Market Conditions

Home Sales Trouble

Less than the favorable amount of home sales, decreasing affordability, appraisal problems, and lender administrative delays are what is impacting todays home sales the most, so says REALTORS® Confidence Index Survey. This survey was sent to over 50,000 real estate professionals regarding their last transaction.

Despite all the issues, those heavily involved in the real estate market stay confident for the future. The confidence level was about 50 according to the survey; as well it is higher than this time last year.

The survey also said that since home prices are becoming less affordable, it’s expected that prices will come down a bit, and grow at a slower pace of 3.3%.

It’s believed that less homes being sold, or on the market, the multiple offers homes are receiving are resulting in significant price increases. The June numbers stated that 41$ of homes sold above the original listing price.

It’s beginning to become a problem when the supply of homes is so short that it’s pushing affordability away from first time homebuyers, who are struggling to save enough for a down payment. The median family income has increased since 2012 by 11%, all the while the median price of a used home has risen by 62%.

The National Association of Realtors believes that homes are still “generally affordable”, and the gap between actual and qualifying income for first-time home buyers is widening. NAR estimates their median income is currently around $44,700, which is barely above the qualifying income of $42,700.

Most real estate deals are being completed on time, but a whopping 32% are stumbling over delays. Only 6% were cancelled. The issues were mostly from financing trouble which was apparent 41% of the time. 27% were from appraisals, 11% from inspections, and titling and/or deed issues at 10%. 

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The Housing Bubble of 2016, & What You Need to Know

Nearly ten years ago the U.S. housing market was on top of a giant bubble. Too many eager buyers were willing to pay more than the asking price for even more houses. Another reason was due to the government forcing the banks to lend to nearly everyone, even the people who couldn’t afford it. When that happens the bubble will bust, leaving millions who lost savings, properties, and their home.

In 2012 home prices fell to their bottom after six long years of free fall. The market today has homes one point shy of the 2006 bubble peak.

June was the 50th straight month of home price appreciation with prices up 33% since 2012. The Black Knight Financial firm gave those statistics. It measured the average national home price in June at $265,000, which happens to be 1.1% shy of the record high.

What’s different about today is these prices aren’t being driven by flakey mortgages. What is driving them is the lack of homes accompanied by record low mortgage rates. The median household income to afford a median household is at 21%, which is quite strong. It was around 36% during the bubble years.

What’s so bad about that? Well it starts to get worrisome when the rates rise again, pushing prospective buyers out of affordability and dropping home prices. Even though rates are low, a good number of buyers still cannot qualify for mortgages, and or afford a down payment and when the prices rise, the down payment follows.

The problem with today is that there’s a segment of people who cannot qualify to buy a home, and a segment just as sizable that has seen nothing but depressing reports of the real estate market for the past five years, and they’re weary to buy tarnished assets.                            

 The second reason for this sharpening of home prices...

Which State is Paying the Most in Closing Costs?

There was a study done earlier this month done by Bankrate.com that concluded Hawaii is paying the most in closing costs. They also have to work more hours every month just to afford their mortgage payment. They start their absurdly high mortgage payments from day one. They lead the nation in highest mortgages.

The CFPB TRID rule which came about last October has stated that estimated amounts homebuyers pay for closing costs are more accurate than ever. These costs include fees the lenders charge, any third-party fees for services like appraisals, etc.

Bankrate.com survey pool consisted of an average of online loan estimates for a $200,000 mortgage single-family home, which also had a 20% down payment.

Their study found that the average closing cost in Hawaii had $1,200 in origination fees, and $1,450 in third-party fees. The next state was New York with an average closing cost of $2,560. Not so far down the list were North Carolina, Delaware, South Carolina, and Connecticut.

The lower tier states were Pennsylvania at $1,840. The states who average below $2,000 were Wisconsin, Kentucky, South Dakota, Oklahoma, and Missouri.

The average closing cost for the entire nation was $2,130.

The cool thing about the CFPB new rules they published in October was it made closing cost estimates much more accurate. Lenders essentially must calculate all the costs ahead of time, allowing homebuyers to shop ahead of time and make sure they have the money needed. 

