Economist: It’s not easier to get a mortgage

WASHINGTON – Aug. 11, 2015 – Home sales are improving, so does that mean it’s easier to get credit access for a mortgage?

Not necessarily, writes Jonathan Smoke, realtor.com’s chief economist.

Last fall, mortgage giant backers Fannie Mae and Freddie Mac urged lenders to ease their requirements and also introduced new 3 percent downpayment programs for qualified buyers. The Federal Housing Administration (FHA) also lowered its insurance premiums.

The Mortgage Bankers Association’s Credit Availability Index was at 122 in June, a 5 percent increase year-over-year in the expansion of credit. However, the index peaked at 869 in June 2004 – indicating that June’s reading is still far from that peak or even a normal reading.

Smoke says that the average FICO score on a closed purchase mortgage in June was 727. Average FICO scores for the past 24 months have hovered between 724 and 742. That represents above-median credit quality households, Smoke says. The average denied FICO score was 672 in June, down from 686 a year ago.

What that means, Smoke notes, is that “more lower credit-quality households are applying but not getting approved. Yet at the same time, the percentage of purchase applications making it to closing has risen from 64 percent last June to 69 percent this June. Times are still tough for those with tarnished credit.”

On the other hand, wealthier households seeking a jumbo mortgage may be having an easier time. Lenders show signs of loosening up on jumbo mortgage requirements.

A more widespread change may be on the horizon. A July Senior Loan Officer survey report from the Federal Reserve did show that over the past three months banks have been easing lending standards on several categories of mortgage loans. Smoke notes that those changes may start appearing in the closing averages in the coming months.

Still, “today’s limited credit availability is at least partly to blame for the tight supply that’s leading to higher prices and higher rents,” Smoke writes. “Builders are not convinced that there’s enough depth of demand to absorb higher levels of new construction, so they’re holding back and focusing on their profitable growth instead. Meanwhile, a substantial percentage of today’s homeowners with mortgages underwritten years ago fear not being able to qualify for a new mortgage today, so they stay on the sidelines and keep their homes off the market.”

Source: “Is It Really Easier to Get a Mortgage These Days? Well …” realtor.com® (Aug. 6, 2015)

© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688

52% of Americans plan home purchase within 5 years

CHICAGO – Aug. 12, 2015 – Just over half (52 percent) of Americans say they are likely to buy a home in the next five years, according to the 2015 BMO Harris Bank Homebuyers Report.

Americans surveyed are willing to pay an average of $296,000 for a home and an average 21 percent downpayment.

The report, conducted by Pollara for BMO Harris, also found that:

  • Among likely buyers, 78 percent plan to get preapproved before seriously searching for a home.
  • Three quarters of current homeowners set a budget before looking for a home. Sixteen percent ended up spending less while 13 percent went over their budget.
  • 74 percent of those looking to buy a new home will consult a real estate agent, while 59 percent said they will visit online real estate websites and 37 percent will seek recommendations from friends and family.
  • 63 percent of American homeowners spent under six months looking for a new home before they made a purchase.
  • 8 percent bought a home without participating in an active real estate search – or even any plan to buy at all – because a specific property caught their attention.
  • Many likely homebuyers are interested in a real estate mobile app to help their home search: 78 percent said the biggest draw for a mobile app would be the ability to look at house listings in their specific desired area, and the ability to obtain information about neighborhoods (77 percent).

The survey results cited in the BMO Harris 2015 Home Buying Report, conducted by Pollara, are compiled from a random sample of 2500 Americans 18 years of age and over between Jan. 23 and Feb. 9, 2015.

© 2015 Florida Realtors®

What do today’s buyers want in a home?

NEW YORK – Aug. 5, 2015 – What building materials are trending in new-home construction? The latest Annual Builder Practices Survey, conducted by Home Innovation, reveals what buyers can expect to see in the new-home market.

1. Garages: The garage door is getting more enhancements, including windows, insulated doors, and doors made of composite or plastic materials. In 2014, 32 percent of all new single-family homes had bays for three or more cars – the most ever recorded in this study’s history.

