Down Payment Insurance Rolls Out Soon

DAILY REAL ESTATE NEWS | MONDAY, OCTOBER 12, 2015

A new type of insurance is expected to roll out early next year that will allow borrowers to protect the thousands of dollars they put down in purchasing a home.

Beginning next January, +Plus by ValueInsured will charge an upfront premium that will mostly be tied into the interest rate borrowers pay on their mortgage and then insure the borrower’s down payment all the way up to $200,000. The borrower will be the beneficiary.

Read more: What's an Average Down Payment?

For borrowers who see a dip in the value of their home and have to sell at a loss, they would be eligible with the insurance to make a claim up to the full amount of their original down payment. The premiums on the insurance are projected to average around $1,200 on a $20,000, 10 percent down payment on a $200,000 house.

The idea is to offer borrowers more protection with their down payment in case of housing market declines or a job transfer, illness, or life event that forces them to sell during a sluggish housing market.

The goal +Plus is “to take the risk element off the table and give [buyers] more confidence,” says Joe Melendez, founder and CEO of ValueInsured, a Dallas-based company. 

The idea has intrigued some in the industry, but they caution it’s important borrowers read the fine details, particularly the terms on when and how much they’ll receive if they make a claim for a loss. Under the program, borrowers won’t be able to file a claim during the first two years after their purchase or after seven years. What’s more, the +Plus plan will judge its payouts in part by a property value index published by the Federal Housing Finance Agency -- so if a borrowers’ state index hasn’t declined as much as their home’s value since the date of purchase, they aren’t likely to get any money back.

Source: “Soon You Can Insure Your Down Payment,” The Seattle Times (Oct. 10, 2015)

CHECK OUT THESE MARKET UPDATES!

3 Home Inspection Deal-Breakers

Daily Real Estate News | Wednesday, October 07, 2015 

 

Home inspectors are hired to perform an objective evaluation of a home's condition, but at times, their discoveries can prompt the buyer to terminate a sale contract.

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Dylan Chalk, owner of Seattle-based Orca Inspection Services LLC, writes on Redfin's blog that, in his experience, the following three issues kill the most deals:

1. Cover-ups. The house may look great, but a deeper inspection may reveal short-cuts on repairs or renovations made by a prior home owner. These commonly occur in homes that were purchased to be flipped. "I sometimes find flips in need of structural repairs or discover chronic moisture problems that were covered up in an effort to sell the house," Chalk writes. "On the outside, everything looks new and shiny, but there may actually be deep dysfunction lurking in the bones of the house." He also finds problems with vacation homes that have been remodeled multiple times over the years. "There can be a hodgepodge of foundations, additions, and rooflines that make them fundamentally different than they appear," Chalk notes. "These are not 'bad houses,' but they are often quirky and may present risks that buyers weren't anticipating. One tip that often gives these homes away is a quirky roofline that shows obvious additions."
2. More repairs than anticipated. This is a common scenario with younger homes, Chalk says. The clients may say, "It's only 20 years old!" But while most 20-year-old houses are in good shape, they often require expensive replacements for systems that last only 15 to 20 years. Systems that usually need to be replaced after 20 years are a deck, furnace, roof, and appliances. Carpets, the home's siding, and even hardwood finishes may need special attention at that point, too. The maintenance list may come as a surprise to some buyers.
3. The home has bad bones. Buyers go into fixer-uppers knowing they intend to do a host of repairs, such as the furnace, kitchen, bathrooms, flooring, paint, and appliances. But buyers may not have taken into account the foundation, frame, roofline, floorplan, and drainage. A home inspection that turns up structural problems or drainage issues will add a significant amount to the buyer's budget — even pushing them out of their price range.

Source: “The 3 Most Common Reasons a Home Inspection Kills a Deal,” Redfin Blog (Oct. 2, 2015)

More Home Owners Turn Equity Into Cash

Daily Real Estate News | Wednesday, October 07, 2015 

 

Home values are on the upswing, and home owners who are becoming equity-rich are taking advantage of their property's increasing worth. Cash-out refinances surged 68 percent in the second quarter compared to a year ago and have reached the highest volume in five years, according to Black Knight Financial Services.

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"People realize that refinancing these funds is extremely inexpensive and that rates will eventually rise, so they're capitalizing on the strength of home-price appreciation," says Ben Graboske, senior vice president at Black Knight Data & Analytics.
Over the past year alone, mortgage borrowers have collectively gained about $1 trillion in home equity. Those doing cash-out refinances are taking an average $65,000 individually — about on par with the boom times of 2006. However, the volume of cash-out refinances is nowhere close, remaining 80 percent below the 2005 peak.
Borrowers today are also using more restraint. The average loan-to-value ratio of today's cash-out refinancers is 68 percent, which means borrowers have leveraged 68 percent of the home's current value. That marks the lowest level in a decade.
Cash-out refinances are gaining the most traction in California, which accounts for 30 percent of all volume, followed by Texas at 7 percent, according to Black Knight. California and Texas have also seen some of the highest home-value appreciation in the country in recent months.
Source: “Homes as ATMs: It’s Starting Again,” CNBC (Oct. 5, 2015)

Chinese Buyers Sink More Cash Into U.S.

Daily Real Estate News | Wednesday, October 07, 2015 

 

Chinese buyers now make up the largest segment of foreign purchasers in the U.S. real estate market, and they predominantly pay in cash.