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Mortgage Rates Move

A little interest rate drop wasn’t enough to spring the mortgage market back up, however refinances are elevated since the Brexit vote which caused the initial rate drop. The total mortgage application fell 3.5% just last week from the seasonally adjusted basis from the prior week, so says the Mortgage Bankers Association.

The rate sensitive refinance volume fell 4% last week; however it’s also 56% higher than this time last year even when rates were a bit higher. The fallen rates after the Brexit vote took the total number of borrowers benefiting from a refinance to 8.7 million.

Mortgage applications for homes are still up from a year ago, but are down 2% this week. A good thing about these is that they aren’t nearly as rate-sensitive each week.

Purchase applications are still being sought at a faster rate than last year, but this summer has slowed that after a strong start to the year.

America’s average contract interest rate for a 30-year fixed rate mortgage with conforming loan balances of $417,000 and less sunk to a 3.67% from 3.69%, and the points decreased 0.24% from 0.32 for the 80% loan-to-value loans.

Because home prices are still rising so fast, homebuyers haven’t been able to benefit as much from the lower rates. Prices are up 5.7% since June of last year, however down from a 5.9% gain in May. It’s still nothing to snub your nose at. Prices are still expected to rise another 5% throughout the year.

We are pretty sure mortgage rates won’t go as low as they did when Brexit became official, but they have yet to make any notable gains. Since July’s employment report was so positive, it could signal a boost to increase the rates.  It’s possible that bond yields could break out of their close range, and affect mortgage rates. 

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How Fast Will Your Home Stay on the Market

Remax has reported that on average, a home is currently selling three times faster than it did three years ago.

Remax National Housing Report, in the month of June looked at 53 metropolitan cities and saw that a home’s average number of days on the market was four days shorter in May of 2016 and June 2016. For the record, the new average amount of time a home spends on the market is 54 days. June was the 39th straight month with a days-on-market average of 80 days or less.

Cities with the least amount of inventory are Denver, Seattle, and San Francisco, and they averaged all in the low 20’s days on the market. Augusta, Maine, and Des Moines, Iowa had the most time on the market. Des Moines was rough 103 days, while Augusta was 143!

Markets across the country are still slowly rebounding from the great collapse in 2008. Sales are on the incline every year. Home prices are being moderated so they are affordable again, and no one is really being priced out of the market. There are a few inventory problems, but overall the entirety of the market is recovering quite well.

Summer of 2016 is one of the most anticipated seasons as home sales and prices are rising. Market demand moved June sales to 9.4 percent over sales in May, and the country’s median sale price in June was $299,900. This time last year, prices were 2.2 percent lower than they are now!

Inventory shrank a little as June home sales fell 15.6 percent.

The amount of time it will take for your home to sell is mostly dependent on your market. Having a good realtor helps as well. If your home is in good shape, you have a hard working, well connected realtor, and are asking a reasonable amount for your home you shouldn’t be on the market long at all. 

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As Borrowers Underestimate Equity, Their Confidence Turns to Confusion

Fannie Mae has been doing her research and has found as the prices of real estate continue to rise, borowers aren't realizing how much equity they actually have. Fannie Mae has reported that the uninformed homeowners are less likely to refinance mortgages, apply for home equity loans, or even buy new homes.

Since home values have risen since 2012, just as reductions in prices submerged some homeowners underwater, the rising home values would bring underwater homes afloat on top of raising a lot of home equity. A lot of homeowners are unware of this, seeing they now have the favor.

Every month Fannie Mae conducts new interviews with homeowners about where they stand on renting, buying, planning to buy and sell. 

What they have found during these interivews is suprising. The number of homeowners who believed they were underwater hasn't changed much, but the fact that home prices are rising has led to homes floating again without homeowners even knowing it. 

Fannie Mae asked homeowners to compare their total mortgage debt to the value of their homes in 2014, 23% of homeowners thought they were underwater. The next year in 2015 showed that the belief of being underwater bumped to 24%. In 2015, the true number of underwater homes was actually 7%!

