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More Buyers Take Advantage of FHA Loans

Daily Real Estate News | Thursday, July 23, 2015

Sales to buyers using Federal Housing Administration loans rose to a two-year high in the second quarter, according to RealtyTrac's June and Midyear 2015 U.S. Home Sales Report.
Buyers using FHA loans — which are typically low down payment loans that are used by first time home buyers -- made up 23 percent of all single family home and condo sales with financing in the second quarter of 2015. That's up from 19 percent in the second quarter of 2014 and the highest share since the first quarter of 2013.

Big move: FHA Lowers Its Mortgage Costs

"As the investor-driven housing recovery faded in the first half of 2015, first-time home buyers, boomerang buyers and other traditional owner-occupant buyers started to step into the gap and pick up the slack," says Daren Blomquist, vice president at RealtyTrac. "This is good news for sellers in many markets, providing them with strong demand from a larger pool of buyers, and U.S. sellers so far in 2015 are realizing the biggest gains in home price appreciation since 2007."
The following markets, with a population of 1 million or more, had the highest share of buyers using FHA loans in the first six months of 2015:

• Riverside-San Bernardino-Ontario in inland Southern California: 35%
• Las Vegas: 32%
• Oklahoma City: 31%
• Salt Lake City: 30%
• Phoenix: 29%

On the other hand, these major markets had the lowest share of buyers using FHA loans in the first six months of 2015:

• San Jose, Calif.: 7%
• Hartford, Conn.: 10%
• San Francisco: 12%
• Boston: 12%
• Milwaukee: 13%

Source: RealtyTrac

New-Home Sales Dip to 7-Month Low

Daily Real Estate News | Monday, July 27, 2015

Sales of newly built single-family homes fell 6.8 percent in June to the lowest level since last November, the Commerce Department reports. But builders remain upbeat that the housing recovery is still intact.
New-home sales were at a seasonally adjusted annual rate of 482,000 units in June. The drop follows a report last week that showed builders were increasing production of new homes, with housing starts climbing nearly 10 percent in June month-over-month. Most of that increase was due to a surge in multifamily construction.
New-home sales continue to be volatile month-to-month.

The Latest Housing Reports
Home Prices Reach an All-Time High
Builders Get Ready to Ramp Up Production

"We knew that there would be ups and downs on the road back to a normal housing market," says Robert Denk, senior economist at the National Association of Home Builders. "As the economy and job growth strengthens, we expect to see gradual, continued momentum in the coming months."
This is the second consecutive month for declines in new home sales. However, new home sales remain up 18.1 percent compared to June of last year.
The inventory of new homes for-sale was 215,000 units in June, representing a 5.4-month supply at the current sales pace.
Regionally, home sales increased by the largest amount month-to-month in the Northeast, where sales were up 28 percent. However, sales fell by 17 percent in the West; dropped by 11.1 percent in the Midwest; and also fell 4.1 percent in the South.
Source: National Association of Home Builders and "U.S. New Home Sales at Seven-Month Low," Reuters (July 24, 2015)

Why Renters May Be in Trouble

Daily Real Estate News | Tuesday, March 17, 2015

The gap between rental costs and household income is widening to unsustainable levels across the country. As more renters face steeper costs, it may put them even further away from home ownership, according to a new study released by the National Association of REALTORS®. NAR evaluated income growth, housing costs, and changes in share of renter and owner-occupied households over the past five years in metropolitan statistical areas across the U.S.

Read more: More Americans Squeezed by Housing Costs

Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, according to their research.
"The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay," says Lawrence Yun, NAR's chief economist.
New York, Seattle, and San Jose, Calif., are among the cities where combined rent growth far exceeds wages, according to the survey.
"Current renters seeking relief and looking to buy are facing the same dilemma: Home prices are rising much faster than their incomes," says Yun. "With rents taking up a larger chunk of household incomes, it's difficult for first-time buyers – especially in high-cost areas – to save for an adequate down payment."
Meanwhile, those who were able to buy a home in recent years have been insulated from the rising housing costs since they were able to lock-in a low 30-year fixed-rate mortgage with a set monthly payment, according to NAR's study. As such, home owners were able to grow their net worth as home values increased and their mortgage balances went down.
"The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year," according to NAR’s study.
The markets that have seen rents rise by the highest amounts since 2009 are:

• New York: 50.7%
• Seattle: 32.38%
• San Jose, Calif.: 25.6%
• Denver: 24.14%
• St. Louis: 22.26%

"Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities," says Yun.
The key to relieve housing costs: Builders need to ramp up the supply of new-home construction, according to Yun. He estimates that housing starts need to rise to 1.5 million. Over the past seven years, housing starts have fallen far short from that historical average – averaging about 766,000 per year.
"With a stronger economy and labor market, it's critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren’t compensating for the gains in home prices," Yun says.
Source: National Association of REALTORS®

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TRID Start Date Bumped to Oct. 3

DAILY REAL ESTATE NEWS | WEDNESDAY, JULY 22, 2015

The Consumer Financial Protection Bureau has announced that its Know Before You Owe mortgage disclosure rule will take effect Oct. 3.

