Last week I read a story from HousingWire that discussed the impact that the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule (TRID) is having on the time to close a mortgage loan — namely that the length of time to close a loan has been increasing since TRID went into effect last October. [See The TRID ripples: Time to close mortgage loans continues to rise for the original piece.]
The HousingWire story cites statistics from a recent Ellie Mae report that found that January 2016’s average time to close a loan is now 10 days longer than it was one year ago in January 2015, when the average time to close a loan was 40 days.
Anecdotally, I feel that the length of escrows have been increasing over recent months; and I’ve been hearing the same observations from other agents. But I wanted to pull the actual numbers in order to see just what has been TRID’s impact.
The CFPB’s TILA-RESPA Integrated Disclosure Rule (a.k.a. TRID) went into effect October 3rd, 2015 and spells out new loan estimate timelines and closing disclosure requirements, which in turn directly impact the escrow period when purchasing a home being financed with a mortgage. [I won’t go into the specifics of the TRID changes here, but if you’re interested simply google TRID timeline and you will find a multitude of examples, infographics and closing date calculators.]
In order to observe the recent trends in the length of escrows I first needed to determine the length of escrow of recent home sales. Although such a metric does not exist in our MLS data set, it can easily be calculated by using two existing metrics — namely the Days on Market (DOM) and the Days to Contract (DTC) numbers.
The Days on Market metric indicates the total number of days a property was listed on the MLS before being sold (e.g. escrow closed). The Days to Contract metric indicates how many days a property was listed before going into contract (e.g. escrow opened). By subtracting DTC from DOM we get the number of days the transaction was in escrow.
I pulled the DOM and DTC numbers for all sales of houses and condos going back to October 2015 — the month that TRID went into effect. I then split the data by month and looked at the median numbers for each of the metrics.
A couple interesting findings came out of this. [See the table below.]
|Month||Median Days on Market||Median Days to Contract||Median Days in Escrow|
* partial month
Firstly, the table shows the median days in escrow clearly has been increasing since last October — and much more so than I expected. Whereas October showed a median 34-day escrow period, that number has now been extended to 55 days. …or, an additional three weeks added to the median escrow period. I find this increase astounding.
But even more enlightening than the days in escrow trend was the DTC trend. Look at the medium number of days to contract thus far in February in the table above. Six days — a decrease of nearly three weeks from October’s DTC of 26 days! Properties are now going into contract in less than a week. That is definitely representative of a high velocity market.
Again, anecdotally, I, as well as my fellow REALTORS®, have noted the increase in market activity (e.g. increased calls, more foot traffic, multiple offers on listings), but these DTC numbers show just how heated the current market is. …and we’ve not even hit the spring/summer home-buying peak yet.
I will continue track these numbers and look for changes to the trends. For now though, if you are a home buyer, you’re in a “hurry up and wait” market. “Hurry” as in be quick to view a home and get your offer submitted before the property goes under contract; and “Wait” as in it may take two months for escrow to close after your offer is accepted.
For the data geeks out there I have added the average and mode statistics for the Days in Escrow data in the table below. Average days in escrow appears to be trending upward just as the median is. The mode, however looks to have peaked in December and now appears to be receding.
|Month||Median Days on Market||Median Days to Contract||Median Days in Escrow||Average Days in Escrow||Mode Days in Escrow|
* partial month
Note: The data in the above tables above covers the cities of Reno, Nevada and Sparks, Nevada [NNRMLS Area #100]. Residential data includes Site/Stick Built and Condo/Townhouse properties only. Data excludes Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – February 24, 2016. Note: This information is deemed reliable, but not guaranteed.