The whole idea is to not misinform homeowners and lead them to take on crippling debt, but to inform them enough to make wise, and sound financial decisions. If you can remove the gap between perceived and actual home equity, the confidence bar would skyrocket. In turn, this would lead to a stronger market.

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5 Questions to Ask Yourself about Real Estate and Brexit

Another article about Brexit! As the U.K. has decided to leave the European Union they have shaken markets globally, and lowering the outlook for economic growth in the United States. It will take years to see the repercussions, but for right now markets and governments are scrambling to react in all the uncertainty.

It seems like buying, selling, lending, and the whole nine yards is now riskier. Buying big assets, like a house take a healthy amount of confidence, and without uncertainty floating around everywhere, that confidence could fade quickly.

Despite grim headlines, the U.S. economy hasn’t faltered thus far. The silver lining in all this restlessness is cheap loans. Today we know Brexit, tomorrow is still to be handled day by day. Without seeing the future, here is what we know.

Will home prices fall?

Maybe! Nationally, homes value might slow down in the short term. The buyers who have money in the stock market aren’t sitting as pretty as they were yesterday, and they’re starting to sweat. The upside is that mortgages are about to get cheaper, which boosts their incentive.

They aren’t expecting a price surge, but they are kind of expecting a few dips in some markets. The fears of uncertainty of the stock market will probably keep people on the conservative side of bidding. They’ll be less likely to bid up $50,000 for a piece of real estate.

The luxury market will feel a slight sting. The foreign real estate investors have their hot spots in New York, Miami, and other places. With the stock market losing some of its value, there is less wealth to go around.

What will happen with interest rates?

Many loans are about to get cheaper because mortgage rates fall when Treasury rates fall, and Treasuries just took a steep dive as money fled out of the U.K.

Right now a...

April Foreclosures Down From This Time Last Year

Foreclosures are declining across the country, decreasing a whopping 23.4% annually in April, while completed foreclosures decreased by 15.8% annually.

The completed foreclosures averaged 37,000 nationally, which is down from 43,000 in April of 2015. From its peak of 117,813 in September 2010, this is down 68.9%.

The foreclosure inventory is the number of homes at some point in the foreclosure process, doesn’t matter where. The completed foreclosures are homes that have been foreclosed upon.

The peak was in 2010 and the number of homeowners with negative equity has decreased by two thirds, and the number of borrowers in foreclosure proceedings has also dropped at the same time.

Roughly four million homeowners were underwater in the first quarter, and they were more susceptible to foreclosure proceedings if they default.

Because home prices continued to rise, it allowed for 268,000 homeowners to regain the equity in the first quarter of 2016m which pushed the total number of mortgaged residential properties with equity to 92%.

The good news about last month is the number of homes in some stage of foreclosure and the numbers of delinquent mortgages were at levels that haven’t been seen since late 2007, just before the big collapse.

April continued the trend and hit another low not seen since 2007, when foreclosures had an average of 21,000.The total homes in the national foreclosure inventory for April was 406,000 homes, about 1.1% of which had a mortgage. Compared to 2015, it’s down from 530,000 homes, which had 1.4% with a mortgage.

The loans that have serious delinquency, meaning they are 90 days or more past due, in foreclosure, or real estate owned, declined by 21.6%, with 3%, and 1.1 million mortgages in this category.

Two major factors have helped the drop in delinquency rates, and we have the rising home prices and improvement in the labor market to thank. The home price index has risen...

Baby Boomers and the Single-Family Market

One of the most important keys in today’s single-family housing market is the baby boomer. They were born well before the first episode of Star Trek was released in the 60’s. Baby Boomers, age 55 and older own almost two-thirds of the country’s equity, which is about $8 trillion. Their numbers are roughly 67 million homeowners ages 55 and older.

It really doesn’t matter if they stay where they are or move before their time comes, their collective impact of their decisions on mortgage demand, housing options available to millennials, affordable housing supplies, and other future homeowners will be quite significant.