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So far this year, 46 percent of Chinese buyers paid cash, up 229 percent from a decade ago, according to RealtyTrac. That is significantly higher than the 33 percent share of cash buyers overall in the market. That figure is also up 65 percent from a decade ago.
"Cash buyers across the board are playing a much bigger role in the housing market now than they were 10 years ago, and that is particularly true for Chinese Mandarin-speaking cash buyers, who are more likely to be foreign nationals," says RealtyTrac Vice President Daren Blomquist. "Foreign cash buyers have helped to accelerate U.S. home-price appreciation over the past few years, given that these buyers are often not as constrained by income as local, traditionally financed buyers."
Even recent instability in China's economy and stock market haven't deterred Chinese buyers from investing in U.S. real estate. In fact, it has heightened their interest. With the influx of money from China so high, Long & Foster even recently partnered with Juwai, a China-based real estate listing site.
"We're seeing demand from Chinese buyers with children of all ages — some as young as 1 year old — and they're relying on our team for insight into the local areas and their educational offerings, from elementary to university level," says Pandra Richie, president of Long & Foster's corporate real estate services. "Access to quality education is one of the top priorities for Chinese buyers, and from Philadelphia to Richmond, our market areas offer some of the best school districts and universities."
Source: “Chinese Money Flows Into U.S. Housing,” CNBC (Oct. 6, 2015)

Loans Soar Ahead of New Mortgage Rules

Daily Real Estate News | Wednesday, October 07, 2015 

 

Borrowers rushed to secure financing last week, sending mortgage applications climbing 25.5 percent week-over-week before the "Know Before You Owe" disclosure rules took effect last Saturday.

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The Mortgage Bankers Association reported that for the week ending Oct. 2, refinance applications spiked 24 percent on a seasonally adjusted basis while applications for home purchases rose 27 percent. Purchase applications, which are viewed as a leading gauge of home buying activity, are now 49 percent higher than a year ago and are at the highest level in five years.
"The number of applications for purchase and refinance mortgages soared last week due both to renewed rate volatility and many applications being filed prior to the TILA-RESPA regulatory change," says Lynn Fisher, MBA's vice president of research and economics.
Starting last Saturday, the TILA-RESPA Integrated Disclosure rule went into effect, which merged the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-in-Lending disclosure form into two new closing forms: a Loan Estimate and a Closing Disclosure. The new rule aims to provide consumers with more time to review the total costs of their mortgage prior to closing. The Loan Estimate form is due to consumers three days after they apply for a loan, while the Closing Disclosure form is due three days prior to closing. Lenders have predicted some possible delays to closing as they transition to the new forms.
While the latest week shows a significant jump in the volume of mortgage applications, they remain low overall by historical standards. Purchase-application volume is still less than half of what it was during the housing boom of 2005 to 2007 and is at comparable levels to the late 1990s, MBA reports.
MBA also reported that the average 30-year fixed-rate mortgage fell to 3.99 percent last week, the lowest average since May.
Source: “Mortgage Applications Surge 25% on Regulation Worry,” CNBC (Oct. 7, 2015)

Get Ready for Explosive 'Smart' Home Growth

Daily Real Estate News | Monday, October 05, 2015 

 

About 100 million households will be “smart” worldwide by the end of the year, and the number will grow to 300 million over the next 10 years, according to a new report released by Deutsche Telekom, a German telecommunications company.
More consumers are embracing “smart” home technology for its promises of home efficiency, convenience, and savings. In the next five years alone, the smart home industry could be worth hundreds of billions of dollars and Deutsche Telekom predicts that it will be one of the next major markets to take off globally.

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Entrepreneurs and start-ups are taking note. They’re focusing on niches like home automation, insurance services, ambient assisted living, and data analytics, according to Deutsche Telekom. “Currently there is an opportunity for smart home security services to provide a reduction in cost for consumers – or even for insurers to offer equipment for free as a method for cutting down on liability,” according to the report.
However, several hurdles are still curtailing smart home adoption rates, such as showing real consumer need, pricing that is often still too high, and too many technologies that still operate in siloed worlds (e.g. light bulbs controlled one way; appliances through another system), according to Deutsche Telekom’s report.
But more consumers are showing an interest in smart home tech. Twenty-eight percent of respondents say they own at least one smart-home product, and nearly half of millennials, ages 18 to 34, say they plan to adopt smart-home technology, according to a joint survey this year of about 4,000 Americans by Coldwell Banker and CNET. Of those who currently use it, 81 percent say they would be more likely to buy a home if smart products — such as connected lighting and thermostats, remote-access security, and smart locks — were already installed.
"Smart-home technology is catching on because it is literally changing the way we live in our homes," says Sean Blankenship, chief marketing officer for Coldwell Banker. "Not only is it shifting the financial perception of the home, but it's also transforming our emotional connection to our homes. We believe that in three to five years, home buyers will expect smart-home technology — it will become the new norm."
Source: “Smart Home Sector Could Be Worth Hundreds of Billions in Next Five Years,” Forbes.com (Sept. 30, 2015) and “Smarter Entrepreneurs Finding Smaller Sector Opportunities From Smart Homes,” Forbes.com (Sept. 30, 2015)

Where Millennial Home Ownership Thrives

Daily Real Estate News | Monday, October 05, 2015

 

Despite claims that millennials are just a “generation of renters,” this generation is showing itself as being just as interested in buying homes as other age groups, according to realtor.com® research.
“People who believe that millennials are disinterested in home ownership are grossly mistaken,” says Jonathan Smoke, realtor.com®’s chief economist. “This generation hit the job market during one of the largest recessions of all time, and they’ve had to work hard to establish credit and save for a down payment. With the older segment just beginning to enjoy living the life that drives home ownership—including marriage and children—now is the most appropriate time for them to consider home ownership. And that’s exactly what the latest numbers are showing.”

