New-Home Sales Climb in July

New-Home Sales Climb in July. Image courtesy of fantasista / FreeDigitalPhotos.net

Sales of new single-family homes rose 5.4 percent in July, as more builders reported higher buyer traffic. Such traffic may lead to an increase in building activity as well, as home builders add more inventory to meet a heightened confidence in the market. The Commerce Department reported Tuesday that sales of newly built single-family homes rose to a seasonally adjusted annual rate of 507,000 units in July.

Regionally, the Northeast saw the largest gains in new-home sales, with sales rising 23.1 percent month-over-month in July to a 14-month high. New-home sales also posted a 6.7 percent gain in the West and a 5.8 percent increase in the South. The Midwest was the only region to post a decline, with sales falling nearly 7 percent month-over-month.

The stock of new homes for-sale reached 218,000 units in July – a 5.2-month supply at the current sales pace. That marks the highest inventory level since March 2010. Nevertheless, supply still remains less than half of what it was during the housing boom.

“As job growth and consumer confidence continue to strengthen, the housing market should make additional gains this year,” says David Crowe, chief economist at the National Association of Home Builders.

Source: National Association of Home Builders and “Consumer Confidence, Housing Data Signal Economy’s Resilience,” Reuters (Aug. 25, 2015)

6 Home Buyer Concerns

6 Home Buyer Concerns. Image courtesy of jscreationzs / FreeDigitalPhotos.net

Rising home prices tops the list of home buyer concerns this year, a shift from last year when nearly half of buyers said their chief concern was the limited number of homes for-sale, according to a new survey of more than 3,500 buyers released by the real estate brokerage Redfin.

In this year’s survey, nearly 27 percent of respondents cited high or rising home prices as their top concern. Another 17 percent of respondents said they were most concerned about competition from other buyers.

First-time buyers were particularly worried about rising home prices. Thirty-one percent of first-time buyers said that higher home prices were their top concern.

The survey identified the following top six home buyer concerns this year:

1. Affordability: “Prices are rising too high” – 27%
2. “There’s too much competition from other buyers” – 17%
3. “There aren’t enough homes to choose from” – 14%
4. “I need to sell a home first” – 8%
5. “I might not have enough for a down payment” – 6%
6. “Mortgage rates will go up before I can buy” – 5%

Last year, the top buyer concern identified was inventory, followed by home prices, competition from other buyers, rising mortgage rates, and home-shopping fatigue.

Source: “Home Prices Weigh Heavily on Buyers as Mortgage-Rate Worry Recedes,” Redfin Research Center (Aug. 19, 2015)

Homelessness Rising Among Families

Homelessness Rising Among Families. Image courtesy of Serge Bertasius Photography / FreeDigitalPhotos.net

Total homelessness has fallen 10 percent in the country since 2010, but among one segment, homelessness is on the rise. A new blog post from Harvard University’s Joint Center for Housing Studies notes that homelessness among families remains persistently high.

More than a third of the total homeless population is made up of people in families, and more than 60 percent of this segment have children who are under the age of 18.

The number of homeless families living in shelters – such as emergency shelters, transitional housing programs, or safe havens – is growing. Nearly nine in 10 homeless people in families were staying in shelters in 2014.

In some pockets across the country, the number has risen to the highest on record, JCHS notes. For example, in New York City, homeless families are estimated to comprise the majority of homeless shelter residents, rising by 67 percent alone between January 2005 and January 2015, according to the advocacy group Coalition for the Homeless.

“Since the end of the recession, the affordable housing shortage has continued to play a major role in rising rates of family homelessness,” JCHS research assistant Irene Law notes on the Housing Perspectives blog. “Between 2010 and 2014, in high-cost locations where affordable rentals are in short supply, the number of homeless people in families increased substantially: by 50 percent in the District of Columbia, 41 percent in Massachusetts, and 22 percent in New York.  The problem is acute in urban areas across the country.”

Indeed, 45 percent of all homeless families lived in major cities in 2014. Nearly 20 percent lived in New York City, which had the highest concentration of homeless families nationwide at 41,633, followed by Los Angeles City and County at 6,229.

“The current inventory of permanent supportive housing largely targets single adults, especially those with chronic patterns of homelessness,” notes Lew at the JCHS blog. “Although the number of permanent supportive housing beds has increased significantly since 2007, a substantial share of permanent supportive housing beds are set aside for individuals rather than families.  The limited availability of subsidies for the services component, as well as higher operating expenses compared to affordable housing, present challenges for expanding the supply of permanent supportive housing.”