2. Flooring: Carpeting continues to be the most popular flooring option for new construction, included in about 83 percent of all new-home bedroom installations. However, only about 40 percent of living rooms now have carpet. Hardwood flooring – both solid and engineered– is the second most popular type of flooring included in 27 percent of all new-home installations. Ceramic tile (which appears in 72 percent of all bathroom floor installation) follows in third place, making up 20 percent of all new-home floor installations.

3. Countertops: For kitchen countertops, granite continues to reign in two out of three homes (64 percent of new-home installations). Quartz/engineered stone is gaining popularity while laminate, solid surfacing and ceramic tile are losing appeal.

4. Appliances: Cooktops and wall oven combinations are gaining in popularity and make up about 24 percent of the market, compared to freestanding ovens (45 percent). Freezer-on-bottom refrigerators are gaining in popularity at 19 percent, while side-by-side has fallen to 28 percent of the share.

5. Kitchen sinks: More buyers are paying attention to their kitchen sink, with the single basin kitchen sink making a comeback, growing from 5 percent to 20 percent of all new single-family homes in the past decade. Also growing in popularity are granite/stone kitchen sinks (at 8 percent). One-piece cultured marble lavatories are continuing to decline in demand.

Source: “Material World: The Hottest Trends From the 2015 Builder Practices Survey,” BUILDER Online (July 29, 2015)

© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688

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Exsisting Home Sales Expected To Continue To Accelerate

DSNEWS

Existing home sales in June reached their highest level in eight years, since before the recession, and they are expected to continue their surge in July, according to online real estate marketplace Auction.com’s Real Estate Nowcast.
The latest Nowcast predicts that existing home sales in July will fall between annual rates of 5.49 and 5.84 million annual sales, with a targeted number of 5.67 million. This represents an increase of 3.2 percent from June and a year-over-year increase of 11.7 percent, according to Auction.com.
“May and June existing home sales have both been very encouraging for anyone looking for proof that the housing market is in recovery, and our July Nowcast indicates that this positive momentum will continue into July,” Auction.com EVP Rick Sharga said. “One potential area of concern is the steeper-than expected increase in home prices. While this is driven by limited inventory, and a declining number of distressed home sales, affordability may start to become an issue if home price increases continue to outpace wage growth. And if the Fed does move to raise interest rates as expected this fall, we could see home sales volume begin to weaken.”
The latest existing home sales report from the National Association of Realtors (NAR), released earlier this week, found that existing home sales were at an annual rate of 5.49 million in June, their highest level in eight years and a 3.2 percent jump from May. This figure was in line with Auction.com’s June Nowcast, which estimated an annual sales rate of 5.55 million for existing homes (revised downwardly from 5.57 million). NAR’s revised May figure of 5.32 million nearly matched Auction.com’s estimate for the month of 5.32 million.
According to Auction.com, from a price perspective, the housing market has shifted from recovery to expansion due to a June increase in existing home prices up to $236,400 as reported by NAR. This figure, in addition to representing a 6.5 percent year-over-year increase, beat the all-time high of $230,400 set in July 2006. June’s total also fell within Auction.com’s predicted range of $217,482 and $240,375.
The July Auction.com Nowcast predicts that existing home prices will fall between $227,170 and $251,082 during the month, with a target price of $239,126. The target price for existing homes would be a 4.6 increase month-over-month and a 7.7 percent increase year-over-year, according to Auction.com, and would also set a new record for median home prices.
First-time buyer share dropped from 32 percent to 30 percent from May to June, according to NAR. Still, first-time buyer share remained higher than earlier in the housing recovery. Limited entry level inventory, tight credit, and rapidly-rising prices will present challenges to first-time buyers, according to Sharga. Also, all-cash sales (an indicator of true investor purchases) fell to 22 percent in June, down from 24 percent in May and 32 percent from a year earlier.
“This is not surprising given the big increases in prices that are making return hurdles harder and harder to meet,” Auction.com Chief Economist Peter Muoio said. “This is the lowest level of all-cash sales since December 2009. Similarly, distressed sales accounted for just 8 percent in June, matching an August 2014 low. Taken together these indicators signify a housing recovery on more solid ground, with fickle investors playing a smaller role, the vast majority of sales non-distressed, prices back to pre-bust levels and sales increasing sharply.”