The financial profile of the average millennial who received a mortgage in the first half of 2015:

• FICO score: 714
• Down payment: 7.1%
• Mortgage rate: 4.03%
• Debt-to-income ratio: 36%

Source: realtor.com®

Indeed, nearly 65 percent of millennials between the ages of 21 to 34 spent time on real estate websites and apps in August, according to realtor.com®’s analysis. What’s more, “older” millennials – between the ages of 25 to 34 are 70 percent more likely than the average adult to look for a home to buy on realtor.com®.
Which markets are they targeting? Realtor.com® recently identified the top 10 areas where millennials are the most represented among mortgage borrowers – accounting for 44 to nearly 60 percent of all mortgages for home purchases.
1. Des Moines, Iowa
2. Provo, Utah
3. Baton Rouge, La.
4. Pittsburgh, Pa.
5. Lafayette, La.
6. Grand Rapids, Mich.
7. Madison, Wis.
8. Clarksville, Tenn.
9. New Orleans, La.
10. Shreveport, La.
Source: “Top 10 Markets for Millennials Seeking a Home,” realtor.com® (Sept. 30, 2015)

Apartment Boom Shows Signs of Cooling

Daily Real Estate News | Monday, October 05, 2015 

 

The thriving apartment market may finally have reached its peak, according to new research by the firm Reis Inc. An increase in supply of multifamily units helped push nationwide vacancy rates up to 4.3 percent in the third quarter. About 200,000 additional rental units are expected to come onto the market this year and vacancy rates are expected to move higher in the coming quarters.

Read more: Why Renters May Be in Trouble

“I don’t think this is the death knell for the apartment market, but it is going to be more challenging over the next four to five years than it was over the last four to five,” says Ryan Severino, REIS’ senior economist.
But as the market cools, renters may not feel any relief with escalating rents anytime soon. Average effective rents increased 4.2 percent from the same quarter a year ago, reaching $1,166. That marks the first time since 2007 where rents have increased more than 4 percent.
Even as vacancies rise, rents can still continue to increase since new rental units tend to bring higher rents and can boost the average. Case in point, in San Jose, Calif., the vacancy rate increased from 2.7 percent in the previous quarter to 3.3 percent, but rents increased 8.5 percent to $2,023. The same was true in Seattle: Vacancy rates increased from 4.7 percent to 5.1 percent and rents also rose 8.5 percent to $1,299, according to Reis data.
But the increase in supply of multifamily units is prompting some landlords to start offering concessions to entice renters. For example, landlords with Urban Igloo, a rental real estate brokerage based in Washington, D.C., are reportedly offering several enticements to renters, from a couple of months free rent and free parking to Uber gift certificates.
“Eventually [landlords] have to drop rents to be competitive,” says Patrick Sprouse, director of sales at Urban Igloo.
Still, vacancy rates nationwide remain well-below historical averages of about 5.5 percent, according to Reis. But they are showing signs of climbing.
“This really looks like we’re at the inflection point where vacancies are going to start to head higher,” Severino says. He expects rent increases to begin to level off in 2017.
Source: “Apartment Market Boom Levels Out, Data Indicate,” The Wall Street Journal (Oct. 1, 2015)

Buying a Home 48% More Affordable Than 2006

Daily Real Estate News | Monday, October 05, 2015 

 

Home prices may be reaching new highs lately, but buying a home is still significantly more affordable than it was during the 2006 housing bubble, according to a new report by RealtyTrac. Low interest rates have largely contributed to keeping homes more affordable in recent months, according to the analysis.

View NAR's latest housing affordability index.

Monthly payments on an average-priced home – including property taxes, home insurance, private mortgage insurance, and assuming a 3 percent down payment – required 36.5 percent of the average wage nationwide in the first quarter. That's slightly down from 37.4 percent in the first quarter a year ago, but it marks the most affordable level since the first quarter of 2013 – when affordability was 33.5 percent, according to RealtyTrac’s analysis.
“Although home prices continue to outpace wage growth in the majority of local markets, this analysis somewhat surprisingly shows that affordability is actually improving in most markets thanks to falling interest rates and slowing home price growth, which is allowing wage growth to catch up in some markets,” says Daren Blomquist, vice president at RealtyTrac. “At the national level, buying an average-priced home in the first quarter of 2015 was the most affordable it’s been in two years and nearly twice as affordable as it was in the second quarter of 2006 — when affordability was its worst in the past 10 years. At the local level we’re seeing several bellwether markets where wage growth matched or even outpaced home price growth over the past year.”
Housing affordability was highest in the last decade in the first quarter of 2012 – that’s when a monthly house payment required 32 percent of average wages. On the other hand, buying a home was the least affordable in the last decade in the second quarter of 2006. Monthly payments then required a whopping 70.7 percent of average wages, according to RealtyTrac’s analysis.
The average home price remains 12 percent below what it was in the second quarter of 2006 – the least affordable level in the last decade. During that same time period, the average wage nationwide has increased 34 percent and the average interest rate on a 30-year fixed-rate mortgage has dropped 44 percent during that time period. That has helped boost affordability by 48 percent, according to RealtyTrac’s analysis.
The most affordable counties in the first quarter, according to RealtyTrac’s analsyis, were:

1. Hamilton County, Fla.: 5.6% of the average wage was needed to make monthly payment on an average-priced home
2. Saint Louis County, Mo.: 8.3%  average wage needed
3. Saint Louis City, Mo.: 9.4% average wage needed
4. Lake County, Ind. (in the Chicago metro area): 9.5% average needed
5. Fairfield County, S.C. (Columbia metro area): 10.3% average needed

Source: RealtyTrac

For 10 Weeks, Mortgage Rates Stay Below 4%

Daily Real Estate News | Friday, October 02, 2015 

 

Thirty-year fixed-rate mortgages continue to hold below 4 percent, often an attractive lure for home buyers and refinancers.
"In contrast to the volatility in equity markets, the 10-year Treasury rate -- a key driver of mortgage rates -- varied just a little more than 10 basis points over the last week,” says Sean Becketti, Freddie Mac’s chief economist. “As a result, the 30-year mortgage rate remained virtually unchanged, dropping 1 basis point to 3.85 percent. This marks the tenth consecutive week of a sub-4-percent mortgage rate.”
Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 1:

• 30-year fixed-rate mortgages: averaged 3.85 percent, with an average 0.6 point, dropping from last week’s 3.86 percent average. Last year at this time, 30-year rates averaged 4.19 percent.
• 15-year fixed-rate mortgages: averaged 3.07 percent, with an average 0.7 point, dropping from last week’s 3.08 percent average. A year ago, 15-year rates averaged 3.36 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.91 percent, with an average 0.4 point, holding the same average as last week. A year ago, 5-year ARMs averaged 3.06 percent.
• 1-year ARMs: averaged 2.53 percent, with an average 0.2 point, holding the same average as the previous week. A year ago, 1-year ARMs averaged 2.42 percent.

Source: Freddie Mac

6 Things Fall Home Buyers Should Notice

DAILY REAL ESTATE NEWS | THURSDAY, OCTOBER 01, 2015

Despite spring being the peak home buying season, buying in the fall might actually be the best option for house hunters. Overall there's less competition, more inventory to choose from, a better chance of getting a good deal, and the weather gives a well-rounded picture of how the house will feel throughout the year.

Why Buy in Autumn?

Homes Still Selling Fast Heading Into Fall

Why September Is The Best Month for Buyers

However, just because a house looks picture-perfect to clients in the fall, it doesn't mean it's the ideal property year-round. You need to pay attention to the little details "that aren't as noticeable in the fall as they might be in the winter or summer months," says Andrea Davitt, a REALTOR® at Lauer Realty Group in Madison, Wisc.

Here's what buyers need to pay attention to in the fall:

1. Air conditioning status: Most likely the air conditioner won't still be cranking in the fall, so it might escape buyers' minds to check it out. First of all, find out if the home even has AC. Then, have an inspector make sure the air conditioning system is functioning properly. Also be sure to check if it needs a new filter and if there are any blockages. The outdoor condenser also should be checked to make sure it's not making weird noises. Finally, take a look at the ductwork for rust.

2. Check the drainage: Besides taking a look at the gutters,  your buyers should also look at the drainage situation of the home. "In the yard, look for areas where water is accumulating in small puddles, which could indicate a leak in buried pipes or grading problems that need to be addressed before the rainy season," realtor.com® points out.

3. What's nearby?: This piece of advice is applicable all year, but since construction generally slows in the fall and winter, a nice and peaceful fall and winter home could be a real headache come spring and summer, once traffic, roadwork, and new construction crop up. Find out if that area is expected to see a lot of new development in the near future.

4. Eye the driveway: A steep driveway may not bat an eye during the summer, but buyers in cold climates should take note of a steep driveway, because it will surely impact their lives when dealing with snow and ice throughout the winter.

5. What's the pest possibility?: It might seem pleasant for buyers to live near water in the fall, when the pesky mosquitoes and bugs have all gone away, but it's a good idea to point out to potential buyers that living near standing water means they will have to get used to being around all types of bugs in other seasons.

6. Window conditions: Nothing is worse than realizing on the first frigid day in winter that a home's windows lack proper insulation. Not to mention what a drafty window can do to clients' pocketbooks! That being said, make sure that fall buyers take extra time to check out a home's window situation.

Source: "Buying a Home This Fall? Don’t Overlook These 6 Things," realtor.com® (Sept. 21, 2015)

Millennials Are Most Upbeat About Finances

DAILY REAL ESTATE NEWS | THURSDAY, OCTOBER 01, 2015

Compared to any other age group, millennials are the most optimistic about their finances. They're also the demographic most likely to buy a home in the next three years, according to a new survey of nearly 2,000 adults ages 18 to 65 conducted by Wells Fargo & Company. Just last year, their views were more in line with other generations, but now the millennials are pushing ahead with their housing optimism.

“This latest survey reflects strong optimism on the part of America’s youngest adult consumers and also tells us consumers in general want to learn more about how credit works,” says Shelley Freeman, head of Wells Fargo’s Consumer Credit Solutions group.