Read more: Don't Get Thrown by Doc Overhaul

The TILA-RESPA Integrated Disclosure rule is expected to have sweeping changes on the real estate industry by merging 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 also 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.

"The bureau believes that moving the effective date may benefit both industry and consumers with a smoother transition to the new rule," the CFPB said in a statement. "The bureau further believes that scheduling the effective date on a Saturday may facilitate implementation by giving industry time over the weekend to launch new systems configurations and to test systems."

The original start date for the new rule had been set for Aug. 1, but after receiving feedback from lawmakers as well as real estate and mortgage industry officials, the agency decided to postpone the start date until after the traditionally busy summer real estate season.

"August is a busy time for REALTORS®, as home buying and selling picks up around the summer season," says Chris Polychron, president of the National Association of REALTORS®. "CFPB's recognition of the challenge that an August implementation posed for the industry is a big win for REALTORS®, for lenders, for consumers, and for everyone involved. An Oct. 3 implementation will help ensure that our industry has time to prepare for the changes ahead while helping consumers get to closing without delay."

NAR says that it will continue to keep its members updated on the rule and "ensure they have the tools to comply with the changes coming their clients' way."

"We will also continue communicating any REALTOR® concerns about the implementation to the CFPB and look forward to a continued partnership as the TRID rule goes into effect later this year," Polychron says.

Source: National Association of REALTORS® and “It’s Official: CFPB Sets TRID Date for Oct. 3,” HousingWire (July 21, 2015)

Housing Trends eNewsletter- LaTasha Fox

Housing Trends eNewsletter- LaTasha Fox

A Big Mistake Mortgage Shoppers Make

DAILY REAL ESTATE NEWS | TUESDAY, APRIL 14, 2015

About one-third of recent home buyers failed to shop around for a mortgage, saying they were satisfied with the first quote that a lender gave them, according to Fannie Mae's National Housing Survey. But that could be a big mistake.

Read more: Borrowers' Mortgage Shopping Habits Differ Greatly

Researchers found that higher-income, younger-aged, and minority borrowers were the most likely to gather multiple quotes when shopping for a mortgage.

On the other hand, "first-time home buyers and lower-income borrowers are more likely to say that referrals from friends, family, or co-workers had a major influence on their choice of lender," note Sarah Shahdad and Qiang Cai of Fannie Mae's
 Economic & Strategic Research Group in commentary at Fannie Mae’s website. "Only first-time home buyers are more likely to say that a real estate agent's or mortgage specialist's referral influenced their choice of lender. … These findings suggest that there is an opportunity to help consumers be better informed and improve upon the mortgage shopping process."

Shahdad and Cai urge that consumers be provided with more information about mortgage product choices and that buyers be encouraged to seek multiple sources of information.

"As large and infrequent as the mortgage transaction is in most people’s financial lives, borrowers may be leaving money on the table by not shopping around and negotiating for the best terms they can get," Shahdad and Cai write. "Getting a better deal can help borrowers sustain their mortgage even in the case of unexpected increases in expenses or decreases in income. The level of influence of referrals on today’s first-time and lower-income home buyers suggests that finding a lender who delivers on other dimensions, such as efficiency and customer service, also is a key area of focus for many."

Source: "What Is the Mortgage Shopping Experience of Today’s Homebuyer?" Fannie Mae (April 13, 2015)

Smaller Down Payments Lure More Buyers

DAILY REAL ESTATE NEWS | MONDAY, JANUARY 26, 2015

Some home buyers are stepping off the sidelines as more lenders require less money up-front on a home purchase.

Recently, more borrowers are able to pay 3 percent or even less of a home’s purchase price to get a mortgage – a big change from when at least 20 percent down payments were practically the norm post-recession.

Opening the Credit Box

3% Down Payments May Be Game Changer

FHA Lowers Its Harangued Mortgage Costs

Did Mortgages Just Get Easier to Obtain?

Additionally, some lenders are luring more home buyers back by waiving mortgage-related fees and even showing more acceptance of allowing down payments to be made by others, such as the borrower’s family members, The Wall Street Journal reports.

