Lenders Feel More Upbeat About Housing

Lenders Feel More Upbeat About Housing. Image courtesy of hywards / FreeDigitalPhotos.net

Mortgage lenders are growing increasingly optimistic that demand for mortgages for home purchases will remain strong over the next three months. Fannie Mae’s second quarter 2015 Mortgage Lender Sentiment Survey showed more lenders are reporting credit loosening and there’s a strong demand from borrowers for home purchase loans.

The latest results solidify a rosier outlook for housing, Fannie Mae economists note. “We expect a continued housing expansion in 2015, after an uneven and disappointing 2014,” says Doug Duncan, Fannie Mae’s chief economist.

The survey showed that senior mortgage executives are increasingly optimistic, and significantly more optimistic than consumers about future home prices. The share of lenders expecting home prices to rise over the next 12 months reached a survey high of 70 percent in the second quarter.

What’s more, the share of lenders reporting an increase in mortgage purchase demand over the prior three months reached a survey high for GSE-eligible and government loans, 77 percent and 65 percent, respectively.

“This quarter’s results showed that the growing optimism of lenders has been rewarded,” says Duncan. “The share of lenders reporting increased purchase mortgage demand over the prior three months reached a survey high for both GSE-eligible and government loans. At the same time, the positive gap grows between lenders reporting loosening or maintaining existing credit standards, relative to those reporting tightening. While not matching first quarter 2015 levels, the profit margin and purchase mortgage demand expectations over the next three months remain above the 2014 readings.”

Source: Fannie Mae

A Big Pick Up in Home building Is Coming.

A Big Pick Up in Home building Is Coming. Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

Permits for future home construction climbed to a near eight-year high in May, which sets the stage for greater inventories from home builders in the months ahead.

Building permits surged 11.8 percent to a seasonally adjusted annual pace of 1.28 million units, the highest since August 2007, the Commerce Department reports. This marks the second consecutive month of increases in housing permits, which have been above a 1 million-unit pace since July.

“Residential construction has been the laggard in this [housing] recovery and the moon shot surge in new permits today means the final piece of the recovery puzzle is now falling into place,” Chris Rupkey, chief financial economist at MUFG Union Bank in New York, told Reuters.

While the future signs look bright, groundbreaking on new homes posted a drop in May, plunging 11.1 percent to a 1.04 million-unit rate. However, that follows a strong April, where housing starts were at a revised rate of 1.17 million, the highest since November 2007, the Commerce Department reports.

Jonathan Smoke, chief economist at realtor.com®, blames the rain for the slowdown last month in home building. May’s record rainfall across the country made it difficult to begin construction on new homes, Smoke notes.

“As Milli Vanilli once crooned: Blame it on the rain,” Smoke says. “You can easily pull a permit in the rain, but it’s a bit harder to break ground and start construction.”

Housing permits are up 25 percent year-over-year, Smoke says. Regionally, housing permits in the Northeast increased to the highest level since March 1987, while in the Midwest, permits neared a one-year high in May. Permits, however, dropped in the South and West.

With job growth increasing and incomes rising, Americans are increasingly finding themselves in a better position to buy a home, Smoke says.

Source: “U.S. Building Permits Near 8-Year High; Starts Pull Back,” Reuters (June 16, 2015) and “Blame it on the Rain: Housing Starts Were Way Down in May – But Permits Hit an 8-Year Record,” Reuters (June 16, 2015)

Commercial Agents See Higher Incomes, Sales

Commercial Agents See Higher Incomes, Sales. Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

As the commercial market shows signs of improving, commercial real estate professionals are reporting an uptick in annual gross income as well as the number of sales transactions and their sales volume, according to the 2015 National Association of REALTORS® Commercial Member Profile, which is based on a survey of nearly 2,000 members.

The incomes of commercial REALTORS® has risen over the past five years. The median gross annual income was $126,900 in 2014, a rise from $96,200 in 2013.  Appraisers and brokers reported the highest annual gross income while sales agents – often those who are newest to the field – had the lowest, according to the report.

Commercial REALTORS® completed a median of 11 sales transactions in 2014, up from eight last year. The median sales transaction volume among members was $2,916,700 – an increase from $2,554,700 in 2013.

“After years of slow recovery, the commercial real estate market has shown meaningful growth and our members are seeing significant improvements in their business activity,” says NAR President Chris Polychron. “REALTORS® who practice commercial real estate help build and revitalize communities by facilitating investment in commercial properties that support millions of jobs nationwide. There is every indication that continued improvement to commercial markets will help stimulate economic growth for the rest of the country.”

Thirty-two percent of commercial members said they were involved in international transactions in 2014, with 18 percent saying they saw an increase in international clients.

