Hike in Interest Rates Likely by Mid-Year

Hike in Interest Rates Likely by Mid-Year. Image courtesy of zirconicusso / FreeDigitalPhotos.net

Many economists believe mortgage rates will be on the move upward this year after sitting near historic lows the past few weeks. The 30-year fixed-rate mortgage rose above 4 percent for only two weeks since Oct. 16, according to Freddie Mac’s weekly mortgage market report. That has helped to lower borrowing costs for home buyers — but that may soon change.

The Federal Reserve is expected to boost its short-term interest rate target around the middle of the year if economic growth continues to move at a solid pace.

“Bond yields and mortgage rates will begin moving higher as the timetable for Fed interest rate hikes comes into focus, with rates on credit cards, auto loans, and home equity lines of credit responding after the fact,” says Greg McBride, Bankrate.com’s chief financial analyst. “The bulk of next year’s increases will come in the back half of the year.”

McBride is forecasting the 30-year fixed-rate mortgage to remain below 5 percent this year, but he says it could see lots of volatility.

“We’ll see rates near 4 percent on the low side if there’s an economic stumble or geopolitical crisis, and rates as high as 4.8 percent or 4.9 percent if the Fed missteps or misspeaks,” McBride says.

Lawrence Yun, chief economist for the National Association of REALTORS®, expects the Fed to act sooner with its uptick in rates due to inflationary pressures of rising wages and rents. Jonathan Smoke, chief economist at realtor.com®, is forecasting mortgage rates to reach 5 percent in 2015.

Source: “Bankrate.com: Expect Fed to Move on Interest Rates by Mid-Year,” HousingWire (Jan. 5, 2015)

Market Types You’ll See This Year

Market Types You’ll See This Year. Image courtesy of ddpavumba / FreeDigitalPhotos.net

From the stalwarts to the tech magnets and comeback kids, the new year is likely to see several types of markets. Redfin recently highlighted six “housing market personas” that the real estate brokerage believes will be driving the continued recovery in 2015. Here’s an overview of the personas and the pros and cons of each:

1. Stalwarts: “Strong economies, lots of Millennial buyers, yet still affordable.”
   Good news: Lots of jobs and booming economies.
   Bad news: Picky buyers and lack of selection.
   Markets that fit this persona: Chicago, Houston, and Dallas.
2. Topping Out: “Sky-high prices that will peak and even dip into negative territory this year.”
   Good news: Strong economies and well-paying government jobs.
   Bad news: Bidding wars and low inventories.
   Markets that fit this persona: San Francisco; San Jose, Calif.; and Washington, D.C.
3. Tech Magnets: “Tech-driven economies, young wealth; getting more expensive, with growth limited by zoning or geography.”
   Good news: Lots of wealthy households.
   Bad news: Little room to expand, and suburbs losing popularity.
   Markets that fit this persona: Boston, Seattle, and Denver.
4. Comeback Kids: “Markets hit hard by the financial crisis that will see a pickup in sales in 2015.”
   Good news: Lots of investors and broad-based job growth.
   Bad news: Few affordable single-family homes, and new construction mostly limited to the luxury market.
   Markets that fit this persona: Miami; Atlanta; and Orlando, Fla.
5. Sleepers: “Not in the news much, but mid-priced cities with good economies and job opportunities.”
   Good news: Lots of new development and big tech-job gains.
   Bad news: Not many affordable homes available.
   Markets that fit this persona: Baltimore; Philadelphia; and Raleigh, N.C.
6. Down But Not Out: “Hit hardest by housing crisis, fewer jobs, still working through foreclosures.”
   Good news: Lots of homes for sale.
   Bad news: Overzealous builders and cookie-cutter remodels.
   Markets that fit this persona: Las Vegas; Phoenix; and Tampa, Fla.

Source: “From Stalwarts to Comeback Kids and Sleepers, Redfin Names 6 Housing Market Personas for 2015,” Redfin blog (Jan. 5, 2015)

When Sellers Try to Take Too Much

When Sellers Try to Take Too Much. Image courtesy of smarnad / FreeDigitalPhotos.net

Some sellers want to take more with them than a favorite light fixture or curtain rod. They may want to move entire rooms to their new home.

That’s what Cindy Jones, a real estate broker in Woodbridge, Va., recently encountered when she saw a listing that noted the seller wanted to take the entire kitchen with them.

“How do you explain to the underwriter that the kitchen doesn’t come with the house and expect to get a loan that includes the value of a kitchen?” she wrote in a recent post on ActiveRain.com.

The Los Angeles Times recently featured an article on sellers who may want to take too much with them when they move, and how it can derail a deal. In some cases, sellers don’t tell their agent of their intentions beforehand.

For example, Lenn Harley, a broker in the Washington area at Homefinders.com, says she had a transaction once where the seller removed a crystal chandelier prior to closing. Her buyers noticed the switch during their pre-closing walk through, and ended up receiving a $2,500 credit for the missing chandelier.