Source: “Despite Declines in Homelessness, Family Homelessness Persists,” Harvard University’s Joint Center for Housing Studies (Aug. 12, 2015)

Common Mortgage Deal Delays

Common Mortgage Deal Delays. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

A last-minute problem with financing can quickly delay a closing on a home sale. Here are two of the most common financing problems that can surface:

• Failure to disclose key financial information. One of the biggest reasons for a financial issue is the failure of the buyer to disclose key financial information, The New York Times reports. Buyers who are not forthright about their financial circumstances can face a delay. Lenders will quickly find borrowers who are behind on child support obligations or real estate taxes, for example.
• Running up credit as a mortgage application is pending. Buyers may go out and purchase new furniture or a car prior to closing on a home, but doing so, could cause them a delay to the closing of their home sale. Lenders will recheck borrowers’ credit right before the closing date. If new debt obligations suddenly appear, that can be a red flag to a lender. Prior to making any large purchases prior to closing, borrowers should check with their lender, says Douglas Rotella, an executive vice president and loan originator with HomeBridge Financial Services.

In some metro markets, a delay to securing financing could mean missing out on a home. For example, in hot markets like California’s Silicon Valley, sellers may even balk at deals that are contingent on a mortgage approval, says Mia Simon, a real estate professional with Redfin’s Silicon Valley office. Nearly every home is getting multiple offers there so buyers must go beyond pre-approval and receive a loan commitment before they submit an offer, she says. The loan commitment indicates that the borrower’s paperwork has passed underwriting and the only thing necessary for final approval is the appraisal and verifying the borrower’s employment.

Source: “How Mortgage Problems Unravel Home Deals,” The New York Times (Aug. 14, 2015)

New-Home Sizes Are Starting to Shrink

New-Home Sizes Are Starting to Shrink. Image courtesy of fantasista / FreeDigitalPhotos.net

The median size of U.S. homes dropped slightly in the second quarter, edging back from a record set in the previous quarter, the Commerce Department reported Tuesday.

In the second quarter, the median size of a new home was 2,479 square feet – about 40 square feet smaller than the record high set in the first quarter.

The smaller size may be a sign that builders are starting to focus on building more entry-level homes, The Wall Street Journal reports. The National Association of Home Builders has predicted that first-time home buyers, who most often purchase entry-level homes, will comprise 18 percent of new-home sales this year, up from 16 percent last year. Still, that is far short of the 25 percent to 27 percent share of buyers that first-time home buyers comprised in the market from 2001 to 2005. At that time, the median size of new homes ranged from 2,051 to 2,263 square feet.

But anticipating the return of first-time buyers, some builders have announced efforts to focus on the entry-level market. For example, Meritage and D.R. Horton have launched divisions to build starter homes.

In the quarter ended June 30, D.R. Horton completed sales of 1,577 of its Express starter homes, which average 2,000 square feet and cost $188,000. Meritage has announced plans to expand into the entry-level market, which now accounts for 20 percent to 25 percent of its sales. Chief Executive Steven Hilton says he wants the entry-level share to rise to 35 percent in the coming years.

David Crowe, chief economist with the National Association of Home Builders, predicts that the median size of new-homes will continue to shrink over the coming years as more first-time buyers enter the market. Still, it may take a long time for the national median-size figure to reflect the trend further.

“It probably will take the rest of this year and next year before the first-time buyer share is sufficient to affect the median size of all new homes in a sustained manner,” Crowe told The Wall Street Journal.

Source: “Size of New Homes in U.S. Shrinks By One Closet,” The Wall Street Journal (Aug. 18, 2015)

Borrowers Make Fewer Late Payments

Borrowers Make Fewer Late Payments. Image courtesy of photostock / FreeDigitalPhotos.net

The mortgage delinquency rate – borrowers who are late on their mortgage payments by 60 days or more – is rapidly declining, dropping to 2.72 percent in the second quarter, according to a new report by TransUnion. The delinquency rate has fallen 20 percent in the last year alone, and by about half in the last three years, when it stood at 5.39 percent in the second quarter of 2012.

Forty-eight states and all of the top 10 largest metro areas saw double-digit declines in seriously delinquent mortgages. The largest declines were in Miami (down 40 percent from 8.87 percent in the second quarter of 2014 to 5.31 percent in the second quarter of 2015) and Los Angeles (down 29.1 percent from 2.62 percent in 2014 to 2.07 percent in 2015).

“This is the lowest mortgage delinquency level we’ve seen in several years – down from a peak of nearly 7 percent in early 2010,” says Joe Mellman, vice president and head of TransUnion’s mortgage group. “This is largely due to foreclosures and other seriously delinquent accounts continuing to work their way through the foreclosure process, as well as a reflection of the high credit quality of recent originations.”

TransUnion reported mortgage originations to subprime and near prime consumers had a year-over-year double-digit growth of 13.3 percent and 22.4 percent – a possible signal to a slight loosening of credit.

“We believe a major reason for the increase in mortgage originations was due to falling mortgage interest rates,” Mellman says. “The growth in jumbo loans for the Prime Plus and Super Prime risk tiers was another key driver. Despite this increase, it should be noted that there were 1.1 million fewer mortgage originations this past quarter compared to the pre-recession high in the third quarter of 2007.”

The average mortgage balance per consumer rose to $188,237 in the second quarter of 2015. For comparison, mortgage balances were at $186,999 at this point last year.

Source: TransUnion