraine war. Since then the benchmark short-term lending rate has increased by 250 basis points. However, the RBI did not raise the rate in its last two bi-monthly monetary policy reviews.
Profitability Analysis, Closed-End 2nd Products; Ginnie Ticket Primer for Government Program Lenders
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Profitability Analysis, Closed-End 2nd Products; Ginnie Ticket Primer for Government Program Lenders
By: Rob Chrisman
1 Hour, 19 Min ago
Hey, I’ve got news for you: 2023 is half over. Sometimes reality bites, and vendors and lenders can’t sit there, wringing their hands, waiting for things to get better on their own. Are lenders suddenly going to make huge margins on lots of volume in the second half? Are LOs who were doing 2-3 loans a month in the first half suddenly going to do 4-6? Are vendor reps suddenly going to double their clients? Are rates going to plummet? Is the number of houses for sale going to skyrocket? Banks, credit unions, and depositories are certainly doing something. An analysis of call reports shows that mortgage banking income at banks and thrifts increased by 36 percent on a sequential basis. JPMorgan Chase and Wells Fargo individually more than doubled their MB income from the fourth quarter to the first. Others, like Truist and PNC followed, as Inside Mortgage Finance points out. That said, to the surprise of no one, mortgage-banking income at banks and thrifts was down 38 percent from the first quarter of 2022. (Today’s podcast can be found here and this week’s is sponsored by Gallus, the premier business intelligence tool for the mortgage industry. With hassle-free insights and user-friendly functionality, Gallus empowers you to make faster, data-driven decisions for enhanced profitability. Hear an interview with Gallus Insights’ Augie Del Rio on how mortgage companies are best leveraging data in a high-rate environment.)
Lender and Broker Software, Services, and Products
Artificial intelligence (AI) is here, and as everyone works to determine how AI can enhance business processes, many are also scratching their heads over the new challenges. If you’re attending the American Legal and Financial Network (ALFN) Answers 2023, don’t miss the panel on Tuesday, July 18, “AI: Like It or Not, It’s Here. Are You Ready? Ethical and Business Challenges to the Utilization of Technology in a Default World.” This lunch session will cover current and future AI uses for industry law firms, service providers and others. Black Knight SVP of Servicing Technologies & Product Innovation Dana Federspiel will participate in this informative discussion to share her expertise in default processing within the mortgage industry. Take advantage of this opportunity to gain a better understanding of the intersection between AI and its potential uses in our industry. Contact Black Knight to learn more about solutions for today’s market challenges.
“I love chasing borrowers down for appraisal fees” said no one ever. With Fee Chaser by LenderLogix, you definitely won’t be saying that. Give your borrowers an easy, secure way to pay their appraisal, lock-in and condo doc fees with Fee Chaser’s seamless integration into Encompass® by ICE Mortgage Technology™. It can even handle first mortgage payments. Head over to LenderLogix and get a demo texted to your phone.
“Did you know that by yearend 2022, a remarkable 82 percent of homeowners enjoyed an interest rate below 5 percent, and an impressive 92 percent of homeowners had an interest rate below 6 percent? Consequently, there has been a decline in the demand for traditional cash-out refinancing. This is exactly where Vista Point’s Closed-End Second loan proves valuable! Rather than discarding the original low interest rate, a second loan creates a blended rate giving your borrower a lower payment solution while tapping their built-up equity. Discover the potential savings for your specific situation by visiting here and see how much your borrower can reduce their monthly mortgage payment by using our Closed-End Second Cash-Out Equity Solution. Give your borrower access to the cash they need without sacrificing their advantageous interest rate, with second line amounts up to $550K and combined lien amounts up to $2.5M. For more information, please contact us.”
Does your mortgage accounting team dream about having the ability to analyze the profitability of each loan the company originates? For Smartfi Home Loans, this dream came true with its new, industry-focused finance system, Loan Vision. Smartfi found they were able to gain efficiency and improve their processes with the help of Loan Vision’s immense drill down capabilities. “With Loan Vision, there is this wealth of information at your fingertips,” says Bill Berg, Finance, Technology, and Servicing Leader at Smartfi®. “To understand the ins and outs at the loan level, there’s a tremendous amount of analytical power there. I’m not sure how you would be able to successfully understand your business without it.” Interested in learning more about how your General Ledger should be helping you maximize efficiencies in your accounting department and gain access to financials faster? Contact Carl Wooloff to schedule a call today.