Other agents share that some sellers try to swap in inexpensive fixtures, for example, for a higher priced one in the final hour. Others say they’ve had clients try to dig up plants and trees from the yard that they wanted to take with them when they moved. Mark Arlow of Keller Williams in Savannah, Ga., said he had a client who wanted to move the home’s front door with him. It was the door to the family farm where he had grown up.

“When they sold the farm, they kept the front door as a reminder of the farm, and now the door goes with them wherever they go,” Arlow said.

It’s hard to guess what sellers are planning on retaining from their home, so real estate professionals must have upfront conversations with sellers about what stays with the house. If home owners plan to take a certain fixture with them, they may be better off removing and replacing it prior to the home being listed.

After all, “when a seller starts keeping things that should stay with the house, I guarantee that the contract negotiations will be painful,” says Eve Alexander of Windermere Real Estate in Orlando, Fla.

Source: “Some Home Sellers Want to Take Everything, Including Kitchen Sink,” Los Angeles Times (Jan. 4, 2015)

Veterans Missing Out on Home Ownership?

Veterans Missing Out on Home Ownership? Image courtesy of stockimages / FreeDigitalPhotos.net

Military vets who fail to look into government programs could be leaving money on the table when they purchase a home, according to a new article published by the Los Angeles Times.

Loans guaranteed by the Department of Veterans Affairs potentially offer big savings, and can be a way for qualified military personnel to break into home ownership since they often don’t require a down payment. In the majority of places, vets can borrow up to $144,000 without making any down payment on their home purchase. The limit stretches higher in some places. For example, in Sacramento, Calif. the maximum that can be borrowed is $827,500, and it’s $546,250 in San Diego.

For buyers who do have to go above the limits, lenders typically require a down payment of $1 for every $4 borrowed over the limit. In other words, the Los Angeles Times article notes: If a vet is borrowing $200,000, he or she will most likely need $14,000 as a down payment in most markets.

The fear of paperwork may scare off some potential buyers who are eligible for VA loans. But, according to data from the Veterans Association of Real Estate Professionals, VA loans close up to two days faster than conventional mortgages.

The VA loan program is among the fastest-growing sectors in the mortgage market, according to Inside Mortgage Finance. The VA department owned nearly 25 percent of the primary insured-loan market, which outpaces the Federal Housing Administration. What’s more, the vet population is huge: Nearly 12 percent of 16.4 million active-duty service members and military vets with a mortgage have a VA loan, according to data from the National Association of REALTORS®.

Several states and local governments also offer vets assistance on home purchases. For example, the California Housing Finance Agency has a tax credit program that reduces buyer’s federal taxes, which thereby creates extra income to use toward the monthly house payment. In Arizona, compensation received by service members who are on active duty any month of the year is exempt from income taxes on those months’ income. Arizona also offers a property tax exemption for widows and widowers of vets, as well as disabled persons. Also, some counties offer special savings to vets too. For example, in San Diego, qualifying military personnel may be eligible for rehab loans to help pay for fixes to existing properties.  Military.com offers a state breakdown of financing options for veterans.

Source: “Sellers who Ignore VA Buyers Are Missing Out,” United Feature Syndicate/Los Angeles Times (Dec. 28, 2014)

Housing Markets Show Signs of Stabilizing

Housing Markets Show Signs of Stabilizing. Image courtesy of hywards / FreeDigitalPhotos.net

A greater number of housing markets are showing signs of normalizing, as 70 of the markets tracked by a Freddie Mac index now move to positive momentum.

Freddie Mac’s latest Multi-Indicator Market Index (MiMi) showed a reading of 74.5 nationwide, which still indicates a weak housing market overall but shows signs of improvement from September to October and an improvement year-over-year.

The index’s all-time high was set in June 2006 when it reached 122.5. Its lowest point was 60.3 in September 2011. Since then, the housing market has made a 23.5 percent rebound, Freddie Mac notes.

The index monitors the stability of the nation’s housing market using Freddie Mac and local market data to gauge the performance of single-family housing markets relative to a long-term stable range. The index tracks home purchase applications, payment-to-income ratios, on-time mortgage payments, and the local employment picture.

In October, 29 of the 50 states and 41 of the 50 metros tracked were showing an improving three-month trend.

“Housing markets continue to heal across the country with those hardest hit showing the biggest improvement,” Freddie Mac Chief Economist Frank Nothaft notes. “Low mortgage rates have helped, but we also need better household income growth. The employment picture needs to improve more to strengthen wage growth. The good news is we’re slowly starting to see this happen in areas like Denver, San Jose, Nashville, and Pittsburgh to name a few, where we’re also seeing better purchase application activity on a monthly basis.”

Thirteen of the 50 states, plus the District of Columbia, now have MiMi values in the stable range. The top five are: North Dakota, the District of Columbia, Montana, Wyoming, and Hawaii. Eight of the 50 metro areas tracked also have MiMi values in the stable range, led by San Antonio, Austin, Houston, Los Angeles, and Salt Lake City.

The states showing the most improvement in their housing markets year-over-year are: Nevada, Illinois, Florida, Rhode Island, and Colorado. On a metro level, the markets showing the largest year-over-year improvement are: Las Vegas, Chicago, Miami, Denver, and Riverside, Calif.

