Home Builders give Hopeful Buyers Financial Therapy.

Home Builders give Hopeful Buyers Financial Therapy

Home builders are conducting financial boot camps to help buyers qualify for home mortgages.

Home builders such as D.R. Horton Inc., Lennar, and PulteGroup Inc. are offering financial programs about repairing credit scores, creating budgets, and applying for loans to hopeful home buyers who are struggling to qualify for loans nowadays.

“These fiscal rehabs are one reason many Home builders are boosting sales, even though mortgage lending is tight,” Reuters reports.

For example, Home builders like D.R. Horton and Lennar have employed financial advisers that are helping potential home buyers with repairing their credit and developing strategies to help raise their credit scores. The buyers who go through the “financial bootcamps” are then typically able to get a mortgage from the builders’ in-house lending connections.

Some are leery about the financial bootcamps, however. Critics say that builders are helping buyers obtain government-backed loans that require no or low down payments.

“You have people applying for loans that there’s no way they can pay, but it doesn’t matter because the ability to repay isn’t the basis of the loan. It’s the ability to pass underwriting so the loan can be sold,” Brett Weiss, a bankruptcy attorney in Washington, D.C., told Reuters.

However, Home builders argue that the home buyers who go through their financial programs must still meet stringent underwriting standards for the government loans, and they insist that they are not putting people in homes they cannot afford. The builders say that buyers with enough cash and income actually are able to lower their monthly housing costs by buying a home than renting, since mortgage rates are so low and housing affordability so high.

Source: “Homebuilders Put Buyers into Credit Bootcamp,” Reuters (Sept. 28, 2012)

Home Ownership Rate Stands at 65.5%

Home Ownership Rate Stands at 65.5%

Americans still favor home ownership. The U.S. home ownership rate continues to remain around 65.5 percent, the U.S. Census Bureau reported late last week. The home ownership rate is nearly the same as it was in the second quarter of 2011 at 65.9 percent.

The Census Bureau also reported that vacancy rates for housing were 2.1 percent and vacancy rates for renting were 8.6 percent in the second quarter.

The home ownership rate peaked at 69.2 percent in 2004. Home owners outnumber renters in nearly 100 percent of the nation’s 3,095 counties evaluated by the Census.

Keweenaw County, located in Michigan’s Upper Peninsula, posted one of the best home ownership rates: 89.8 percent.

Source: “National Home Ownership Rate Is Pegged at 65 Percent,” The Business Journals (Sept. 28, 2012)

New Home Prices Soar to 5-Year High

New Home Prices Soar to 5-Year High

The median price of a new home rose a record-breaking 11.2 percent in August, reaching $256,000. That marks the highest level since March 2007, the U.S. Census Bureau reported Wednesday.

The prices of a new home in August soared 17 percent compared to last year at this time.

The number of new homes that sold in higher price ranges — $400,000 or more — rose significantly in August.

“This reflects the fact that people who are able to buy a new home right now are those in higher-income ranges who have cash and equity on hand, while first-time buyers are having a tougher time getting qualified for a mortgage,” says David Crowe, the National Association of Home Builders’ chief economist.

As prices rose, inventories for a new home in August remained at record lows. It would take 4.5 months to clear the houses on the market at August’s sales pace, the Census Bureau reported.

Single-family new home sales mostly held steady in August, remaining at two-year highs. Sales slipped 0.3 percent to a seasonally adjusted annual rate of 373,000.

On a regional basis, new-home sales in August soared 20 percent in the Northeast, 1.8 percent in the Midwest, and 0.9 percent in the West. New-home sales declined 4.9 percent in the South in August.

“New home sales in August effectively tied the pace they set in the previous month, when they were the strongest we’ve seen in more than two years — so this is really a continuation of the good news we’ve been getting on the housing front,” says Barry Rutenberg, NAHB chairman. “Looking at the big picture, sales have been trending gradually upward since the middle of last year as favorable interest rates and prices have driven more consumers to get back in the market for a newly built home.”