Also, 83 percent of commercial members reported having a leasing transaction, according to the report. The median transaction leasing volume for members who reported at least one transaction was $500,000 in 2014 – a more than 15 percent increase from 2013.

“When it comes to leasing transactions, the report tells us that the more years of experience an agent or broker has the more high value transactions in which they are involved,” says Lawrence Yun, NAR’s chief economist. “The broad improving leasing trend will continue this year and next because of rising occupancy rates across all commercial property types.”

Source: National Association of REALTORS®

Higher Home Prices Push Affordability Down

Higher Home Prices Push Affordability Down. Image courtesy of hywards / FreeDigitalPhotos.net

Housing affordability is down from a year ago as higher prices continue to outpace incomes, according to the National Association of REALTORS® Economists’ Outlook blog.

Nationally, the median single-family home price is $221,000, up 10 percent from April 2014, NAR reports. The Midwest has seen some of the largest increases in home prices – climbing 11.6 percent in the past year alone. The Northeast, on the other hand, is seeing the slowest price growth regionally at 4.9 percent in the past year.

Housing affordability is down in all major regions of the U.S. from a year ago, except in the Northeast, where home price growth is moderating.

“In other regions, the decline from a year ago was relatively small as mortgage rates lower than a year ago helped but could not completely offset increases in home prices,” NAR finds.

But mortgage rates are on their way up. Freddie Mac reported last week that the 30-year fixed-rate mortgage set a new high for 2015, averaging above 4 percent for the first time in nearly a year.

“This may be a good time for return and first-time home buyers to surge back into the housing market before rates climb higher, further reducing affordability,” NAR notes.

View NAR’s latest Housing Affordability Index for a full breakdown of affordability across the U.S.

Source: “Housing Affordability Index,” National Association of REALTORS® Economists’ Outlook Blog (June 12, 2015)

Renter Growth to Explode by 2030

Renter Growth to Explode by 2030. Image courtesy of hywards / FreeDigitalPhotos.net

The renter population is expected to only get bigger in the next 15 years and will likely exceed new home owners by millions, according to a newly released report by the Urban Institute, “Headship and Home ownership: What Does the Future Hold?”

Between 2010 and 2030 – the year millennials are to reach peak home buying age – new renters will exceed new home owners by 4 million, according to the report. Broken out, the report estimates 13 million renters to 9 million home owners by 2030.

“The rapid growth of the renter population will create significant demand for new rental housing construction and encourage a shift of owner-occupied dwellings to rentals,” according to the report. “In the next 15 years, many more rental households will form because of the size and ethnic composition of the millennial generation. Rental housing vacancy rates are already low, and rents are rising. Single-family homes are shifting to renter occupancy throughout the nation, and this trend is likely to continue.”

Still, the total number of home owners are expected to see growth in the next 15 years due to net household formation, the report notes. In particular, the rate of Hispanics in home ownership is expected to make gains, from 47.3 percent in 2010 to 48.2 percent by 2030.

Household formations are mostly expected to be driven among nonwhite populations from 2010 to 2020 with 77 percent of new households expected to be nonwhite, according to the report. In the following 10 years, that growth is expected to be at 88 percent. Also, household formation growth also is expected to be driven by a growth among senior households, those who are 65 or older.

Source: “Headship and Home Ownership: What Does the Future Hold?,” The Urban Institute (June 2015)

The Most Common Delays Toward Closing

The Most Common Delays Toward Closing. Image courtesy of stockimages / FreeDigitalPhotos.net

The majority of contracts – 64 percent — are settled on time with no delays to closing, but some REALTORS® acknowledge facing delays or even having contracts terminated for numerous reasons, according to the latest REALTORS® Confidence Index Survey, a survey of more than 1,500 REALTORS®. Twenty-six percent of REALTORS® surveyed identified a delay to settlement, while 10 percent said they have even had a contract terminated prior to closing.

About 60 percent of REALTORS® reported some type of issue on their contract in April. For example, 12 percent of REALTORS® identified a financing issue; 8 percent had home inspection problems surface; and 7 percent had an appraisal issue. Three percent of REALTORS® also identified issues buying/selling distressed property; titling and deed issues; or with contingencies stated in the contract.

“It is surprising that in a ‘tight’ and ‘difficult’ credit environment, only 12 percent of contracts that were reported to have settled or terminated had financing issues,” economists at the National Association of REALTORS® report. “One explanation may be that potential home buyers are deciding to sit on the sidelines for now, so these buyers were not captured in the data.”

Source:”64 Percent of Contracts Are Settled on Time,” National Association of REALTORS® Economists’ Outlook Blog (June 8, 2015)