Bidding wars return

NEW YORK – July 21, 2015 – Bidding wars are returning to U.S. housing markets with too few homes for sale.

A number of conditions led to the current lack of for-sale inventory, including an unexpectedly sluggish rebound in home construction. At the same time, millions of homeowners aren’t listing their home because they don’t believe they’ll qualify for a new mortgage, or that they cannot afford the costs associated with a sale.

As of May 31, there were 2.3 million existing U.S. houses on the selling block – enough inventory to last 5.1 months at the current sales pace but shy of the six to seven months of supply that typically signals a balanced market.

But in more than 33 percent of the 300 biggest metro areas tracked by Realtor.com, listings have been on the market a median of less than two months, indicating a rapid turnover as demand for residential properties exceeds supply. Those include such large markets as Dallas and San Francisco along with smaller markets like Vallejo, California, and Kennewick, Washington.

Even in the face of a tight home listing inventory, some economists hope renters will add demand to the sector as rent increases continue, prompting many to pursue ownership. Apartment rents have climbed almost 16 percent in the United States since 2010, calculates Reis Inc.

Source: Wall Street Journal (07/20/15) P. A1; Hudson, Kris

© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688

The top 3 mistakes made by first-time buyer

NEW YORK – July 30, 2015 – First-time homebuyers are emerging as a bigger force in the housing market. But getting approved for a mortgage, finding the right home and staying within budget can pose a challenge for them.

Bankrate.com notes some of the most common first-time buyer mistakes:

1. Judging only the mortgage payment: Some first-time homebuyers mistakenly focus only on the monthly mortgage payment, which they can afford, and forget that a home comes with other expenses, which they can’t afford.

“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 downpayment: It’s a mistake to spend everything in the savings account for a downpayment, 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 downpayment 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 homeowners – needs to have a rainy-day fund.”

3. Getting new credit before the deal is closed: When borrowers prequalify for a loan, they need to avoid 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)

© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688

Removing squatters: Rules vary by district

MIAMI – June 12, 2015 – Is removing a squatter a civil matter or a crime? It depends.

Overall, two things impact squatting: The police department system in the jurisdiction and its procedures for handling a squatting complaint, and the steps a property owner takes when he or she first discovers the squatter.

Miami-Dade County police noted an increase in squatters last year. Working with local groups, including Realtors, the city proposed and passed an ordinance creating a system for dealing with squatter complaints.

Following the change, the Miami Association of Realtors hosted a “Removing Illegal Occupants from Residences” seminar. An important distinction noted by Miami-Dade Police Department Sgt. David Goldberger during the conference had to do with an owner’s reaction to a squatter.

Goldberger’s advice specific to Miami-Dade County’s squatting rules:

  • Squatters can be removed under trespassing laws, but officers must verify certain information and documentation before they can act.
  • If an owner identifies a squatter, he or she should call the police bureau (in Miami-Dade it’s the Economic Crimes Bureau) during normal business hours. Squatting is not considered a “911” emergency telephone call.
  • If calling after hours, request that a uniform officer go to the home.
  • If the property is located within an incorporated city’s boundaries rather than unincorporated Miami-Dade County, ask the local police department about their policy. If the response is, “It’s a civil matter,” you should verify that. Under certain circumstances, squatting does become a civil matter.
  • Owners or their representatives with a squatter complaint must provide proof of ownership. Acceptable documentation is a writ of possession, a certified copy of the certificate of title or a certified copy of the final summary judgment. Agents must have a limited power of attorney to act on the owner’s behalf.

After documentation is verified, the owner/representative needs to provide a verbal trespass warning in the officer’s presence. Under the trespass warning, the squatter will be instructed to leave immediately or within a reasonable timeframe (for example, 30 minutes to gather belongings).

Important note: The owner/representative should not give the squatter additional time to get out (such as 24 hours to clear everything), because doing so gives the squatter permission to remain in the home. That “permission” could make the problem a civil rather than criminal matter.

It’s okay for the owner/representative to make arrangements with the squatter to return and gather the remainder of their belongings. An officer will respond if needed to keep the peace.

Realtors with squatter questions can call Florida Realtors Legal Hotline, a free service for members.

© 2015 Florida Realtors®