Market Conditions

Mortgage Lending

Mortgage rates fell again this week for a 30-year fixed rate to 3.83 percent, which is down 8 basis points from last Wednesday. It was actually lower earlier in the week before finding its current position. This happens to be the lowest level since June. If the GDP is looking good this week we can expect an increase in the rate.

 The 15-year fixed rate is 2.97 percent, and 5/1 ARMs, the rate is 2.84 percent. Not much change in these mortgages.

 Stay tuned next week for another update.

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You're Probably Making Money on Your Home & Don't Realize It

We all know a home is one of the biggest investments we will ever make in our lifetime, however we know very little about the asset itself. A good portion of American homeowners were unaware of the growth value in homes for 2014, when in reality homes grew by 4 percent, and by double digits in more than 65 metropolitan areas across the United States!

The gap between what homeowners thought and reality was quite evident in Florida. Values of homes in southern Florida rose by 12 percent, which is roughly $23,000 per home, yet a fifth of all Floridians didn’t think values moved at all. In Tampa, the values rose by 9 percent, boosting homeowners’ properties by $12,300, all while 45 percent of the residents in Tampa believed the market never moved.

In Boston, 23 percent of residents believed their property values hadn’t changed, and they were right. Most metropolitan areas had residents undervaluing their homes; Boston on the other hand, overvalued their home prices.

Residents of Washington D.C. were the only ones who accurately predicted how their homes changed. They said anywhere from 1 – 3 percent, which is correct.

We will continue to see how the market rises or falls in the coming months.

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Even Lower-Tier Homes Are Still Too Expensive For Many Workers

As rents are rising faster than ever, they are also eating more of people’s incomes. People want to buy homes, but this route isn’t possible for many of the lower-income class.

 The incomes aren’t matching the rise in home prices. Since 2000, incomes for the lowest third of U.S. workers have grown juts 15%, while home values has grown 41%.

 Renters are spending around 31% of their monthly income on rent, and homeowners are spending about 15% for mortgage payments. Obviously the situation is different geographically, as well as the household income. For example, in Los Angeles, a bottom tier worker will spend around 85% of their monthly income on a lower-priced home. Middle-income workers will spend 41% for a middle priced home, and the top will pay just 30% for the most expensive homes.

 Los Angeles, Santa Barbara, Salinas, and San Jose all are in California and the top third of workers pay just 30% or more of their monthly incomes for mortgages on expensive homes. Mid-level earners pay a little more than 30% of their incomes for middle-valued homes in 11 markets.

 The lowest third of earners pay more than 30% of their monthly incomes on low-priced homes in 77 markets! Because of this statistic, we see that many cannot afford this and are priced out of the market.

 

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Underwater Homeowners Sink Even Deeper

 Despite homes rising 6.6 percent in 2014, lower-tier homes have dropped 3.2 percent in value. Even though the water is rising in real estate, some homes have not risen with the water. The homes that are experiencing the struggle are the lower-end homes. They have actually seen their values drop, keeping their mortgages underwater.

During the recovery, the housing market was seeing improvement, but there has been a reversal for these lower-end homes. At its worst, the housing market saw 15 million homeowners owing more on their mortgages than what their home was worth. This put them in negative equity, commonly known as underwater. Their answer was foreclosures and short sales.

Lower-tier homes have been left behind during the recovery because the demand for them is not what it once was. Homes rose 6.6 percent nationwide last year, but the bottom 10% of homes dropped 3.2 percent. During any recovery there will be someone left behind. Negative equity is 16.9 percent nationally and rising in 21 of the top 50 housing markets. More than a quarter of mortgages homes are underwater in many parts of the Southeast and Midwest.

Atlanta saw homes rise 12.2 percent and almost half of the borrowers with homes valued I the bottom tier are underwater. This compares with 10p percent of borrowers with the highest-valued homes.