Read more: Millennial Renters Dish on When They'll Buy

The survey showed that 28 percent of millennials rate their current financial situation favorably compared to 24 percent of the general population. Sixty-six percent of millennials are optimistic that their personal financial situation will improve too, compared to 48 percent of the general population.

What’s more, nearly a third of millennials surveyed say they plan to buy a new home in the next three years, compared to 19 percent of their general population counterparts.

Overall, among all age groups, 82 percent of respondents are reporting their financial situation is “stable” to “strong” and 90 percent say they expect their personal financial situation to stay the same or improve a year from now.

The survey also showed that most respondents show a lack of confidence when it comes to financial information. A third – or 34 percent – grade their overall understanding of personal finances a C, D, or F. Forty-five percent grade their overall understanding of credit and loan products as a C, D or F.

Source: Wells Fargo

5 Top Motivators for Buying Now

DAILY REAL ESTATE NEWS | THURSDAY, OCTOBER 01, 2015

What are the main drivers in today’s home-buying decisions? Realtor.com® sought to find out in a recent survey of active house hunters taken this June and July through the BDX Home Shopper Insights Panel. According to the survey, here are the top reasons buyers identified as triggering them to start thinking about purchasing a home:

1. “I’m tired of my house.”

That was the top reason house hunters identified as wanting to move, cited by 28 percent of the panel. The average time in a home has risen since the last recession as more owners found themselves underwater and facing price declines from 2007 to 2011. “After four years of above-average price appreciation, confidence in the market has returned,” notes Jonathan Smoke, realtor.com®’s chief economist.

Read more: Advantage: Home Buyers?

2. Interest rates are attractive.

Interest rates continue to be low and they were the second trigger that buyers identified among 27 percent of shoppers as why they want to act now. The average 30-year fixed-rate mortgage reached a low in January at 3.63 percent and continue to mostly average under 4 percent. Last week, Freddie Mac reported the 30-year fixed-rate mortgage averaged 3.86 percent. That’s a big discount compared to the average monthly 30-year fixed conforming rate since 1971, which was a whopping 8.39 percent. “Compared to that, interest rates will certainly remain favorable for many months ahead,” Smoke says.

3. Home prices are favorable.

In a 2012 realtor.com® survey, 47 percent of active home shoppers cited favorable home prices as the top trigger for buying. The price motivation has been decreasing, but it still remains one of the top triggers. Today, just 26 percent of home shoppers cite favorable home prices as a reason for buying. In June, the U.S. surpassed its 2006 peak as home prices zoomed to a record high – a median of $236,400, according to the National Association of REALTORS®. But on an inflation-adjusted basis, home prices today are still about 20 percent beneath the peak at the height of the housing bubble, Smoke adds.

4. “I’ve got more money to spend.”

Twenty-four percent of active home buyers say an increase in income is their primary trigger for buying a home now. Indeed, now several years post-recession, more households are financially better off. Among 25- to 34-year-olds surveyed, they cited having more money to spend as the No. 1 motivator in buying – cited by 35 percent of these “older” millennials, Smoke notes. 

5. A change in family circumstances.

Eighteen percent of home buyers said a change in family circumstance or composition was their main reason for buying. More people are expanding their families: Births did rise last year and are expected to grow again this year as well.

Source: “Here’s What Pushes People to Buy Homes in 2015,” realtor.com® (Oct. 1, 2015)

Loan Demand Showing Huge Volatility

DAILY REAL ESTATE NEWS | WEDNESDAY, SEPTEMBER 30, 2015

Mortgage applications for refinancings and home purchases have made big swings in recent weeks – both up and down. In the latest week, total applications dropped 6.7 percent week to week on a seasonally adjusted basis, which follows the previous week’s double-digit jump in volume.

The average 30-year fixed-rate mortgage fell to 4.08 percent for the week ending Sept. 25, down just slightly from 4.09 percent the prior week, according to the Mortgage Bankers Association.

But "once again, the weekly average mortgage rate is not telling the story regarding mortgage application volume," says Michael Fratantoni, chief economist for the MBA. "The prior week included days with much lower rates due to volatility around the Fed's announcement that drove refinance volume up. Last week, a more stable rate produced less volume, as rates at this level just do not provide an incentive for most home owners to refinance."

Broken out, refinance applications fell 8 percent from the previous week, while applications for home purchases dropped 6 percent from one week earlier. Purchase applications, however, are 20 percent higher than the same week one year ago.

Still, the week-to-week drop in home purchase volume may stick around as the housing market enters a traditionally slower buying season. Both signed contracts to buy homes and closed home sales already saw a slowdown in August, according to the National Association of REALTORS®. Also, starting Oct. 3, lenders will face new regulations for disclosing loan information that could delay some closings on some home purchases. Read more: Closing Process Changes: What to Expect

Source: “Weekly Mortgage Applications Drop 6.7% on Interest Rate Swings,” CNBC (Sept. 30

     

‘Tiny Condos’ Draw Millennials to Ownership

DAILY REAL ESTATE NEWS | WEDNESDAY, SEPTEMBER 30, 2015

Real estate developers are hoping to entice young professional renters into home ownership by wooing them with tiny, more affordable condos.

Downtown Washington, D.C. serves as one example of the tiny condo movement's gain in momentum.

