Stage for Home Buyers’ Return

Stage for Home Buyers’ Return. Image courtesy of jannoon028 / FreeDigitalPhotos.net

Home buyers are reportedly returning to the market after nearly a year, as mortgage rates mostly stabilize and federal regulators offer up rules that promise to make it easier to get a loan, Reuters reports.

Home building giants D.R. Horton Inc. and Toll Brothers Inc. reported this week a sharp rise in new orders that hasn’t been matched since last year. Builders are welcoming the rise, after a reportedly disappointing spring selling season.

In October, mortgage rates plummeted to the lowest levels since June 2013 – below 4 percent – and near record lows. The dip was welcome news to buyers after a steady rise in rates for the past year. What’s more, government regulators have recently proposed new rules to allow buyers to purchase homes with down payments as low as 3 percent, more welcome news for many buyers who have been sidelined by strict underwriting in recent years.

“We’re definitely seeing a lot more purchase business than we have in the past,” Matt Hackett, underwriting manager at Equity Now, a New York–based mortgage lender, told Reuters.

Still, for the recovery to take full root, one important buyer segment needs to reemerge: first-time buyers. The National Association of REALTORS®’ research released earlier this month showed the number of first-time buyers this year dropped 5 percentage points from a year prior to 33 percent — the lowest share since 1987, in which it was 30 percent.

“First-time home buyers are the ones missing from the marketplace (and) part of the reason we’ve had a relatively slow recovery in housing,” says David Crowe, chief economist at the National Association of Home Builders. “Some relaxation in the overly restrictive lending standards will bring the first-time home buyer back.”

Source: “Easier Mortgage Rules, Stable Rates Bring Back U.S. Home Buyers,” Reuters (Nov. 11, 2014)

Financing Barriers Stifle Condo Resurgence

Financing Barriers Stifle Condo Resurgence. Image courtesy of jscreationzs / FreeDigitalPhotos.net

Demand for condo units is rising in urban areas nationwide, but mortgage financing continues to squeeze out entry-level buyers, the Los Angeles Times reports.

List prices for condos in major markets are rising faster than prices for single-family detached homes in many areas. Condos are surging in popularity as boomers look to downsize and other owners seek to live closer to urban workplaces and cities.

Lawrence Yun, chief economist for the National Association of REALTORS®, estimates that condos have surged from about 8 percent of the market share to between 11 percent and 12 percent recently. In some markets, the share is greater: In Miami, for example, condos accounted for nearly 45 percent of home sales in September, and in Los Angeles, they accounted for about 27 percent, according to CoreLogic’s DataQuick.

But financial barriers — particularly for Millennial and first-time buyers — may be keeping the condo surge from heightening more. The Times reports that the Federal Housing Administration continues to severely restrict the availability of its low-down-payment mortgages in several condo projects. The FHA will insure mortgages in less than 7 percent of the nation’s estimated 150,000-plus condominium developments, according to the Times.

In particular, the agency has stopped approving so-called “spot loans” in condo projects where condo associations have not applied for and received special certification. Several condo HOA boards have called the certification burdensome and say that the process often ends in rejection.

FHA tightened its financing of condo projects after being faced with significant foreclosures during the housing crisis.

However, the agency may be considering a change: The Times reports that FHA is drafting a major condo proposal for 2015, which could potentially bring back financing to more buyers and existing unit owners.

Source: “FHA Squeezing Loans for Condos Despite Surging Demand,” Los Angeles Times (Nov. 9, 2014)

Renters Face Affordability Crisis

Renters Face Affordability Crisis. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

With increased competition for units, rents are shooting up, and the increases are biting renters’ wallets as they find themselves increasingly getting priced out of the market, with wages failing to keep pace.

Nationwide rents have risen about 6 percent from a year ago, due to rising demand and still-limited supply, CNBC reports. Renters in San Francisco, San Diego, Boston, Baltimore, Washington, D.C., and Chicago are paying more than 30 percent of their wages on a two-bedroom rental, according to an analysis by Trulia. Financial experts often recommend spending no more than 30 percent of wages on housing expenses.

“Both rents and [home] prices are outpacing income growth, so neither renting nor buying has become more within reach of what people can afford,” says Jed Kolko, Trulia’s chief economist. “Plus, paying more on rent makes it harder for would-be homebuyers to save for a down payment.”

Rental demand is strong and likely will remain so for the foreseeable future, analysts note. Apartment vacancies rose slightly in the third quarter for the first time in four-and-a-half years, but was mostly attributed to more rental supply coming on the market, according to Reis analytics firm.

“Units brought online during tight market environments have a tendency to actually push rents upward, not downward,” says Ryan Severino, a senior economist at Reis, told CNBC. “So landlords should still be able to push asking rent increases on to their tenants.”