Still, borrowers must have good credit scores and a steady income to often qualify for these smaller down payment loans.

In two big moves in recent weeks, the Federal Housing Administration, which insures mortgages with down payments as low as 3.5 percent, announced it is lowering its annual mortgage-insurance premiums on new mortgages beginning Monday. The move is expected to save a typical first-time home buyer about $900 a year. What’s more, Freddie Mac and Fannie Mae recently lowered the minimum down payments they will accept on loans they back from 5 percent to 3 percent.

Lenders have reportedly been lowering requirements on “jumbo” mortgages too -- loans that exceed $417,000 in most parts of the country and $625,500 in more expensive housing markets. For example, PNC Financial Services Group lowered its requirement from 20 percent down for jumbos up to $1.5 million to 15 percent down. Last year, Wells Fargo started allowing down payments of 10.1 percent on jumbo mortgages; previously its lowest down payment on jumbos was 15 percent, The Wall Street Journal reports.

So far, the changes appear to be luring more home buyers. For the week ending Jan. 9, the Mortgage Bankers Association reported that applications for home purchases -- viewed as a gauge of future homebuying activity -- rose to a seasonally adjusted 24 percent from the prior week. The MBA credited most of that jump to the new 3 percent down payment option for qualified buyers, announced by Fannie Mae and Freddie Mac.

However, financial experts urge borrowers to realize the risks that come with making smaller down payments and also ensure they are the best move for them.

Borrowers who make smaller down payments are more at risk of owing more on their mortgage if property values should decline, notes Jack McCabe, a housing analyst in Deerfield Beach, Fla. Also, borrowers likely will have to pay higher costs over the life of the loan – including higher interest rates and usually mortgage insurance. Financial experts urge borrowers to compare costs, including the interest rate, and whether they have to pay any upfront fees to get that rate. Also, in exchange for a low down payment, borrowers often will be required to pay an extra fee for private mortgage insurance if a down payment under 20 percent is made. Often borrowers who have higher credit scores, smaller loan amounts, and fixed-rate mortgages pay less, The Wall Street Journal notes.

Source: “Down Payments Get Smaller,” The Wall Street Journal (Jan. 23, 2015) and “Loan Demand Posts Biggest Leap in 6 Years,” REALTOR® Magazine Daily News (Jan. 14, 2015)

Buyer Competition Steepens in Tight Markets

DAILY REAL ESTATE NEWS | MONDAY, JULY 20, 2015

Some markets with particularly tight inventories of for-sale homes are seeing a significant uptick in bidding wars that are sending prices far beyond a property’s original list price.

Read more: Economists Pinpoint Inventory Shortage Causes

"In Seattle right now, it's usually more than two buyers," says Sam DeBord, managing broker at Seattle Homes Group, about bidding wars in the city. "We hear about a 20-plus offer bidding war weekly. In most cases, it's closer to five offers."

Debord, who is also the state director of Seattle King County REALTORS®, says that institutional investors often bid the most aggressively and get the higher-priced deals. But traditional buyers are involved in many of these bidding wars too, he says.

And they're increasingly finding themselves up against deep-pocketed investors for the same house.

"Occupant-buyers need to show somehow that they're more likely to close the transaction than an investor," says DeBord. "Cash and speed are to the advantage of the investor, but they're not as heavily invested in actually getting any single property they're writing offers for. Regular buyers should show commitment, whether by financial, logistical, or personal means to sway the seller – within legal guidelines, of course. Personal letters, earnest money increases, and waivers of contingencies can all show serious intent to close." Also, the timing of the closing can influence a seller too, DeBord says.

"For sellers, it's worth considering that the investor may be making offers on multiple properties at the same time," says DeBord. "Keep in mind that the well-financed traditional home buyer might, in some cases, be more likely to get your transaction to closing."

Investors tend to make all-cash offers, while non-investors are making offers that are often supported by a mortgage. Some buyers are also taking the appraisal amount and adding their own cash on top to try to edge out another bidder. These so-called hybrid offers are growing more popularity in middle-market bidding wars – under $1 million, says Mark Stark, CEO and owner at Berkshire Hathaway HomeServices Nevada Properties and Arizona Properties.

Source: "Bidding Wars Still Dominate Low-Inventory Markets," RISMedia (July 19, 2015)

More Than Half of Homes Sold at a Discount

DAILY REAL ESTATE NEWS | TUESDAY, JULY 14, 2015

Prices may be on the rise, but about 63 percent of homes sold at a discount compared to the list price in May, according to the 2015 REALTORS® Confidence Index Survey. The discount averaged in the 1 to 11 percent range.