A Freddie Mac survey 55+ was released recently to help better understand these opportunities and challenges. About 5,000 applicants of all sexes and races born before 1961 were surveyed. They were asked about their current housing situation, their plans, and if they plan on helping their children become homeowners if they already aren’t.

The American Dream isn’t dead

A majority of surveyors said they are very satisfied with their current homes, communities, and overall quality of life. Almost 90 percent said people their age should own a home.

Homeownership is part of a healthy retirement

76 percent of the surveyors said they trust they will have a comfortable retirement. Race was of no factor in this question, despite many of which were still working. 44 percent of those still have a mortgage.

 It makes sense to own a home

An overwhelming majority said homeowner ship makes perfect sense financial stability, especially for married couples with, and without children. Slightly less claimed it made sense for single people to own a home. A quarter of the surveyors...

Americans are buying More Homes!

Lately, Americans have signed more contracts to buy homes in April for the third consecutive month, driving home sales to its highest level in more than a decade. The National Association of Realtors has claimed that its seasonally adjusted pending home sales index surged 5.1 percent last month to 116.3, which is the highest since 117.4 in February of 2006.

The April numbers are the latest examples of great news for the housing industry, which is currently in the late spring, early summer buying season. The pending home sales are up 4.6 percent from this time last year.

The sales have increased 11.4 percent last month in the west, 6.8 percent in the south, 1.2 percent in the northeast, and have actually dropped 0.6 percent in the Midwest.

They have credited the long-term mortgage rate that remains below 4 percent as steady job growth; which gives consumers the confidence to buy homes.

After a contract is signed, the pending home sale is complete usually a month or two after. This is a significant barometer for future purchases.

The department of Commerce has stated that the new home sales have increased 16.6 percent last month to a seasonally adjusted rate of 619,000, which is the most since January of 2008. The sale of existing homes is responsible for 910 percent of the housing market, rose in April for the second straight month to an annual pace of 5.45 million. 

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How to Know if You’re in a Seller’s Market

Never give up in searching for a new home in a competitive market; it may take a while, but you will end up with the house you want. Here are the definite signs you are searching in a competitive market.

Cash wins, for it is king

A sure sign is when sellers are expecting cash offers for their home. Cash offers trump loan offers any day of the week. If you aren’t offering cash, don’t worry, there are other ways to get the house you want.

Bidding wars galore

When there is a bidding war, you automatically know you’re in the thick of a completive market. This is usually good for the home owner as they will see who gives them the best offer. Most bidding wars happen when they have three common features; excelling price, excellent location, and excellent condition.

Hip-town USA

Watching the growth and desirability of a city reflects its housing market. Watch what’s going on in the industries around and where they are headed. The west coast (San Francisco particularly) had a tech explosion which increased the competitiveness of living quarters drastically. One quick way to notice how hip your city is is to take a look at the amount of coffee shops and yoga studios.

Escalation clauses

An escalation clause is when you write in your offer that you are willing to increase the dollar amount of you offer up to a certain amount if there are multiple bids. This is one way bidding wars get started.

Extras

Some buyers can and will spice up their offer by making the transaction super easy for the seller. They look for their “dream sale” and go for it. How quickly do they prefer to close vs. how slowly they choose to close?...

How Sky High Home Values Can Impact Today's Buyers

In 26 percent of the country, homes are breaking records due to the recovery, and the start of this year’s competitive housing market. It’s really no surprise San Francisco and San Jose are shattering their home price records, but homes in the Midwest, Northeast, and South are creeping above their usual median home values.

Most markets in the south (particularly Texas and Tennessee) are seeing new heights for their homes. Here is what is going on.

Low inventory increases price

This time last year there were many more homes for sale across the country. Now there are fewer homes giving buyers less options. Even if they have the finances to buy a home, finding the right one for them can be incredibly difficult.

Because the inventory is down, the competition for homes can be quite severe, creating bidding wars and pricing out beginning buyers. For those of us who are looking to get in the real estate market for the first time, we are having trouble gathering money for a down payment when home prices are rising and rent is as well.