Source: “New Home Sales Ease, But Prices Hit 5-Year High,” Reuters (Sept. 26, 2012) and the National Association of Home Builders

Loan Applications Rise as Rates Reach Record Lows.

Loan Applications Rise as Rates Reach Record Lows

More home owners and purchasers took advantage of locking in last week’s record low rates. Mortgage Loan Applications — which include both for refinancing and purchase — rose 2.8 percent for the week ending Sept. 21, the Mortgage Bankers Association reports.

Mortgage Loan Applications for home purchases, an indicator for future home sales, increased 0.7 percent last week. Applications for refinancing rose 3.3 percent, as more home owners tried to trim their monthly mortgage payment by locking in a lower rate.

Mortgage rates last week sank to record lows, following the Federal Reserve’s announcement of more stimulus efforts on the way. The Fed announced it would purchase $40 billion in mortgage-backed securities every month, which is expected to send rates even lower. The 30-year fixed-rate mortgage averaged 3.63 percent, its lowest level on record, according to the MBA.

Source: “Mortgage Applications Rose as Rates Hit New Lows,” NBC News (Sept. 26, 2012)

Home Prices Continue to Rise Over Last Year’s Levels

Home Prices Continue to Rise Over Last Year’s Levels

More housing reports released on Tuesday showed Home Prices Continue to Rise. The Federal Housing Finance Agency reported that U.S. home prices increased 3.7 percent from a year ago in the 12-month period ending in July.

FHFA’s home price index is now at about the same level it was in June 2004. However, it’s 16.4 percent below the peak reached in April 2007. To calculate its housing index, the FHFA uses purchase price data on mortgages owned or guaranteed by Freddie Mac and Fannie Mae.

Also on Tuesday, S&P/Case-Shiller released a report also showing Home Prices Continue to Rise for the fourth consecutive month and at their highest level in nearly two years. S&P/Case-Shiller report measures home prices in 10-city and 20-city composite indices. In its 20-city index, S&P/Case-Shiller reported home prices up 1.2 percent compared to a year earlier.

“The news that Home Prices Continue to Rise in this report confirm recent good news about housing,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, told The Wall Street Journal. “Single family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic about housing.”

Last week, NAR reported that the median price on existing-homes rose 9.5 percent over year ago levels. The median home price in August is $187,400.

The increase to the sales price in August was the strongest since January 2006 when median home prices had risen 10.2 percent higher than what they were a year ago.

The National Association of REALTORS® will release its pending home sales report on Thursday.

Source: “FHFA Home Price Index Now Equals 2004 Levels,” HousingWire (Sept. 25, 2012) and “Case-Shiller Shows Home Prices Rise Sharply Again,” The Wall Street Journal (Sept. 25, 2012)

Credit Scores Can Differ From What Lenders Use

Credit Scores Can Differ From What Lenders Use

When reviewing their credit scores, one in five consumers are likely to receive a different credit score from what a creditor will use to price a loan, according to the Consumer Financial Protection Bureau. The discrepancy has the agency concerned.

Lenders use credit scores to help determine the interest rate they’ll charge customers—with higher credit scores often receiving the best rates.

“Many consumers incorrectly believe that the scores they purchase are the same ones used by lenders,” according to a CFPB report. As such, a “substantial minority” of consumers are at risk of overpaying for credit or in applying for loans that they’re ineligible for.

Even the slightest variation in credit scores can make a big difference and has the potential to hamper a person’s chances for qualifying for certain kinds of home loans, according to the CFPB.

The CFPB sites FICO scores, which are widely used by lenders, as having different credit scoring models for lenders and consumers that can vary. VantageScore also has different types of credit scores, CFPB says.

CFPB is evaluating the accuracy that credit reporting firms provide to consumers.  It encourages consumers that when they review their credit reports to focus not on credit scores but to check the accuracy of the payment history on the reports because the firms use that to calculate scores. Consumers should take steps to correct any errors they find on the payment history of their reports because it can help improve their scores, CFPB notes.

Source: “Regulator Sees Flaws in Credit-Score Information,” The Wall Street Journal (Sept. 25, 2012)