Read more: REALTORS® Stay Upbeat in Market Outlook

The longer a property lingers on the market, it becomes more likely the home will end up selling at a discount. Eighty-four percent of homes that sold after 12 months were sold at a discount. On the other hand, 24 percent of homes that sold within a month sold at a premium.

Staging a home may help a listing to fetch more, according to the National Association of REALTORS®' 2015 Profile of Home Staging. The survey found that 32 percent of buyers' agents say that staged homes increases the dollar value a home buyer is willing to offer by one to five percent.

Source: "Despite Rising Prices, 63 Percent of Properties Sold at Discount in May 2015," National Association of REALTORS® Economists' Outlook blog (July 13, 2015)

Greek Debt Crisis Spurs Bargain House Hunters

Daily Real Estate News | Thursday, July 09, 2015

Foreign investors are swooping in to snag cheap island villas in Greece as the country's financial troubles mount. Some analysts are calling Greece a "buyers market," but buying does come with some risks as the country works through its financial woes and the possibility of having to introduce a new currency.

Read more: Start and Spread Your Global Brand

"We have people that are in a hurry to buy,” says George Eliades, managing partner of property firm Algean Group, who says inquiries about vacation homes on the Greek island Mykonos have soared in recent weeks. "They are looking for a quick turnaround."
Since 2011, island property values have dropped 30 percent, Eliades says. Home prices in Athens alone have dropped by nearly a half since 2008.
"In this market, you will find good deals," says Alexandros Moulas, an associate at the global property firm Savills in Athens.
This coming weekend, a summit of European leaders will determine whether or not to accept Greece's last bid for a bailout to rescue the country from its debt. But so far, foreign buyers don't seem to be deterred when it comes to real estate. Investors may face a sharp devaluation of their property value if Greece abandons the euro and brings in a new currency. What's more, property taxes may increase as a way for the Greek government to raise more revenue, CNNMoney reports. However, investors right now are seeing big bargains in properties that they say are worth those risks.
Source: "Greek Crisis Sparks Bargains on Island Villas," CNNMoney (July 8, 2015)

A Slip in Rates Lifts Mortgage Demand

Daily Real Estate News | Wednesday, July 08, 2015

Mortgage applications for both refinancings and home purchases gained ground last week, rising 4.6 percent on a seasonally adjusted basis, as interest rates took a slight dip, the Mortgage Bankers Association reports. Total mortgage application volume is 22 percent higher now than it was one year ago.
Refinance applications rose 3 percent last week over the previous week, while applications for home purchases saw the biggest spike, increasing 7 percent week-to-week. Applications for home purchases, viewed as a gauge of future home buying activity, are 32 percent higher now than a year ago, the MBA reports.
The MBA also reported that the average 30-year fixed-rate mortgage rate fell from 4.26 percent to 4.23 percent last week.
"Overall, trends in mortgage applications last week were consistent with the ongoing shift towards a purchase market accompanied by growth in employment and higher interest rates,” says Lynn Fisher, the MBA’s vice president for research and economics. “Although contract interest rates fell by 3 basis points due to economic uncertainty abroad last week, they remain 40 basis points above April levels, and the refinance share of mortgage applications fell to 48 percent, the lowest rate since June of 2009.”
Source: “Weekly Mortgage Applications Rise 4.6% on Rate Dip,” CNBC.com (July 8, 2015)

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Fewer Home Buyers Pay All-Cash

Daily Real Estate News | Monday, July 06, 2015

The share of home buyers using all-cash to pay for their real estate transactions dropped to the lowest level since November 2009, according to a new report by RealtyTrac. Nearly 25 percent of all single-family home and condo sales in May were all-cash purchases, down from 30 percent a year ago.

Read more: Cash Sales are Weakening

The percentage of cash sales is nearing a long-term average that goes back to January 2000 of 24.8 percent. Cash sales are also well-below the peak of 42.2 percent reached in February 2011.
The share of institutional investors -- those who purchase at least 10 properties in a year and who often pay all-cash -- is plunging.
As such, housing markets are transitioning from an "investor-driven, cash-is-king market to one more dependent on traditional buyers," says Daren Blomquist, vice president at RealtyTrac.
The top five metro areas with the highest share of cash buyers (and a population of at least 200,000) are all located in Florida. They are: Naples-Marco Island (56%); Sarasaota-Bradenton (54%); Miami (53.4%); Ocala (49.9%); and Cape Coral-Fort Myers (49.7%).
Source: "All-Cash Share of U.S. Home Purchases in May Drops to Lowest Level Since November 2009," RealtyTrac (July 1, 2015)