 

The major markets with the worst negative equity are:

 

1. Las Vegas, NV – 26.4%

2. Atlanta, GA – 26.1%

3. Chicago, IL – 25.1%

4. St. Louis, MO – 22.8%

5. Cleveland, OH – 21.4%

6. Detroit, MI – 21.3%

7. Tampa, FL – 21.2%

8. Orlando, FL – 20.9%

9. Kansas City, MO – 20.9%

10. Phoenix, AZ – 20.6%

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Newcomers Outpace New Housing in Least Affordable Rental Markets

A big wave of new homebuyers is outpacing new housing stocks in the country’s most expensive rental markets. Los Angeles, where renters spend roughly 50% of their income on rent, is among one of the highest. When 1,000 new arrivals came in, only 187 housing units were built. New York was 383 for every new 1,000 residents, and San Francisco was 193.

 

The middle class is who is feeling the squeeze. They are the ones fighting tooth and nail for affordable living spaces, not to mention the competition is as high as its ever been. The rent is going up, and incomes aren’t rising tick for tack with it.

 

Where you can find the best rent is in a place with a slow population growth like Pittsburgh, St. Louis, and areas where population growth and housing units are rising the same amount. In 2012, Chicago added 906 new housing units for every 1,000 newcomers. Renters there spend only 31% of their income on rent.

 

Most cities are trying to find a suitable remedy for this problem, like the mayor of San Francisco is pledging to add 30,000 units by 2020. Boston says they will add 53,000 by 2030. New York mayor, Comrade Bill de Blasio says he will add 200,000 units in 10 years. But he’s a communist so who knows when that will get done and where the money will come from.

 

Building new units will help this problem, but in these expensive cities, building at a price that middle income citizens can afford is a difficult task. Some cities make this a bit easier by letting homeowners add accessory units. People can turn their garages, attics, storage rooms into living spaces and rent them out.

 

The middle class is facing challenges they haven’t had in the past and it is creating problems. Some people want the government to subsidize middle-income households, but it is important to have a middle class. Who knows what will happen in the near future?

 

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Expect Apartment Rent to Go Up Again

Are you living in an apartment? If so, you should expect your rent to be going up again in the near future. Rent has skyrocketed in the last five years. The average renter in the U.S. has had their rent raised by 14% since 2010, and the average monthly rent is $1,124. This is four percentage points faster than inflation and more than doubles the rise in home prices for that same period!

 Even though apartments have been popping up rapidly, rent is still expected to rise another 3.3 percent for an average of $1,161. This isn’t as drastic of an increase as it has been, but it’s still an increase nonetheless.

 The reason

 Now more than ever people are searching for apartments. They do not want to buy houses because they simply cannot afford it. Prices of homes are rising (not at the rate of apartments) which makes renters stay put.

 Another reason is that most apartments that are being built today are aimed at the affluent tenants. They are built for luxury and want top dollar for their living quarters. This is undeniably true in big cities where these buildings are being built in urban core areas, and builders need to regain their costs.

 A good example is Denver, their rent has gone up 5% in the past five years, and 9.2% in 2014. Out of the total 9,400 new apartments built last year, 23% were built in these urban core areas.

 Because competition is so high right now among apartments, renters do not have the wiggle room to negotiate with the landlord for concessions, or a free month of rent for whatever reason.

 Here is why renters should expect rent to go up for a sixth straight year:              

 More jobs means more competition: during the last recession, many of the works who were laid off had to move in with their relatives, or take on roommates. 32% of the U.S....

Cities Where Homes are Undervalued, and Overvalued

Homes across the U.S. are undervalued by a mere 2% on average, but at the same time still overvalued by double-digit percentages in some places.  Most home prices were nearly back to normal for the fourth quarter of 2014 after being down 5% this time last year.

The extent as to which areas are undervalued, and overvalued, varies across the 100 largest cities in the country. At the beginning of 2006’s housing bubble, homes were overvalued by a giant 34%, but fell to 14% at the start of 2012.

The more homes are overvalued shows that a bubble might be forming. When a home is overvalued it doesn’t always mean they are unaffordable. Even though Cities like Boston and New York are statistically undervalued, they are still way more expensive than cities like Houston and Austin. It also is all relative towards the cities fundamental like jobs, income growth, and rent.

70 out of the 100 homes surveyed by Trulia are less than 10% overvalued. This is the highest number since the beginning of the recovery. Most homebuyers spend 15% of their income on their housing payments (excluding taxes), which is down from the 22% of the last 25 years.