Government Loans and Servicing
Traditionally FHA and VA loans have a higher profit margin than other loan types. But originating them is not a walk in the park. James Hedvall, Chief Capital Markets Officer with Doorway Home Loans, put down some notes he titled a, “GNMA Primer.”
“I’ve been in this business for many years and have seen things done well and things done poorly. And I receive a fair number of questions regarding secondary execution. One typical question is whether a lender should pursue obtaining their ‘Ginnie Ticket,’ or to become a GNMA Approved Issuer.
“Having the ability to take FHA, VA, and USDA loans, turn them into securities, is a powerful tool for well-equipped secondary groups. Why? Well, first it allows you to underwrite straight to AUS findings, manual underwrites and originating loans that are outside correspondent overlays, provide competitive pricing and service to underserved communities, as well as allowing for efficient execution into the capital markets. However, there are a few considerations that need to be understood, because it’s not for every originator.”
James writes, “There are approximately 350 issuers spread across large and small depositories, credit unions, servicers, and independent mortgage bankers. The approval process, sometimes referred to sarcastically within capital markets circles as the GNMA Denial Department, can be long and challenging. There are plenty of cases out there where relatively large originators, with good balance sheets, are rejected by Ginnie Mae. I have witnessed first-hand the approval process a few times, and my best piece of advice is that ‘all battles are won, before they’re ever fought.’ Successful applicants have a few things in common: good financial standing, very competent Secondary and Accounting departments, plenty of operational redundancies, strong quality control oversight, last but not least, updated and complete Policies and Procedures which cover the entire origination cycle.
“For those interested in servicing, when you’re approved to issue GNMA bonds, you will be servicing your loans (PIIT agreements aside). This is why you deliver to the GSEs and issue GNMA bonds in the first place; originators should have a strategy with servicing and its intricate oversite, even if they are utilizing a sub-servicer. Historically, servicing GNMA loans (primarily FHA & VA) is costlier than its conforming cousin. A good sub-servicer can minimize this financial burden.
“In terms of keeping, maintaining, and tracking documents, if you’re FNMA/FHLMC approved, you certainly know what a document custodian does. More times than not, when I hear complaints about a custodian, it has to do with a problem on GNMA loans, as they will be the ones who review your loan collateral and initially certifies your pools for trade (most pools are traded after getting initial certification, although not a requisite).
“Ideally, a good custodian will perform a single document review that accommodates all requirements at once. This eliminates “exception surprises” at the time of sale due to different requirements delaying settlement. Choosing your custodian wisely can save headaches down the road, headaches which normally cause delays in settlements, resulting in an erosion of gain-on-sale.
“In the capital markets, broker/dealers come into play. Outside Secondary Marketing, Broker/Dealers are normally given very little thought by originators. If you’re hedging a pipeline for mandatory execution, broker/dealers are the ones your Secondary group trades forward TBA contracts with, that off-set interest rate exposure from the time the loan is locked, until the time the loan funds and gets committed. But for Issuers, they play an important role in the execution of GNMA pools as they are the ones who are buying them from the Issuer. A good relationship with your broker/dealer goes further than just execution. They can also help with pool formation and optimization. Without going down the rabbit-hole on coupons vs note rates vs high balance di-minimus requirements, B/D’s can help you build out pools that can increase the spread that is willing to be paid above (and sometimes below) what TBA’s are trading at; what you hear as the ‘spec pool pay up.’
“Lenders must pay attention to operations within the Originator. A strong Secondary Marketing team is imperative. Having a good Secondary Manager who understands the entire process: what can be pooled, when can it be pooled, when to create a pool in GinnieNet, and purview into the whole mortgage pipeline not just funded loans, helps in the dozens of moving parts in the process. A strong CFO/Accounting Dept who understands the financial risk of issuing GNMA securities pays dividends.
“Some may not know, but part of the financial risk in issuing has to do with covering P&I shortages every month. GNMA doesn’t buy loans directly like FNMA & FHLMC do. They act primarily as an insurance company, guaranteeing that bond holders receive timely payments of cash flow (for this service GNMA charges 6 bps on every loan, referred to as their Guarantee Fee, or G-Fee). When borrowers are late with payments, or miss payments, it’s the responsibility of the issuer to make up for the missed P&I payment to the holder of that security. This can be a huge outflow of cash per month considering your responsibility is to EVERY bond that has ever been issued by the originator. Anyone issuing GNMA securities back in early 2020 when COVID hit, and the term “forbearance” went mainstream, remembers that moment. Possessing the capital to weather P&I shortages is an absolute must.
