3 Mistakes First-Time Buyers Make

Daily Real Estate News | Monday, June 29, 2015

First-time home buyers are emerging as a bigger force in the housing market, helping to lift home sales. But getting approved for a mortgage, finding the right home, and staying within a budget are still posing some of the biggest challenges for first-timers.

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Bankrate.com notes some of the most common mistakes made by first-time home buyers:
1. Just judging the mortgage payment: First-time home buyers shouldn't make the mistake of believing that just because they can afford the mortgage payment, they'll be able to afford everything else with the home. "They have an idea of what their mortgage payment is going to be, but they don't realize there's much more to it," says attorney Rafael Castellanos, a managing director at Expert Title Insurance. Property insurance, taxes, homeowner association dues, maintenance, and utility bills can add up too.
2. Emptying out their savings for a down payment: Spending their entire savings on a down payment and closing costs is also a big mistake, says Ed Conarchy, a mortgage planner and investment adviser at Cherry Creek Mortgage in Gurnee, Ill. "Some people scrape all their money together to make the 20 percent down payment so they don't have to pay for mortgage insurance, but they are picking the wrong poison because they are left with no savings at all," he says. "I'd take paying for mortgage insurance any day over not having money for rainy days. Everyone -- especially home owners -- needs to have a rainy-day fund."
3. Getting new credit before the deal is closed: When borrowers are prequalified for a loan, they need to avoid any big-ticket purchases until the loan closes. Lenders pull credit reports before the closing to make sure the borrower’s financial situation has not changed since the loan was approved. Any new loans on their credit report could cause a closing delay.
First-time buyers "sign the contract and they want to buy new furniture for the house or a new car," says Steve Anderson, a broker and owner at RE/MAX Benchmark Realty in Las Vegas. "I remember one case where just before closing, the buyer drove to the office and says, 'Look at my brand-new car.' I told them, 'You'd better go back to that dealership.'"
Source: "5 First-Time Homebuyer Mistakes to Avoid," Bankrate.com (June 2015)

Gay Marriage Ruling: 'Housing Game Changer'

Daily Real Estate News | Monday, June 29, 2015

The U.S. Supreme Court's decision late last week to make same-sex marriages legal throughout the country could lift home ownership among lesbian, gay bisexual and transgender couples.
"As with other momentous social landmarks, this progress will trigger key milestones along the path to home ownership," says Sherry Chris, CEO of Better Homes and Gardens Real Estate. The LGBT community is "a powerful market segment that represents an estimated buying power of $840 billion."
With home prices on the rise and mortgage requirements more strict, home buyers may find that two incomes can be better in affording a home.
"There is no more awkwardness—no more 'joint tenants' or however gay people have had to take titles in order to own," says Summer Greene, a general manager of Better Homes and Gardens Florida 1st in Fort Lauderdale, Fla. "That means less paperwork, and now it's therefore easier to qualify. Before you'd have people committed for 20 years and would have to have two different applications for mortgages, et cetera."
According to a recent survey, 81 percent of nearly 1,800 LGBT respondents recently surveyed felt that "a ruling for marriage equality will make them feel more financially protected and confident," according to the survey conducted by Better Homes and Gardens Real Estate and the National Association of Gay and Lesbian Real Estate Professionals.
Many of the LGBT's surveyed also expressed concerns about renting. Eighty-two percent said they were concerned about rising rents. What's more, 59 percent say they plan to have children in the future -- both factors are potential motivators for purchasing a home.

Read more: LGBTs Worry About Housing Discrimination

A 2012 study by the Harvard Business Review that looked at more than 20,000 real estate transactions in Ohio in 2000 suggested that gay couples gentrifying neighborhoods could even influence home values. The study concluded: "The addition of one same-sex couple for every 1,000 households is associated with a 1 percent increase in home prices in U.S. neighborhoods that are socially liberal, but a 1 percent drop in neighborhoods that are extremely conservative."
Migration of same-sex couples to an area increases home values, in part, because they tend to develop or enhance cultural amenities, the study's authors notes. However, in socially conservative areas, housing prices reflect prejudice against gays.
Source: "The Supreme Court’s Gay Marriage Decision Is a Housing Game Changer,” realtor.com® (June 26, 2015) and "Here’s How Gay Marriage Will Improve Housing," HousingWire (June 26, 2015)

Can the Housing Market Survive Higher Rates?