In that survey Trulia found Austin, Texas as the most overvalued city. Overvalued by 16%! The second city was Orange County by 15%. The following in descending order were Los Angeles, Honolulu, and San Francisco. The median single family home price was $245,000 in2014, and in 2011 it was $189,000. The mean numbers respectively of both years were $251,838, and $311,222.

Austin was more overvalued in 2014 than it was in 2006. This is somewhat due to a property market that hasn’t kept up with the demand, which is helped by a growing jobs market. Other overvalued markets have relaxed a bit on their jobs market the past few years.

Fun fact- most of the undervalued cities were found it be in New England, Ohio, and Connecticut. Most of these cities were undervalued by at least 14%, ranging...

Looking Back at 2014

It’s always a good idea to know where you stand in the beginning of a new year. Looking back at last year and trying to predict what is to come for this year in real estate, is what it’s all about. So let’s take a look back at last year, and go a little bit more into 2014.

All of Louisville’s MLS includes the counties of Jefferson, Shelby, and even Oldham. 2014 was the third straight year in which the number of units sold rose from the previous 12 months.

2011 was a relatively low year, only selling 11,720 units, however, each year beyond that sold significantly more units. 2012 sold 13,572, 2013 sold 15,745, and 2014 sold 16,082. Every year increased by decent margins. All of these numbers come directly from the MLS, which include single family homes, along with multi-family properties, rentals and vacant land or lots.

Since 2009, the MLS has sold 26% more homes in 2014. This isn’t a horrible number considering some of the other markets around the country that are decreasing in units sold.

So all in all, real estate continues to be on the up and up. Keep watching your local market and watch what happens. Hopefully these numbers continue to rise!

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Mortgage Rate Update

The 30-year fixed mortgage rate fell this week. The current rate borrowers were quoted on at 3.36 percent, while last week the rate was at 3.77 percent. It hovered around 3.75 percent this time last week before it settled at 3.76

Erin Lantz, VP of mortgages at Zillow states, “Rates continued to slide last week and are now down more than a half of a percentage point from their mid-September peak. Strong economic data suggests rates should move higher, but weak demand for new loans as kept rates low. This week we expect to see some volatility as markets react to Friday’s job report but anticipate rates to increase modestly by week’s end.”

Furthermore, a 15-year fixed mortgage rate is currently 2.97 percent and for 5/1 ARMs, the rate was 2.76. Zillow predicts tomorrow’s seasonally adjusted Mortgage Bankers Associates Weekly Application Index will show purchase loan activity boost by 15 percent from last week. Stay tuned for another update, coming soon!

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Red States Pummel Blue States in Housing Recovery

According to data from RealtyTrac, more housing markets (52% to be exact) are now better off than they were two years ago. 11% exactly are worse off, and the other 37% have stayed right where they are.

There are five factors to account for when deemed “better off”. Further more, a county must meet three of these five to be considered better off. All five factors have a major influence on the state of a houses health. Let’s go through the list shall we?

  1. Significant fewer foreclosures.
  2. Higher median home prices.
  3. A percentage of homeowners who are deeply underwater on their mortgages that is lower than the national average.
  4. Drastically lower unemployment.
  5. Counties where home prices didn’t rise rapidly that many average people could not afford to buy in those areas anymore.

 

We must also consider the role of politics. The status of your state’s housing market may depend on if you live in a “red state”, or “blue state”. When we look at the market from two years ago, we can see that 53% (10/19 analyzed) of the Blue states were better off, while fully 78% (18/23 analyzed) of the Red states housing markets were better off.

Out of the 1,547 total counties studied by RealtyTrac (accounting for 77% of the total U.S. population) from August 2012 – August 2014, Colorado, Florida, Virginia, Ohio, and Nevada were thrown out because they are swing states. Also, Delaware, Hawaii, and South Dakota were omitted because there wasn’t enough statistical data.

While RealtyTrac is unsure of the exact reasons for the Red states being better off, they believe it has to do with how each state handled the foreclosure crisis. He says, “This fits with the storyline of many of the blue states taking a more pro-active/aggressive stance toward foreclosure prevention, while many of the...