Source: “Rents Skyrocket Well Beyond Wages,” CNBC (Nov. 6, 2014)

Building Reality Into the American Dream

Building Reality Into the American Dream. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

It wasn’t quite real until she saw it firsthand. Quenetria “Que” Harris had just dropped her three-year-old son Ja’kyi off at school when she drove up to thank a few of the more than 100 REALTOR® volunteers working to make her new home a reality.

“It hit me because they just put the walls up,” said Harris, the recipient of one of three East New Orleans–area homes that were part of Wednesday’s REALTOR® Build Day organized in conjunction with the 2014 REALTORS® Conference & Expo. “I’m shocked; it’s overwhelming… I haven’t met any of these people and they are just doing this out of the kindness of their hearts.”

But those who showed up ready to work were hardly shocked by the turnout.

“That’s what REALTORS® do. We make a difference,” said NAR President Steve Brown. He noted that the volunteers were among the select few able to participate in the sold-out event: “There were only 150 slots for today’s build. What does that tell you about our organization?”

NAR began the REALTORS® Volunteer Build Program at the annual conference in Chicago in 2001, and has continued to host an event at every conference host city since. This year marks the fourth build in the city of New Orleans, which is also the location of the two largest REALTORS® Volunteer Builds ever, in terms of volunteers.

“You guys were here in 2006 right after Katrina, when our fragile and beautiful city needed you most,” said Marguerite Oestreicher, chief advancement officer for the New Orleans Area Habitat for Humanity. “REALTORS® know better than most of our other volunteer groups what a difference home ownership makes in the life of a family.” Harris and her son expect to move in to their home by Christmas.

—By REALTOR® Magazine

Home sales down because of: Down Payments or Debt?

Home sales down because of: Down Payments or Debt? Image courtesy of marin / FreeDigitalPhotos.net

Debt — like student loans and car payments — can create the biggest barrier to home ownership, more so than saving for a down payment, according to a new analysis by RealtyTrac.

RealtyTrac analyzed affordability in 500 counties and found that one of the biggest obstacles potential buyers face is any non mortgage debt they may carry as they try to qualify for a loan.

Such extra debt loads are making housing payments less affordable in many markets across the country. For example, the addition of debts such as student loans and car payments made monthly house payments affordable in less than half — 48 percent — of U.S. housing markets, assuming a 3 percent down payment, according to RealtyTrac’s analysis. Borrowers with extra debt who can come up with a larger down payment may find affordability easier to achieve, however. With a down payment of 20 percent, for example, about 78 percent of the country’s housing markets become affordable, even when carrying student loan debt and a car payment.

For borrowers without any additional debt, they’ll find affordability high. Their monthly house payments were affordable in more than 90 percent of U.S. housing markets, even with just a 3 percent down payment, according to RealtyTrac’s analysis.

Still, saving for a down payment can be a big obstacle to home ownership too. It takes an average of 12.5 years to save for a 20 percent down payment on a median-priced home at the current annual savings rate of 5.6 percent, according to the St. Louis Federal Reserve. It takes an average of less than two years to save up for a 3 percent down payment.

But researchers note there are down payment assistance programs available. In fact, there are more than 2,300 down payment and closing costs programs nationwide, offering assistance amounts, on average, of $19,720, according to data collected by the Down Payment Resource.

“The narrative is that it’s too hard to get a loan today, and when first-time buyers believe that, they won’t even begin their search. That hurts the overall housing market,” says Rob Chrane of Down Payment Resource. “Consumers for the most part have no idea that these programs exist, so they don’t think to ask for them. Whatever your situation is, whatever you have for a down payment, you could be in a much better situation if you find out you are eligible for one of these programs.”

Source: “The Biggest Drag on Home Ownership: Down Payments or Debt?” RealtyTrac (Nov. 4, 2014)

Home Applications Post First Rise in Weeks

Home Applications Post First Rise in Weeks. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Applications for home purchases, a leading indicator of home sales, increased 2.6 percent last week, even with a rise in interest rates, according to the Mortgage Bankers Association’s seasonally adjust index of mortgage activity, reflecting the week ending Oct. 31. The rise follows a 5 percent decrease the previous week.

Refinance activity is diminishing. Refinancing posted a big surge last month due to interest rates hitting the lowest point of the year. But for the last two weeks, refinance activity has fallen, dropping 5.5 percent the prior week.

Due to the big drop in refinancing applications last week, overall mortgage application activity, which reflects both refinancing and home purchases, posted a 2.6 percent decrease in the week.

Meanwhile, the 30-year fixed-rate mortgage was on the rise last week, up four basis points, averaging 4.17 percent.

Source: “U.S. Mortgage Applications Fall in Latest Week: MBA,” Reuters (Nov. 5, 2014)