Reaching Out to First-Timers

Report: Singles and First-Timers Squeezed Out

Top Housing Markets for First-Time Buyers

The Plight of First-Time Buyers

"They definitely notice it's smaller, so it is an explanation; it takes a little bit of an adjustment," says Chris Ballard, principal at McWilliams/Ballard, a marketing firm that works with the Peterson Cos., the developer of Ontario 17, a new condominium building in D.C.'s Adams Morgan neighborhood. The building’s tiny studios are just 380 square feet and cost $275,000 – which is about half the neighborhood’s median price. The building, which is not yet finished, is already about 70 percent sold.

"Things are getting smaller, and people are starting to understand," says Laina Lee, one of the sales managers at Ontario 17. "About 80 percent of all our buyers, including our studios and our one-bedrooms, have all been first-time home buyers."

Many young professionals are battling historically high rents that have made it difficult for them to save for a down payment to break into home ownership.

Ballard says it’s cheaper to buy at Ontario 17 than to rent in D.C.’s booming rental market.

"We're definitely getting a consumer that's priced out of the market," Ballard says. "They look at older resales, and now they get to come and look at something that is brand new, and so that's a great difference, when you're comparing a 1970s build, older-type condominium with something that's brand-new with all new fit and finish."

At Ontario 17 in D.C., within 380 square feet, the studio units have a bed that pulls out of the wall, a dining table that pulls down from a hanging picture frame, a sofa that is built into the bottom of the bed, high-end kitchen appliances that are slightly smaller to fit the space, and in many cases a small terrace as well.

Source: “Wooing Millennials to Buy Condos: Really Tiny Condos,” CNBC (Sept. 29, 2015)

Housing's 20 Top Performers This Month

DAILY REAL ESTATE NEWS | TUESDAY, SEPTEMBER 29, 2015

The Golden State’s housing market is proving to be golden so far heading into the fall buying season. Several Californian cities dominate realtor.com®’s list of the top-performing housing markets in the country, with San Francisco taking the No 1 spot.

Realtor.com® has singled out 20 of the nation’s 300 largest markets, identifying the “hottest markets” in terms of housing supply (measured by days on the market) and demand (measured by listing views on its site).

“Sellers in these markets continue to see listings move much more quickly than the rest of the country in September, and the seasonal slowdown is not as strong in these markets,” says Jonathan Smoke, realtor.com®’s chief economist.

Here are the top 20 housing markets in September, according to realtor.com®:

1. San Francisco, Calif.
2. Dallas, Texas
3. Denver, Colo.
4. Vallejo, Calif.
5. San Jose, Calif.
6. San Diego, Calif.
7. Santa Rosa, Calif.
8. Sacramento, Calif.
9. Santa Cruz, Calif.
10. Yuba City, Calif.
11. Midland, Texas
12. Stockton, Calif.
13. Los Angeles, Calif.
14. Columbus, Ohio
15. Nashville, Tenn.
16. Detroit, Mich.
17. Ann Arbor, Mich.
18. Modesto, Calif.
19. Austin, Texas
20. Fort Wayne, Ind.

Source: “The 20 Hottest Markets in September 2015,” realtor.com® (Sept. 29, 2015)

Are Higher Home Prices Spooking Buyers?

DAILY REAL ESTATE NEWS | TUESDAY, SEPTEMBER 29, 2015

Contracts to buy homes dropped nationwide in August, as home prices continued to inch upward, the National Association of REALTORS® reports. Modest increases in pending home sales in the West were offset by declines in all other regions last month.

Pending Home Sales By Region

• Northeast: pending home sales dropped 5.6 percent to 93.3 last month, but remain 8.9 percent above a year ago.
• Midwest: pending home sales were down 0.4 percent to 107.4 in August, but are 6.5 percent above August 2014 levels.
• South: pending home sales dropped 2.2 percent to an index reading of 121.5, but are 4.1 percent above year ago levels.
• West: pending home sales increased 1.8 percent in August to 104.9, and are 7.6 percent above a year ago.

Source: National Association of REALTORS®

NAR’s Pending Home Sales Index – a forward-looking indicator based on contract signings – retreated 1.4 percent in August to a 109.4 reading. Despite the drop, pending home sales remain 6.1 percent above August 2014 levels.

Buyer demand is continuing to outpace the housing supply and it’s also prompting home prices to increase in many markets across the country, says Lawrence Yun, NAR’s chief economist.

“Pending sales have leveled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget,” Yun says. “Even with existing-housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago.”

Yun predicts that sales will maintain their current pace in the months ahead. But, he cautions, there are several headwinds that could impact housing.

“The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being,” Yun says. “Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales.”

Still, NAR says the national median existing-home price will likely rise 5.8 percent this year, reaching $220,300. Also, existing-home sales likely will rise 7 percent to around 5.28 million – 25 percent below the prior peak set in 2005.