Fed Vows to Keep Rates Low

     The Federal Reserve has acknowledged Wednesday to keep the interest rates low. They said the economy is beginning to look up, especially in the housing industry. They also claimed they will continue to press forward with the stimulus campaign- which will keep interest rates low- until the economy shows more muscle. 

     At the last meeting, the Fed said they would keep rates incredibly low until about mid 2015. A program known as "QE3", in which the Fed buys $40 billion in mortgage backed debt every month, helps keep the rates incredibly low.

     However, on the flip side, the Fed is a bit concerned. In a statement they made recently, they said, "The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions."

     Even though the unemployment still remains high at 7.8 percent, the fiscal cliff still looms at the end of the year, the global economy is struggling, and the U.S. GDP grew only by 1.3 percent for the second quarter.

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80 Percent of Americans Unwilling to Buy a House

     Incredibly record low mortgage rates and low home prices aren't enough to encourage Americans to go through the process of buying a house. Even as the market has slightly picked up, still four of five Americans will not buy a house or even refinance their mortgage. A major factor contributing to this is the lack of jobs.

     Economists expected 125,000 new jobs in August, but we were only given 96,000, according to the Labor Department. The unemployment rate fell to 8.1 percent, but only because more discouraged workers left the labor force. So that doesn't really say much. Only workers between the ages of 18-34 were slightly more likely to invest in housing over the next year.

     With record low interest rates, Union Plus launched an awareness campaign for Union members to learn more about the advantages of buying a home. "With only 18% of working families willing to invest in buying new homes, what this tells us is that we need to help working families feel confident about investing in housing" says Union Plus President Leslie Tolf. Confidence comes in knowing the benefits of owning a a home.

APPRECIATION- the largest benefit is appreciation, and right now that's a much better bet than it has been in years. Appreciation occurs when the value of a home increases due to supply and demand, home improvements, and other factors. It acts as interest on an investment. It taps as equity you can use for other investments like starting your own business. sending your kid to college, or other possibilities.

     Acquire enough equity and you can upgrade your house, move to a nicer neighborhood, or even downgrade and save the rest for retirement. many homeowners rely on equity as they nest egg to use during retirement.

TAX BENEFITS- Homeownership is the mother of all tax shelters. The mother of all tax breaks is the deduction for...

Louisville Market Conditions

The average price per square foot for a Louisville home is $130, which is actually up 30% from a year ago for the same period. The median sales price for homes in Louisville was $202,644 (based on 62 home sales). Compared to the same period one year ago, the median home sales prices have increased 47%, however the number of home sales has decreased 96.6%. Currently there are 3,671 resale and new homes on the market in Louisville. The homes in re-sale, foreclosure, and auction are at 2, 864. The average listing prices for Louisville homes for sale are $212,983. This number tells us that there has been a decrease of .3%, or $632 compared to the prior week. The popular neighborhoods in Louisville include Old Louisville, Cherokee Triangle, with the average listing price of $217,777, and $449,094.

Just a little market news.

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Half of Mortgage Borrowers Under 40 are Underwater

     Rising home prices have helped nearly a million homeowners emerge from being underwater from their mortgages. But the younger homeowners are still struggling to stay afloat. The percentage of of borrowers who owed more on their homes than what they were worth fell to nearly 31%, which is down a few tenths of  percentage points from the previous months. Of the 15 million owners who were underwater, a significantly large number are under the age of 40.

     Nearly 48% of all underwater homeowners are under the age of 40, which is twice the rate of borrowers that are older. This creates a gridlock which has the potential to hinder the market's recovery.

     You hear about tight inventory in many markets, and it's clear where it is coming from. Having a negative equity is trapping young people in their homes, which prevents them from selling. Most of these homes are the starter-first-time buyer homes. Underwater homes that wish they could be sold have difficult decisions to make. They will either have to pay the mortgage in full at closing (which needs a bundle of cash on hand) or go through a short sale.

      Going through with a short sale however means getting the bank to forgive the difference that you still owe. If the bank won't approve of the short sale, then the sale cannot be completed. even if the sale is completed the seller takes a large dent on their credit score, which is where reluctance kicks in.