“Most often overlooked is your Trailing/Final Docs department. Your last responsibility as an issuer is to make sure that trailing docs (final title/deed or mortgage) get to your custodian for final certification. This needs to be done within 365 days of issuance. This may not be a huge problem for some, but states like Hawaii come to mind, where turn times of county recorders are historically slow and getting a certified copies of anything may take months.”
James wrapped up with, “Everything above is scrutinized by GNMA during the approval process. As I mentioned before, possessing the right individuals, having strong relationships with vendors, and possessing very strong operational controls should be viewed as a requirement before submitting your application.” Thank you, James!
Capital Markets
Many mortgage rates are firmly in the 7 percent range now, and certainly 6 and 6.5 percent pass through mortgage securities are the norm for hedging. We might just be here for the remainder of 2023. The solid economic news certainly doesn’t point to lower rates any time soon.
Monday was a quiet day for those in the mortgage industry, with few locks, many people out of the office, and an early close ahead of the Independence Day holiday. Markets shook off warnings about cooling growth and a slowdown in manufacturing, likely because the highlight of the week will be Friday’s fresh look at the labor market, with June Nonfarm Payroll data following May’s big upward payroll surprise. U.S. IHS Markit Manufacturing PMI remained in contractionary territory for the eighth consecutive month in the final reading for June while the ISM Manufacturing Index fell further into contractionary territory. The manufacturing sector continues to operate in a state of contraction as optimism about the second half of 2023 weakens amid recession concerns. Some would argue that investors are still too optimistic about the prospects for economic growth and the ability of the Fed to stamp out inflation.
There was a better-than-expected Construction Spending report for May, in at +0.9 percent month-over-month. On a year-over-year basis, total construction spending was up 2.4 percent due to renewed strength in new single-family construction despite a jump in mortgage rates. Economic data over the last week continued to show a resilient U.S. economy. The final estimate of first quarter GDP was unexpectedly revised higher from 1.3 percent to 2.0 percent as additional data on consumer expenditures contributed to the increase. The personal consumption expenditures index (4.1 percent) remained well above the Fed’s target. Home price data from Case-Shiller indexes showed increasing prices in April while building permits increased 5.6 percent to an annualized rate of 1.496 million units in May. The lack of existing homes for sale has led to price increases on the limited available for sale inventory as well as an increase in new construction. Consumer confidence reached its highest level since January 2022 due to a strong labor market and receding fears of recession. We also learned last week that consumer confidence rose to its highest level in 17 months in June amid a brighter take on the current situation and a less dire assessment of the future.
Markets return to a relatively quiet calendar today, though there is some potential market moving potential from the release of the minutes from the June 13/14 FOMC meeting, Redbook same store sales, May factory orders, and remarks from New York Fed President Williams. We begin Wednesday with Agency MBS prices little changed from Monday and the 10-year yielding 3.86 after closing Monday at 3.86 percent; the 2-year is up to 4.91 percent.
Jobs
“In our most recent Chrisman post, MWF announced our Growth Strategy into the mid-west and Southeast markets. Most recently, we are pleased to announce the addition of Jeff Hemm RVP in Idaho and the Pacific NW, and the expansion of our new Branch in North Carolina. Jeff is a well-known leader in our industry and will bring a strong leadership presence in our new markets. MWF is excited to have TJ Powell on our team and the entire North Carolina team as we grow in new markets and expand in Florida. “I’m proud of our Team and the efforts to expand the MWF family in new areas. This is part of our written growth strategy and an important part of our overall company expansion,” Ed Adams, SVP Production. For information about our growth plans and career opportunities, contact Ed Adams.”
“Is your firm interested in launching a wholesale mortgage enterprise that’s mission-driven? Our group has a combined 100-year history in mortgage banking (operations, sales, underwriting, and capital markets) with a proven track record of generating over $2 billion annually over the last three decades. There are two participation opportunities: investment or joint venture. Our team includes an experienced and trusted sales force, operators, tech stack, warehouse lines, and take-out investors. Although we are currently based in California, we are actively working towards expanding to the East Coast and Southeast regions. Our expertise lies in Non-QM; however, we offer conventional and will offer government loans as well. Our focus is on serving underserved communities, and our long-term goal is to become a CDFI to ensure fair lending practices. If interested, please reach out to Chrisman LLC’s Anjelica Nixt to forward your note.
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Mortgage applications increased 2% for the week ending Dec. 3, driven by a surge in government refinancings according to the Mortgage Bankers Association (MBA) survey published on Wednesday.