Source: National Association of REALTORS®

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4 Costly Mistakes When Building New

Daily Real Estate News | Monday, September 28, 2015 

 

When building a new home, home buyers may quickly find themselves over-budget and over-stressed. U.S. News & World Report recently highlighted some of the most common financial mistakes when building a new home:
1. Don't overbuild. "I meet potential clients in my office almost weekly who tell me, 'We built a 6,000 square-foot home, but now we're dying to downsize to something smaller,'" says Andy Stauffer, owner of Stauffer and Sons Construction, a homebuilder in Colorado Springs. "Most families don't even need 5,000 square feet, and a home as small as 2,500 or 3,000 square feet won't feel small if it's designed properly. A larger house is just more expensive and harder to maintain and clean. According to the National Association of Home Builders, a custom home in the U.S. costs an average of $105 per square foot to build. That means by eliminating even 500 square feet in a home that you don't need, you'll save over $50,000."
2. Consider the resale value at the beginning. "It's simply a fact of life. Most of us don't know for sure where we'll be in 10 or 15 years, as much as we'd like to think we do," Stauffer says. "I recently spoke to a real estate agent who had some clients that built a five-story custom home. They loved it, but when it was time to sell, they had to drop the price by tens of thousands of dollars and sell at a significant loss because nobody wanted to buy a five-story home and walk up and down the stairs all day long. So build your dream home, but don't make it a nightmare for someone else."
3. Weigh the upgrades. Buyers may have to teeter on too conservative or not conservative enough when choosing their extras. "You will be surprised at how quickly a $200,000 home becomes $400,000 in upgrades," Joan Fradella, a family mediator in West Palm Beach, Fla., who built a new home in 1998 told U.S. News & World Report.

Read more: New-Home Due Diligence and Vigilance

Brian Brunhofter, president of Meritus Custom Builders in Chicago, says buyers need to carefully consider what upgrades are must haves. "For example, carpet can always be switched out to hardwood floors later, but a full basement is something you should decide on now," he says. That said, some buyers may want to do some of those upgrades now while lending is relatively inexpensive at the moment. As long as you don't go overboard, it may "be much more economic to stretch and plan for those features in your budget now," he says.
4. Monitor the progress. "Visit the site during construction," advises Nicole Cannon, a resident architect in Los Angeles. "Make sure things are matching your expectations and ask questions if they don’t. The worst option is to remain quiet and end up with something that you are unhappy with or have to pay to fix after the fact."
View more new-home financial mistakes at U.S. News & World Report.
Source: "8 Financial Mistakes to Avoid When Building a New Home," U.S. News & World Report (Sept. 25, 2015)

Closing Process Changes: What To Expect

Daily Real Estate News | Monday, September 28, 2015 

 

New mortgage disclosure rules will take effect Oct. 3, and lenders and real estate brokerages are quickly preparing for what has been predicted to be big changes to home closings.
Mortgage lenders will be required to begin using new consumer disclosure forms on Oct. 3. The changes will merge the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-in-Lending disclosure form into two new closing forms: a Loan Estimate and a Closing Disclosure.
Consumers will have more time to review the total costs of their mortgage prior to closing. The Loan Estimate form is due to consumers three days after they apply for a loan, while the Closing Disclosure form is due three days prior to closing. The Loan Estimate form shows the loan amount and interest rate, what the borrower’s monthly payment will be, estimated taxes and insurance, and how much cash is required to close.
Borrowers will face delays to closing if there are any last-minute changes with the financing of their loan. For example, if borrowers decide to change loan products at the last minute – such as switching from a fixed-rate mortgage to an adjustable-rate loan – borrowers will face a three-day delay in the closing to allow for reviews of the new Closing Disclosure form. Borrowers will not have a choice to waive the three-day review period.
Some mortgage experts are recommending that borrowers lock in their mortgage rates 45 or 60 days, rather than the more common 30-day lock, in case there is any delay in closing. 

At realtor.org, access a free webcast outlining the changes and new "Know Before You Owe" resources from the CFPB.

“There's going to be a little bit of a learning curve in the beginning,” says Tammy Felenstein, the executive director of sales for Halstead Property in Stamford, Conn. Consumers should “go with a lending institution that has prepared for these changes and knows what they’re doing.”
Consumers may face slightly longer closing times as the industry adjusts to the new process. The new rules will require lenders, title companies, real estate professionals and insurance representatives to all come together sooner in the process to ensure the disclosures do get out in time.
As such, some real estate professionals say they’re planning to write contracts with 45-day closings instead of 30. About 56 percent of REALTORS® say they plan to change their purchase agreements to allow for a longer timeline for the closing process due to the upcoming changes from new mortgage disclosures rules, according to a new survey by the National Association of REALTORS®. Thirty-one percent of real estate professionals surveyed said they would also add contingencies to the contract.
Eighty-two percent of real estate professionals also say they've taken some training to prepare for the "Know Before You Owe" initiative.
To try to avoid a closing delay from the new rules, 30 percent of real estate professionals surveyed by NAR say they plan to share contracts and amendments sooner with lenders, title insurers, and closing agents. Thirty-three percent plan to perform final or pre-closing walk-through home inspections earlier, and 37 percent say they plan to develop a plan with lenders and title agents to ensure a smooth transition.
The Consumer Financial Protection Bureau has published a new guide for real estate agents detailing all the changes with the upcoming "Know Before You Owe" mortgage initiative. CFPB's toolkit for agents includes sections on how to have on-time closings, an overview of what has changed and the new loan documents, and the ability to share resources with your clients about the new rules.
Also, view a slideshow at Bankrate.com to see additional examples of the new disclosure forms.
Source: "Tour the Loan Estimate Form for Mortgages," Bankrate.com (September 2015); "New Disclosure Rules for Mortgage," The New York Times (Sept. 25, 2015); and "Agents Plan to Extend Sales Contract for TRID," REALTOR® Magazine Daily News (Sept. 3, 2015)

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Housing's 20 Top Performers This Month

DAILY REAL ESTATE NEWS | TUESDAY, SEPTEMBER 29, 2015

The Golden State’s housing market is proving to be golden so far heading into the fall buying season. Several Californian cities dominate realtor.com®’s list of the top-performing housing markets in the country, with San Francisco taking the No 1 spot.