     Still many homeowners do not want to absorb the loss, They hang onto their homes hoping the prices will rebound and they can sell above water. This is such that case in states like Florida and California.

     Here's the impact of the underwater generation: This could have horrible ramifications for the economy and borrowers under 40. Many young homeowners bought their homes at the peak of the market,...

Loan Applications Rise 7% for Home Purchases

Home purchase mortgage applications last week have risen 7.2 percent. This is the highest level since  December 2, 2011 the Mortgage Bankers Association reports.

They said 'Applications for to buy a home picked up last week, and are running more than two percent above the leve reported at this time last year,' says MBa'S VP of research and economics.

He also said loan application for home buying from conventional loans are ten percent higher than last year. What also increased by ten percent was purchase and refinance applications for government loans. They believe this was caused by borrowers seeking to apply before the scheduled increases in insurance premiums at the start of April.

Overall, mortgage applications for purchase and refinancing increased 4.8 percent last week, and applications for refinancing increased 4 percent from the previous week. this increase is the first increase in six weeks of consecutive declines.

Let's hope this is the start of a popular long-term trend!

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US Census Releases News on Housing Starts


US Census Releases News on Housing Starts

November 17, 2011

Released this morning, the US Department of Housing and Urban Development jointly with the US Census Bureau states that building permits and housing starts are up from that of October 2010, overall. Compared are structures of one unit, two to four units, and five or more units. Privately owned new homes with five or more units have increased 62.9% since 2010 in places that require a permit. The south has had an increase of 13% in the permits required for one unit privately owned homes. Authorized, but not started new construction is up 6.1% in the Midwest from last year.


See the breakdown based on region of the United States or just the country as a whole & read the full report:

http://www.census.gov/const/newresconst.pdf

 

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Investing in Property in Asia

For property investors wondering if the US is the right place to invest at a time like now, I've checked out an international area as an alternative. This area is a condominium development in the suburbs of Taipei, Taiwan. There is no city website for this local area called, 'The City Peak'. What drives this market is the experienced real estate agents, and personal relationships with them, which limits the access of outside investors.

These condominiums are designed so the living space is 20+ floors, and two possible retail stores on the first two floors, which actually is a western building concept. The developer hired an award winning architect and never made his building available to public investors.

The average condo in Taiwan is a wall-to-wall shell with high ceilings and fire retardants. The rest of the space is left to the buyer. The condo is sold on the total square footage as is regional tradition. So a little less than half the the area you buy is made to be the common area. The buyer is still responsible for paying rent, utilities, etc. 

Pretty much, don't move there it sounds like it sucks, and America is much better any day of the week!

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Homeownership Tax Benefits Must be Preserved

The Mortage Interest Deduction is vital in keeping housing prices from plummeting to devestating lows, and potentially damaging the economy even further. So why would preserving the MID be crucial to uphold struggling small businesses and the middle and lower classes? The interest payments on loans are added up at Uncle Sam's collection day (April 15) and that interest is allowed to be subtracted from a citizens total yearly income, giving him/her extra cash in their pocket to put back into the economy if they choose. That is the point of the MID, which has worked so well in the past.

Now we face possible changes or elimation to the tax code by Congress. They are currently considering revising the MID or eliminating it completely. Any changes to this code will have devestating consequences to the American people, especially the middle and lower classes. Changes to this law would decrease the value of homes across the nation destroying the recent progress of the weak housing market, decrease salaries of all families, destroy a few million jobs, and will have other rippling effects. It is our duty and responsibility to make sure Congress does not touch a single word to the tax code laws. To do your part, please contact your state Congressman to insist they leave the MID alone. It would benefit a few while crippling the entire nation even further if these laws are revised.  

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Are McMansion's Loosing Their Appeal to the Masses?

 

LIVING SMALLER

Monday, February 14, 2011

  

Are McMansion's loosing there appeal to the masses?

Is the small cozy cottage with the white picket fence making a comeback?




It looks like home buyers are able to live in a smaller space and fix it up with all the bells and whistles. Many homeowners are paying attention to what buyers want and what the design shows are telling viewers; light, tranquil colors look best in smaller spaces. Homeowners are learning to work within their space to give it a modern appeal with a comfortable feel.

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