The increase was mainly driven by the refinance index up 9% from the previous week on a seasonally adjusted basis. Concurrently, the purchase index decreased 5% from the week prior.
“Mortgage rates declined for the first time in a month, prompting a pickup in refinancing, with government refinances increasing more than 20% over the week,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a statement.
The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($548,250 or less) decreased to 3.30%, one basis point down from the previous week. For jumbo mortgage loans (greater than $548,250), rates rose to 3.33% from 3.27% the week prior. Meanwhile, the rate for mortgages backed by the Federal Housing Administration (FHA) fell to 3.35% from 3.42%.
“Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller,” Kan said.
Regarding the purchase market, Kan said mortgage applications fell after four consecutive increases, but activity is still close to the highest level since March, a positive sign. “Purchase activity continues to be constrained by a lack of inventory, combined with rapid rates of home-price appreciation and mortgage rates higher than in 2020.”
Compared to a year ago, mortgage applications declined across the board. The overall market composite index dipped 27.3% on a seasonally adjusted basis. Refinance apps fell 36.5% year over year, and purchase apps decreased 9.4% in the same period.
Refinances represented 63.9% of total mortgage applications, down from 59.4% the previous week. VA loans comprised 10.7%, increasing seven basis points. Meanwhile, FHA loans went from 8.9% to 9.9% in the period. The USDA share was at 0.5% of the total.
Mortgage applications declined 7.2% for the week ending Nov. 26, reflecting a lower appetite for refinances, according to the Mortgage Bankers Association (MBA) survey published on Wednesday.
The drop was mainly driven by the refinance index declining by 14.8% from the previous week, on a seasonally adjusted basis. Concurrently, the purchase index grew by 5.1% from the week prior.
However, mortgage applications declined across the board in comparison to a year ago. The overall market composite index dipped 29.6% on a seasonally adjusted basis. Refinance apps fell 40.7% year over year, and purchase apps decreased 9.4% in the same period.
Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said mortgage rates rose for the third week in a row, reducing incentives for many borrowers to refinance. “Over the past three weeks, rates are up 15 basis points, and refinance activity has declined over 18%,” he said.
Regarding purchase activity, he said the increase in applications was driven by a 6% growth in conventional loans apps, which tend to be larger than government loans. The average loan amount increased to $414,700, the highest since February.
The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($548,250 or less) increased to 3.31%, seven basis points higher than the previous week. For jumbo mortgage loans (greater than $548,250), it went to 3.27% from 3.28%.
Refinances represented 59.4% of total applications, down from 63.1% the previous week. VA loans consisted of 10% of the share, decreasing three basis points. Meanwhile, FHA loans went from 8.6% to 8.9% in the period. The USDA share was at 0.5% of the total.
Mortgage applications increased 2.3% from the previous week, largely due to a strong purchase market, according to the Mortgage Bankers Association (MBA) survey for the week ending Jan. 14.
The seasonally adjusted Purchase Index rose 7.9% from the previous week, while the Refinance Index decreased 3.1% in the same period.
Compared to the same week one year ago, mortgage apps overall dropped 37.3%, with a sharp decline in refinance (-49.2%) compared to purchase (-12.2%).
According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, the 30-year fixed rate reached 3.64%, more than 30 basis points over the past two weeks. Higher rates led to the “slowest pace of refinance activity in over two years,” mainly among FHA and VA loans, Kan said in a statement.
Regarding purchase applications, the average loan size set a record at $418,500. “The continued rise in purchase loan application sizes is driven by high home price appreciation and the lack of housing inventory on the market – especially for entry-level homes,” Kan said.
The economist added that government purchase applications had slower growth, contributing to the larger loan balances and suggesting that prospective first-time buyers are struggling to find homes to buy in their price range.
The refinance share of mortgage activity decreased to 60.3% of total applications last week, from 64.1% the previous week. The VA apps went from 11.4% to 10% in the same period.
The FHA share of total applications decreased from 9.9% to 9.3%. Meanwhile, the adjustable-rate mortgage share of activity increased to 3.8% of total applications. The USDA share of total applications stood unchanged at 0.4%.
The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased from 3.52% to 3.64%. For jumbo mortgage loans (greater than $647,200), rates went to 3.54% from 3.42% the week prior.
Economists expect that rates will increase in 2022 but will still be close to record-low levels. MBA forecasts that 30-year mortgage-rates will reach 4% by the end of 2022.