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January 2024 » thefivestar.com 61 January 2024 J O U R N A L Navy Federal than whites, even when a selection of more than a dozen different lending metrics were the same among the two groups. Bob Otondi, a Black business owner in Texas who was denied a mortgage by Navy Federal in 2021—and then approved by another lender in about two weeks—said the rejection "didn't make any sense at all." "I thought it could have been racial discrimination," he told CNN, "But I could never prove it." By the numbers, the credit union was found to have rejected about 3,700 Black home mortgage customers last year, a trend which was also found to affect Lati- no borrowers, but at a much lower rate. In a statement, Navy Federal spokes- person Bill Pearson defended the credit union's lending practices. "Navy Federal Credit Union is commit- ted to equal and equitable lending practic- es and strict adherence to all fair lending laws," Pearson said. "Employee training, fair lending statistical testing, third-party evaluations, and compliance reviews are embedded in our lending practices to ensure fairness across the board." Pearson said that CNN's analysis "does not accurately reflect our practices" because it did not account for "major criteria required by any financial institu- tion to approve a mortgage loan." Those factors included "credit score, available cash deposits, and relationship history with the lender," he said. PURCHASE MORTGAGE APPS ON THE RISE F irst American Data & Analytics, a division of First American Fi- nancial Corporation has released its First American Data & Analytics' proprietary Potential Home Sales Model for November 2023. November 2023 Potential Home Sales For November, First American Data & Analytics updated its proprietary Po- tential Home Sales Model to show that: » Potential existing-home sales in- creased to a 5.30 million seasonally adjusted annualized rate (SAAR), a 1.3% month-over-month increase. » This represents a 52.1% increase from the market potential low point reached in February 1993. » The market potential for exist- ing-home sales increased 1.5% com- pared with a year ago, a gain of 80,000 (SAAR) sales. » Currently, potential existing-home sales are 1,486,400 (SAAR), or 21.9%, below the peak of market potential, which occurred in April 2006. Chief Economist Analysis: Largest Monthly Growth in Housing Market Potential in a Year "In the month of October, exist- ing-home sales hit the lowest level since 2010 as a result of the higher mortgage rate environment. Rising mortgage rates reduce affordability, all else held equal, for buyers and strengthen the rate lock-in effect for potential sellers. However, mortgage rates declined in November, igniting cautious optimism in the industry," said Mark Fleming, Chief Economist at First American. "In fact, our Potential Home Sales Model, which measures what a healthy market for home sales should be based on the economic, demographic, and housing market environments, increased by 1.3% in November—that's the highest month- ly growth since December 2022. The question remains: Will the recent decline in mortgage rates translate into growth in existing-home sales?" Lower Mortgage Rates Drive the Market Forward "The average 30-year fixed mortgage rate declined to 7.4% in November from a recent peak of 7.6% in October. The nearly 0.2 percentage-point monthly decline in mortgage rates combined with a 0.3% increase in median household income fueled a 2% ($6,500) month-over- month increase in house-buying power," Fleming said. "Mortgage rates have fallen further in December to approximately 7%. Holding median household income constant at its November level, a 0.4 percentage point decline in the aver- age 30-year fixed mortgage rate boosts house-buying power by approximately $13,000. "One way to project whether lower mortgage rates will result in a boost in sales is by tracking mortgage applica- tions," Fleming said. "Most home buyers purchase a home with a mortgage, and filling out a purchase mortgage applica- tion is an early step in the home-buying process. An increase in purchase mort- gage applications, therefore, precedes an uptick in home sales as these applica- tions reflect growing demand in the market." Fleming went on to detail how mort- gage applications have been affected in this whirlwind of a housing market this year: "According to purchase mortgage ap- plication data from the Mortgage Bank- ers Association (MBA), average mortgage applications in the month of November increased 5% compared with October. Additionally, data from the first two weeks of December indicates a nearly 8% increase from November," Fleming said. "A simple analysis based on the historical relationship between mortgage applica- tions and existing-home sales indicates that home sales should accelerate and approach 4 million seasonally adjusted annualized sales (SAAR) as 2023 comes to a close." What's Next? "Existing-home sales of 4 million SAAR are still low from a historical perspective, but it represents a move in the right direction. Heading into 2024, existing-home sales may continue to drift higher if mortgage rates fall further or stabilize. However, it's unlikely that ex- isting-home sales will increase dramati- cally, as the bulk of existing homeowners will remain rate-locked in, even if rates drift closer to 6%," Fleming said. "The road back to a market that is not too hot, not too cold, but just right will be a slow one, but recent mortgage application data indicates a thaw in the housing market is upon us."