Is this another housing bubble?

Because homes are breaking new records some experts are beginning to worry. Places with the hotter markets like several cities in California have been loving the double digit pace for months now, but it isn’t exactly normal. These places usually have plentiful of new tech jobs while their housing availability is staying the same.  Home competition is increasing in these areas and the low inventory is making it really difficult for renters to break into the market.

Returning to normal

The good part about home prices rising is that fewer homes are underwater, and they are free to sell, increasing inventory. More homes being sold on the market means buyers have more options. The other side of...

Where Do All The Young Rich Millennials Live?

We all know this generation of millennials faces its own challenges like graduating from college with a ton of student debt, and unaffordable rent prices, but not all of them are going hungry. The segment of kids ageing from 22-34 in the tech industry are doing quite well actually; some are actually quite rich riding the wave of the tech boom.

Here are the cities where you might find a great deal of millennials who make $350,000+ a year.

Arlington, VA – almost 9 percent of millennials living in this suburb are making more than $350,000, which people 55 and older didn’t make that much. Only 7.9 percent of people 55 and older made that kind of money.

San Francisco, CA – San Francisco is one of the biggest tech capitals in the country, with a very limited housing supply. 7.8 percent of the cities millennials make more than $350,000. On the other hand, their median rent is $4,500.

Huntington Beach, CA – This little city is right next door to the famous Newport Beach, and only 5 percent of millennials make more than $350,000. It’s a nice place with almost impeccable weather, but it can be quite costly.

Sunnyvale, CA – one of the hotspots in Silicon Valley with a median home value of 1.3 million. 3.9 percent of millennials make $350,000.

Seattle, WA – Seattle is dealing with its own tech boom, and rents and home values are rising rapidly. Tied with Sunnyvale, Seattle has 3.9 percent of millennials making $350,000.

Pasadena, CA – This city has mostly rich baby boomers sitting right outside of L.A., but the millennials there making $350,000 comprise of 3.3 percent.

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Mortgage Rate 2/3/2016

Mortgage rates fell this week. For the 30-year fixed mortgage, the rate settled at 3.5% after falling 11 basis points from last week. Rates fell throughout last week and rise on Sunday to 3.47%. This was the lowest they’ve been since 2013, before creeping up to the current point. Friday’s monthly job report will give a better indication of where the market will move.  

The 15-year fixed mortgage settled on 2.72%, and for 5/1 ARMs, the rate was 2.73%. 

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Why the Mortgage Rates Dropped After the Fed Rate Hike

At the end of the year in December, the Federal Reserve actually increased rates for the first time in almost a decade. Surprisingly, mortgage rates actually dropped when this happened. How’d this happen and will the trend likely hold up for home buyers in 2016?

Immediate mortgage rete reaction to Fed meeting

Majority of U.S. mortgage loans up to $417,000 are pooled into bonds called Mortgage Backed Securities (MBS), and they are traded around the global market. During the course of a trading day, mortgage rates will fall as the price of these MBS’s rise, and vice versa.

On December 16, the mortgage rates rose when investors sold MBS ahead of the meeting that day. While expecting the Feds would raise rates at the end of the year, and not knowing how the Fed might position 2016 rate policy entirely, MBS investors played the conservative card, and sold before the meeting.

Once it was announced that rates were raised, the Fed claimed they would only raise it .25%, and will take a “gradual” approach to tightening the policy from there.

Bond markets didn’t go into a tizzy, but reacted favorably, and MBS buying resumed, pushing mortgage rates down.

Mortgage rate outlook based on revised Fed policy

Markets are predicting this “gradual” approach means raising interest rates four times throughout the year to total the hike at 1%.

The fed Funds Rate is supposed to influence broad rate markets overall, not to directly impact mortgage rates. For example: the last time the Fed lifted fed Funds was from June 2004 to July 2006, hiking a total of 4.25%. While all this was happening a 30-year fixed rate mortgage only rise 0.5%.

If 2016 estimates call for Fed Funds to rise, mortgage rates probably won’t rise by that full amount. However, there happens to be another element of Fed policy...