Daily Real Estate News | Tuesday, June 23, 2015

Home buyers may rush purchases in the coming months as a looming increase in mortgage rates is largely believed to be nearing.

NAR's latest report: First-Time Buyers Fuel Latest Sales Boost

Mortgage rates have been hovering around 50-year lows for the past five years. The Federal Reserve is expected to begin raising short-term interest rates later this year, which will put pressure on all mortgage rates soon after, including the 30-year fixed-rate mortgage which has been averaging around 4 percent lately.
Even the slightest tick up in mortgage rates can impact mortgage payments. As The Wall Street Journal notes, a 3.9 percent mortgage rate on a $400,000, 30-year loan would amount to about a $1,890 mortgage payment. On the other hand, if rates rose just one point to 4.9 percent, that mortgage payment would rise to $2,100 a month. If rates rose again to 5.9 percent, payments would amount to $2,370 a month.
Still, most economists believe the majority of home buyers will continue to desire to buy, at least for the short term, even with higher rates. That's because the monthly cost of an average size-home remains affordable when compared with average incomes. On the other hand, apartment rents have been rising sharply.
Pricier areas in the U.S. – like San Francisco, San Diego, and Los Angeles – may see the biggest impact of rising rates, as a rise in rates could put housing out of reach to more potential buyers. For example, in Los Angeles, mortgage rates at 4 percent would mean that the average household there would need to spend 41 percent of their income on mortgage payments to buy a house at the median price in the area, according to a study conducted by Zillow. At 5 percent interest rates, households would need to spend 46 percent of its household income to afford mortgage payments. In general, financial analysts often cite that no more than 30 percent of a household's income should go toward housing costs.
"The result for these overpriced markets will be less of a pop and more of a fizzle," The Wall Street Journal reports. "Economists expect that prices in those places will mostly likely flatten out or decline slightly, which may help keep the markets from overheating."
"I'm worried about it," Glenn Kelman, chief executive of Redfin, told The Wall Street Journal. "The rates have been so low for so long that trying to persuade anyone that 4 percent or 4.5 percent is still a bargain may not be easy to do."
But some consumers may look for relief from high rent increases, and believe it's still cheaper to buy than rent.
Source: "Rising Mortgage Rates to Test Housing Market’s Strength," The Wall Street Journal (June 21, 2015)

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Mortgage Rates Drop After Last Week's Spike

DAILY REAL ESTATE NEWS | FRIDAY, JUNE 19, 2015

Average fixed-rate mortgages reversed course this week, falling after having soared to new highs for 2015 last week.

Freddie Mac reports the following national averages with mortgage rates for the week ending June 18:

• 30-year fixed-rate mortgages: averaged 4 percent, with an average 0.7 point, dropping from last week's 4.04 percent average. Last year at this time, 30-year rates averaged 4.17 percent.
• 15-year fixed-rate mortgages: averaged 3.23 percent, with an average 0.5 point, dropping from last week's 3.25 percent average. A year ago, 15-year rates averaged 3.30 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3 percent, with an average 0.4 point, dropping from last week's 3.01 percent average. Last year at this time, 5-year ARMs averaged 3 percent.
• 1-year ARMs: averaged 2.53 percent, with an average 0.2 point, holding the same as last week. A year ago, 1-year ARMs averaged 2.41 percent.

10 States With High, Low Down Payments

DAILY REAL ESTATE NEWS | TUESDAY, JUNE 16, 2015

As lenders show some signs of loosening up on credit, home buyers are bringing less money to closing. Down payment percentages for conventional 30-year fixed-rate mortgages among home buyers fell in the first quarter to an average of 16.98 percent, down from 17.59 percent in the fourth quarter of 2014, according to a new report released by LendingTree. The average down payment amount also dropped quarter-over-quarter from $47,585 to $44,007.