Realtor.com® has singled out 20 of the nation’s 300 largest markets, identifying the “hottest markets” in terms of housing supply (measured by days on the market) and demand (measured by listing views on its site).

“Sellers in these markets continue to see listings move much more quickly than the rest of the country in September, and the seasonal slowdown is not as strong in these markets,” says Jonathan Smoke, realtor.com®’s chief economist.

Here are the top 20 housing markets in September, according to realtor.com®:

1. San Francisco, Calif.
2. Dallas, Texas
3. Denver, Colo.
4. Vallejo, Calif.
5. San Jose, Calif.
6. San Diego, Calif.
7. Santa Rosa, Calif.
8. Sacramento, Calif.
9. Santa Cruz, Calif.
10. Yuba City, Calif.
11. Midland, Texas
12. Stockton, Calif.
13. Los Angeles, Calif.
14. Columbus, Ohio
15. Nashville, Tenn.
16. Detroit, Mich.
17. Ann Arbor, Mich.
18. Modesto, Calif.
19. Austin, Texas
20. Fort Wayne, Ind.

Source: “The 20 Hottest Markets in September 2015,” realtor.com® (Sept. 29, 2015)

Are Higher Home Prices Spooking Buyers?

DAILY REAL ESTATE NEWS | TUESDAY, SEPTEMBER 29, 2015

Contracts to buy homes dropped nationwide in August, as home prices continued to inch upward, the National Association of REALTORS® reports. Modest increases in pending home sales in the West were offset by declines in all other regions last month.

Pending Home Sales By Region

• Northeast: pending home sales dropped 5.6 percent to 93.3 last month, but remain 8.9 percent above a year ago.
• Midwest: pending home sales were down 0.4 percent to 107.4 in August, but are 6.5 percent above August 2014 levels.
• South: pending home sales dropped 2.2 percent to an index reading of 121.5, but are 4.1 percent above year ago levels.
• West: pending home sales increased 1.8 percent in August to 104.9, and are 7.6 percent above a year ago.

Source: National Association of REALTORS®

NAR’s Pending Home Sales Index – a forward-looking indicator based on contract signings – retreated 1.4 percent in August to a 109.4 reading. Despite the drop, pending home sales remain 6.1 percent above August 2014 levels.

Buyer demand is continuing to outpace the housing supply and it’s also prompting home prices to increase in many markets across the country, says Lawrence Yun, NAR’s chief economist.

“Pending sales have leveled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget,” Yun says. “Even with existing-housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago.”

Yun predicts that sales will maintain their current pace in the months ahead. But, he cautions, there are several headwinds that could impact housing.

“The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being,” Yun says. “Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales.”

Still, NAR says the national median existing-home price will likely rise 5.8 percent this year, reaching $220,300. Also, existing-home sales likely will rise 7 percent to around 5.28 million – 25 percent below the prior peak set in 2005.

Source: National Association of REALTORS®

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Oregon's Smaller Cities Growing Faster Than Other States' . News | OPB

Oregon's Smaller Cities Growing Faster Than Other States' . News | OPB

Why the foreclosure crisis isn't over yet

Why the foreclosure crisis isn't over yet

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Mortgage Rates in Free Fall, After Fed's Vote

DAILY REAL ESTATE NEWS | FRIDAY, SEPTEMBER 25, 2015

The 30-year fixed-rate mortgage averaged 3.86 percent this week, dropping lower after the Federal Reserve's decision last week to hold off on raising the Federal funds rate.

Read more: Fed Votes to Hold Off on Rate Hike, For Now

"Global growth concerns and lackluster inflation convinced the Fed to defer a hike in the Federal funds rate," says Sean Becketti, Freddie Mac's chief economist. "In response, Treasury yields fell about nine basis points over the week, with some larger day-to-day swings along the way."

That marks nine consecutive weeks that mortgage rates have now remained below 4 percent.

"These low mortgage rates have supported strong home sales, and 2015 is on pace to have the highest home sales total since 2007," Becketti says.

However, on Thursday, Federal Reserve Chair Janet Yellen said the U.S. central bank was on track to raise interest rates this year for the first time in nearly a decade. The Fed's benchmark short-term rate has stayed near zero since December 2008, which has also helped to keep mortgage rates low ever since.

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 24:

• 30-year fixed-rate mortgages: averaged 3.86 percent, with an average 0.7 point, dropping from last week's 3.91 percent average. Last year at this time, 30-year rates averaged 4.20 percent.
• 15-year fixed-rate mortgages: averaged 3.08 percent, with an average 0.6 point, dropping from last week's 3.11 percent average. A year ago, 15-year rates averaged 3.36 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.91 percent, with an average 0.5 point, dropping from last week's 2.92 percent average. Last year at this time, 5-year ARMs averaged 3.08 percent.
• 1-year ARMs: averaged 2.53 percent, with an average 0.2 point, dropping from last week's 2.56 percent average. A year ago, 1-year ARMs averaged 2.43 percent.

Source: Freddie Mac and "Fed's Yellen Gets Medical Attention After Struggling With Speech," Reuters (Sept. 24, 2015)