2016 Predictions for Housing Market

2015 was a recovery year in the housing market, and 2016 is predicted to be a year of affordability. Since inner cities are becoming more expensive every year, first-time buyers and young people will be forced to look in the suburbs. They will want to live in a community that’s amenity rich, and often resembling that of a city where they can walk most places. These are mini cities that look like a regular city.

Here are the predictions for 2016 according to Zillow.com

  1. The median age of buyers buying their first home will be a new record. On average, buyers are already three years older than they were in the 80’s.
  2. Because home values are rising, most of the low-income Americans won’t be able to buy a home. The poorest American’s won’t be able to buy a home.
  3. They are predicting rents to soar, and be the highest median price ever.
  4. A lot of people will be moving to the suburbs, changing them into hot popular spots. They will change into looking more like inner cities with everything in walking distance.
  5. We are expecting home prices to rise a solid 3.5%. 
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November's Mortgage Rate Update

This week’s mortgage rate has risen yet again! For a 30-year fixed rate mortgage, it settled on 3.83 which is up 17 basis points from last week. IT has been rising all week and finally landed where it currently is.

The Fed is talking about raising interest rates this December due to “strong job reports”. There are still other factors for the Fed to look at before they raise rates, but you should probably get ready to watch them hike.

For a 15-0year fixed mortgage the rate is 2.98, and for 5/1 ARMS its 2.99 percent. 

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New Mortgage Rate Update

The mortgage rate for a 30-year fixed rate rose this week. It’s up 4 basis points from this time last week at 3.63 percent. For most of the week it floated around 3.60 percent, until settling on its current spot. It managed to stay flat while fending off central bank movements in Europe and China.

For the 15-year fixed mortgage rate, it settled on 2.82 percent, and for the 5/1 ARMS, the rate is 2.77 percent.  

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The Feds Considering Rate Hike, Is Our Economy Strong Enough?

The Federal Reserve is considering raising interest rates before the end of the year. The ultimate question is, is the U.S. economy strong enough to handle a hike?

A Reuters Poll was taken with 22 economists, and 20 of them said our economy could withstand this hike. Their main support was the amount of jobs created, and the demand for homes for millennials. If their data holds true, how do they factor in the trend of millennials who prefer renting? Most of this generation has outstanding debt, and owning a house is just a dream.

One of the economists has stated, “Rates are very reasonable now, and the signal the Fed will give when they begin raising their key lending rate will push more people into the market.

They have also claimed that the home prices in twenty metropolitan areas would rise an average of 5.0 percent this year.

Expecting a 5 percent increase in home prices will barely be strong enough to raise homeowners’ equity, which in turn will encourage them to put their properties on the market helping to fix the shortage of houses.

They are hoping this increase isn’t going to discourage first time home buyers. For some it will, and for some it won’t.

The next area the economists looked at was rate of home ownership. In the second quarter of 2015, the rate of home ownership fell to a 35 year low, and a rate hike could very well make that number fall further.

With data from last week, a positive number emerged; they found existing home sales rose 5.59 million in July nearing a 9 year high.

The economists have stated they believe all the activity in the market has strengthened itself for this hike. With the labor force rising, and the relaxation of credit conditions, these two factors should help justify the rise in rates.

Those of us watching the clock until the hike will try to lock in low rates, and for a lot of people their crippling student debt will weed them out of the market.

We can...

Mortgage Rates 8-12-15

Another week, another update on the mortgage rates is in the books. The current rate for a 30-year fixed mortgage is 3.77 percent, which is up two basis points from this time last week. It started out a bit higher at the beginning of the week and fell to its current place on Wednesday.

 They rose after the Atlanta Fed claimed the interest rates might increase in September. Because China’s yuan has been decreasing in value, they are expecting the rates to go down a bit more.

 For the 15-year fixed rate mortgage settled at 2.96 percent, and for 5/1 ARMs, the rate is at 2.83 percent.

 Stay tuned next week for another update. Hopefully they don’t rise too high too quickly.  

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