Read more: What's an Average Down Payment?

A report released earlier this month from RealtyTrac also found down payments were getting smaller. The average down payment for single-family homes, condos, and townhomes purchased in the first quarter was 14.8 percent of the purchase price. This is the lowest since the first quarter of 2012, according to RealtyTrac's First Quarter 2015 U.S. Home Purchase Down Payment Report.

"As lenders need more mortgage volume, average down payments start to drop," says Doug Lebda, founder and CEO of LendingTree. "More lenders are beginning to loosen their guidelines and are going after a slightly broader pool of potential borrowers. For first time home buyers, this spring and summer home-buying season is proving itself to be an excellent time to enter the market.”

The following 10 states had the lowest average down payment percentage for a 30-year fixed-rate conventional loan:

On the other hand, these 10 states had the highest average down payment percentage for a 30-year fixed-rate conventional loan:

Source: "LendingTree Reports Average Down Payments Fall in Q1 2015," LendingTree (June 12, 2015)

Buyers Overestimate Mortgage Requirements

DAILY REAL ESTATE NEWS | WEDNESDAY, JUNE 17, 2015

Sixty-five percent of recent survey respondents feel home ownership is a dream come true or an accomplishment to be proud of. But when it comes to achieving that dream, many consumers may sit on the sidelines because they’re overestimating what it takes to make it come true.  

Many consumers have misperceptions about the credit score, down payment, and income requirements needed to qualify for a mortgage, according to a survey released by Wells Fargo and Ipsos Public Affairs of more than 2,000 U.S. adults. A high percentage of home owners are still unaware of recent efforts by lenders and the government to enhance the availability of credit through lower down payment programs.

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Two-thirds of consumers surveyed believe they need a very good credit score to purchase a home, with 45 percent believing a “good credit score” is over 780 (many lenders consider scores over 660 to be “good”). Consumers also tend to overemphasize credit scores as a single factor that determines whether they’ll be able to buy a home. But a credit score is not the sole criteria. Many lenders will consider a loan applicant’s entire financial picture, including income, assets, debt-to-income ratio, credit history, credit scores, and the amount of the loan compared to the value of the property.

Also, the survey found that consumers tend to overestimate the down payment funds needed to qualify for a home loan. Thirty-six percent of respondents said they believe a 20 percent down payment is always required, the survey showed. However, down payment options are available as low as 3 percent or 3.5 percent for some loan programs.

“The American aspiration for home ownership is alive and well,” says Franklin Codel, head of mortgage production for Wells Fargo Home Mortgage. “Home ownership has traditionally been the vehicle through which many people build wealth and financial stability. Home-buying and its downstream financial benefits strengthen the U.S. economy with strong neighborhoods and vital local businesses. For the millions of consumers who express a desire to own a home, it's essential that lending and housing professionals provide clear, simple information to build consumer confidence about buying a home."

Source: “Consumers’ Misconceptions Temper Desire for Home Ownership,” Business Wire (June 16, 2015)

Home Owners See Solar, Wind in Their Future

DAILY REAL ESTATE NEWS | WEDNESDAY, JUNE 03, 2015

The preferred energy sources for the future of U.S. homes may be solar and wind, according to a new survey conducted by SolarCity, a solar installer, and Clean Edge, a marketing research firm.

Read more: Getting the Word Out About Going Green

Of the approximately 1,400 home owners surveyed, half identified solar energy as the most important energy source for the future of housing—regardless of where respondents lived or their political views. Coming in second as an important future energy source was wind, followed by natural gas, increased efficiency, oil, hydro- and nuclear power. 

On the other hand, the power sources that received the least public support were geothermal, coal, and biofuel/biomass. 

About 87 percent of respondents surveyed said that renewable sources are important to the nation’s energy future. However, respondents said that “saving money,” not “reducing my environmental impact," serves as the most important factor in deciding to purchase clean energy products and services. In fact, 82 percent of home owners surveyed cited saving money as the most important factor, while reducing the environmental impact was cited by 34 percent.