Source: Freddie Mac

‘Naughtiest, Nicest Housing Market’ List

‘Naughtiest, Nicest Housing Market’ List. Image courtesy of photostock / FreeDigitalPhotos.net

Researchers have been checking their lists, trying to find out which housing markets have been naughty or nice this year. RealtyTrac analyzed 334 U.S. cities with populations of at least 100,000 to compile lists of the nicest — those markets with some of the lowest crime rates and foreclosures, highest employment, and best school scores — and to fish out those that have been the naughtiest.

RealtyTrac’s analysis found that in the 10 “nicest” housing markets school scores were nearly twice the national average, crime rates were one-third the national average, and the unemployment rate was at an average of 4.6 percent. They also found that foreclosures were lowest — 24 foreclosures per 10,000 housing units.

The 10 cities that made RealtyTrac’s “nicest” list this year are:

1. Cary, N.C.
2. Fairfax, Va.
3. Pearland, Texas
4. Irvine, Calif.
5. Frisco, Texas
6. Sugar Land, Texas
7. Richardson, Texas
8. Katy, Texas
9. College Station, Texas
10. Fremont, Calif.

On the other hand, in the “naughtiest” cities this year, RealtyTrac found that school scores were one-half the national average; crime rates were nearly twice the national average, and the average unemployment rate was 7.8 percent. Milwaukee, Detroit, and Stockton, Calif., topped RealtyTrac’s list as the “naughtiest” this year.

Source: “The 10 Naughtiest and Nicest Housing Markets,” RealtyTrac (Dec. 18, 2014)

Home Sales Lost Momentum in November

Home Sales Lost Momentum in November. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Existing-home sales fell last month as housing supply showed signs of tightening, according to the National Association of REALTORS®’ latest housing report. Sales activity was choppy throughout the country, with all regions posting declines compared to a month earlier, NAR noted.

“Fewer people bought homes last month despite interest rates being at their lowest levels of the year,” says Lawrence Yun, NAR’s chief economist. “The stock market swings in October may have impacted some consumers’ psyche and, therefore, led to fewer November closings. Furthermore, rising home values are causing more investors to retreat from the market.”

Existing-home sales, which reflects single-family homes, townhomes, condos, and co-op sales, dropped 6.1 percent in November to a seasonally adjusted annual rate of 4.93 million. Sales are at their lowest annual pace since May. However, sales remain above year-over-year levels, up 2.1 percent compared to November 2013.

5 Stats to Gauge the Market

Here’s an overview of the latest housing data from NAR’s November report:

1. Home prices: The median price of an existing home for all housing types was $205,300 in November, which is 5 percent higher than a year ago. November marked the 33rd consecutive month of year-over-year price gains.
2. Single-family home and condo sales: Single-family home sales fell 6.3 percent to a seasonally adjusted annual rate of 4.33 million in November, down from 4.62 million in October. However, they remain 2.4 percent above the 4.23 million pace a year ago. Existing condominium and co-op sales fell 4.8 percent to a seasonally adjusted annual rate of 600,000 units in November, unchanged from a year ago.
3. Inventory levels: Housing inventory dropped 6.7 percent at the end of November to 2.09 million existing homes available for sale. That represents a 5.1-month supply at the current sales pace, which is unchanged from last month. Still, unsold inventory remains 2 percent higher than a year ago. “Lagging homebuilding activity continues to hamstring overall housing supply and is still too low in relation to this year’s promising job growth,” says Yun. “Much faster price and rent appreciation — easily exceeding wage growth — will occur next year unless new construction picks up measurably.”
4. First-time buyers: The share of first-time buyers rose to 31 percent in November, marking the highest share since October 2012. First-time buyers have averaged a 29 percent market share through most of this year. Fannie Mae and Freddie Mac’s new low-down-payment program, offering 3 percent down-payment loans, likely will improve access to credit for first-time buyers, says NAR President Chris Polychron. “The new program mitigates risk with strong underwriting and ensures that responsible buyers have access to safe and affordable mortgage credit,” Polychron says. “Furthermore, NAR believes lenders must do their part to ensure loans are prudently underwritten and are made available to qualified borrowers.”
5. Distressed sales: Foreclosures and short sales were mostly unchanged in November from October, remaining at 9 percent. Distressed sales made up 14 percent of all sales a year ago. Broken out in November, 6 percent of sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in November, while short sales were discounted 13 percent.

Regional Breakdown

Here’s an overview of how existing-home sales performed across the country in November:

• Northeast: Dropped 4.2 percent to an annual rate of 680,000 but remain 4.6 percent above a year ago. Median price: $246,100, 1.3 percent above a year ago.
• Midwest: Fell 8.9 percent to an annual rate of 1.13 million and are 1.7 percent below November 2013. Median price: $160,500, up 7 percent from a year ago
• South: Decreased 3.2 percent to an annual rate of 2.09 million but remain 5 percent above November 2013. Median price: $176,500, up 5.2 percent from a year ago
• West: Fell 9.6 percent to an annual rate of 1.03 million but are 1 percent below a year ago. Median price: $292,700, 3.5 percent above November 2013

Source: National Association of REALTORS®