"Sustained double-digit growth rates for more than a decade reflect the long-term nature of this current shift to more efficient, cleaner, and environmentally friendly products and services," the surveyors wrote. "But don’t be mistaken; as our research clearly points out, it is cost savings, much more than environmental factors, that are driving this monumental shift."

The survey found the most popular energy upgrades that home owners are planning on for the next year are LED light bulbs (27 percent) and smart thermostats (12 percent). Fewer people cited pricier energy upgrades such as photovoltaic panels (6 percent), electric vehicles (4 percent), and heat pumps (4 percent). 

Source: “What Home Owners Think About Clean Energy,” Green Building Advisor (June 2, 2015)

Home Buyers Make Less of a Down Payment

DAILY REAL ESTATE NEWS | FRIDAY, JUNE 05, 2015

The average down payment for single-family homes, condos, and townhomes purchased in the first quarter was 14.8 percent of the purchase price, the lowest since the first quarter of 2012, according to RealtyTrac's First Quarter 2015 U.S. Home Purchase Down Payment Report. Down payments were down from 15.5 percent a year earlier. The average down payment in dollars was $57,710 in the first quarter.

Read more: What's an Average Down Payment?

Broken out, the average down payment for Federal Housing Administration purchase loans was 2.9 percent of the purchase price (or in dollars, $7,609) while down payments for conventional loans were 18.4 percent of the purchase price (or $72,590), the report showed.

The share of FHA loans rose throughout the first quarter, making up 25 percent of loan originations in March.

"Down payment trends in the first quarter indicate that first time home buyers are finally starting to come out of the woodwork, albeit it gradually," said Daren Blomquist, vice president at RealtyTrac. "New low down payment loan programs recently introduced by Fannie Mae and Freddie Mac, along with the lower insurance premiums for FHA loans that took effect at the end of January are helping, given that first time home buyers typically aren't able to pony up large down payments. Also helping tilt the balances toward first time home buyers in the first quarter is less competition from the large institutional investors that have been buying up starter home inventory as rentals."

The share of low down payment loans is at a nearly two-year high. Low down payment loans -- defined as down payments of 3 percent or lower -- comprised 27 percent purchase loans in the first quarter, up from 26 percent a year ago. The bulk of low down payments – 83 percent -- were made through FHA purchase loans originated in the first quarter while 11 percent of conventional loans were low down payment loans.

The RealtyTrac report showed that among the nation’s 20 largest counties with down payment data available, the following counties had the lowest average down payment percentage in the first quarter:

• Wayne County, Mich., in Detroit: 12%
• Philadelphia County: 12.6%
• Clark County, Nev., in Las Vegas: 13.3%
• Riverside County, Calif., in Inland Southern California: 13.7%
• Maricopa County, Ariz., in Phoenix: 14.2%

On the other hand, the counties with the highest average down payment percent in the first quarter were:

• New York, N.Y./Manhattan: 37.2%
• Kings County, New York/Brooklyn: 29.3%
• Queens County, N.Y.: 27.3%
• Santa Clara County, Calif., in the San Jose metro area: 25.4%
• Orange County, Calif., in the Los Angeles metro area: 22.9%
• Miami-Dade in the Miami metro area: 19%

Source: RealtyTrac

The 8 Fastest-Growing Cities for Millennials

DAILY REAL ESTATE NEWS | THURSDAY, JUNE 04, 2015

The Millennials, aged 20 to 34, are viewed by many housing analysts as the key to boosting home ownership -- so where are they flocking to? 

Read more: What Millennials Want in a Home

The Riverside, Calif., metro area saw a 40 percent rise from 2010 to 2013 in millennials -- the largest of any other U.S. city, according to U.S. Census data compiled by Bloomberg. 

"Millennials want to live, work, and play in an urban area," Nancy Lashine, managing partner at Park Madison Partners, told Bloomberg. "Austin, Texas, Salt Lake City, Dallas, Denver, and San Diego—these are all cities where there is a very high concentration of Millennials. You are seeing multifamily developers buying land."

The following U.S. cities saw the largest increase in millennial population from 2010 to 2013: 

1. Riverside, Calif.
2. Bakersfield, Calif.
3. Las Vegas
4. Orlando
5. McAllen, Texas
6. San Antonio
7. Austin
8. Houston, Texas

Source: "Ten Cities That Are Magnets for Millennials," Bloomberg (June 2, 2015)

These 20 Housing Markets Are Booming

DAILY REAL ESTATE NEWS | TUESDAY, JUNE 02, 2015

Where is the housing market most on the upswing for buyers and sellers this spring? Realtor.com® recently analyzed 300 of the largest housing markets to come up with a list of the nation's 20 hottest real estate markets. The rankings are based on the number of views per listing on realtor.com® (which helps to gauge buyer demand) as well as the median age of inventory (to analyze the supply). 

Read more: 20 Housing Markets That Are Heating Up

California cities made up half of the nation's 20 hottest real estate markets. But landing No. 1 on the list was Denver, which has seen limited inventories of homes for-sale at a time when it's seeing substantial economic growth and increased buyer demand. 

Realtor.com® ranked the following 20 housing markets as the hottest in May: 

1. Denver-Aurora-Lakewood, Colo.
2. San Francisco-Oakland-Hayward, Calif.
3. San Jose-Sunnyvale-Santa Clara, Calif. 
4. Dallas-Fort Worth-Arlington, Texas
5. Vallejo-Fairfield, Calif.
6. Boston-Cambridge-Newton, Mass.-N.H.
7. Santa Cruz-Watsonville, Calif.
8. Santa Rosa, Calif.
9. Ann Arbor, Mich.
10. Detroit-Warren-Dearborn, Mich.
11. San Diego-Carlsbad, Calif.
12. Sacramento-Roseville-Arden-Arcade, Calif.
13. Boulder, Colo.
14. Fargo, N.D.-MN
15. Los Angeles-Long Beach-Anaheim, Calif.
16. Austin-Round Rock, Texas
17. Oxnard-Thousand Oaks-Ventura, Calif.
18. Manchester-Nashua, N.H.
19. Columbus, Ohio
20. Stockton-Lodi, Calif.

Source: "The 20 Hottest U.S. Real Estate Markets in May 2015," realtor.com® (June 1, 2015)

Economists Deflate Bubbling Mumblings

DAILY REAL ESTATE NEWS | THURSDAY, MAY 28, 2015

Home prices are skyrocketing.  The median existing-home price for all housing types was $219,400 in April – 8.9 percent above last year. This marks the largest percentage gain in home prices since January 2014, according to the National Association of REALTORS®' latest housing report.

Read more: Are Some Markets Being Overvalued?

The run up in prices is prompting some housing analysts to question whether another housing bubble could be brewing. However, economists are quick to note that this isn't 2006 and there’s no reason for concern of a repeat, at least for now.

For one, economists point out that while home prices are still rising, the rate of appreciation lately has been showing signs of slowing. 

"There is no bubble to be anxious about," David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices, told The Wall Street Journal. Home price increases in many markets is "a lot softer" than a year ago, he says.

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Also, economists say that oversupply is not an issue this time around, since builders have drastically reduced the number of homes they're building. Also notable, home buyers are taking out more conservative loans – 30-year fixed-rate mortgages – unlike the housing bubble when subprime, adjustable-rate mortgages soared in popularity.

While some housing markets – like San Francisco and Denver – have surpassed their previous 2006 peaks in home prices, economists still aren’t concerned. They say that’s a sign of a normal housing market "because in a bubble prices typically rise in tandem across the country, rather than responding to the strength of local economies," reports The Wall Street Journal.

Lawrence Yun, chief economist for the National Association of REALTORS®, says that prices have risen quickly but he also isn’t alarmed about a housing bubble. However, he is concerned that housing affordability will continue to soften.

Source: "Housing Bubble? Despite Rising Prices, Most Economists Still Say No," The Wall Street Journal (May 26, 2015)