on February 1st, 2012
Home ownership affordability is at a record high due to low home prices and all-time low mortgage rates. But housing experts have blamed banks’ tightened lending standards for keeping more buyers on the sidelines because they are unable to qualify for financing.
Lending standards increased sharply after the financial crisis in 2008, and even after the recession ended in 2009. Lenders have yet to ease their stricter standards, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn.
Why? The researchers say it’s mostly because there’s less money available to lend.
“During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up,” an article at MSNBC.com notes, in describing the study’s findings. “That market has all but vanished; 90 percent of new mortgages written today are backed by the government.”
Also, researchers found that lenders are swamped with more paperwork, which is also causing delays in processing. Many lenders have issued stricter documentation requirements before they’ll approve a loan. Nowadays, nearly 90 percent of mortgage applications require “full documentation” before getting approved. From 2000 to 2006, less than 60 percent of applications required “full documentation,” researchers found.
Source: “Tight-Fisted Mortgage Lenders Pressure Home Sales,” MSNBC.com (Jan. 27, 2012)
Editor’s Note: Another reason banks have tightened up their lending is because Fannie Mae and Freddie Mac are requiring banks to repurchase some of the loans they’ve made. As reported by Bloomberg News, banks don’t want to get hit with more mandatory repurchases, so they have added “overlays” (such as minimum downpayment, debt ratio, etc.) to FHA, Fannie, and Freddie standards, and are only making the most conservative loans.
on January 29th, 2012
List prices are heating up in Florida, as recovery takes hold in the Sunshine State. Florida boasts the highest number of cities in the top 10 for largest increases in median list prices in the last year. In Miami alone, median list prices have jumped 32 percent in the last year.
Nationwide, median list prices have inched up 5.03 percent from December 2010 to December 2011, according to Realtor.com data.
The following cities are where median list prices have increased the most in the last year, based on December 2011 data of 146 metro areas from Realtor.com:
1. Miami, Fla.
Year-over-year increase: 32.50%
Median list price: $265,000
2. Naples, Fla.
Year-over-year increase: 21.67%
Median list price: $365,000
3. Fort Myers-Cape Coral, Fla.
Year-over-year increase: 21.47%
Median list price: $229,375
4. Punta Gorda, Fla.
Year-over-year increase: 19.42%
Median list price: $179,000
5. Boise City, Idaho
Year-over-year increase: 19.25%
Median list price: $154,900
6. West Palm Beach-Boca Raton, Fla.
Year-over-year increase: 18.38%
Median list price: $219,000
7. Sarasota-Bradenton, Fla.
Year-over-year increase: 17.62%
Median list price: $241,000
8. Daytona Beach, Fla.
Year-over-year increase: 16.06%
Median list price: $179,900
9. Phoenix-Mesa, Ariz.
Year-over-year increase: 13.79%
Median list price: $165,000
10. Grand Rapids-Muskegon-Holland, Mich.
Year-over-year increase: 13.32%
Median list price: $137,000
By Melissa Dittmann Tracey, REALTOR® Magazine Daily News
on January 27th, 2012
Many in the real estate industry were concerned that a change announced last year to the maximum seller contributions allowed for Federal Housing Administration-insured loans could cause more deals to fall apart. The FHA announced last year that it would cut seller contributions from 6 percent to 3 percent for purchases using FHA-insured loans. Seller concessions, such as seller assistance to buyers in closing costs, can play a big part in FHA-financed home sales and in closing deals, real estate agents say.
Inman News reports that the FHA may be rethinking its seller contribution cap and will likely announce changes to its policy in April.
“Rather than an across-the-board 3 percent ceiling on all FHA mortgages, the new policy would permit higher seller contributions, probably between 4 and 5 percent, on smaller loan balances,” Inman News reports. “Meanwhile, the 3 percent cap would be mandatory on all loan amounts above some yet-to-be-specified limit.”
Inman News also speculates that a dollar ceiling on seller concessions might be announced, like a maximum cap of $6,000 instead of a percentage.
“The FHA is what’s keeping us alive,” Steve A. Brown, executive vice president of Memphis-based Crye-Leike, told Inman News. “If they do a 3 percent across-the-board limit, that would knock out a lot of our sales. But if they go with some graduated deal tied into lower-priced homes, then we should be all right.”
Source: “FHA Concessions on Seller Concessions?” Inman News (Jan. 25, 2012)
on January 25th, 2012
When you compare the cost of owning a home to renting, you’ll find that buying may soon make more sense, Paul Diggle, a housing economist at Capital Economics, told MSNBC.com.
Diggle’s analysis of the housing market showed a 33 percent drop in home prices, record-low mortgage rates (with 30-year fixed-rate mortgages available under 4 percent now), and a 15 percent rise in rents since the housing market turned sour are making more consumers take a closer look at buying.
“The median monthly mortgage payment of about $700 has fallen to about the level of a median monthly rent check,” an article at MSNBC.com notes about Diggle’s analysis. “If mortgage rates keep falling and rents keep rising, the equation will tip even further toward owning.”
Case in point: Diggle says that a buyer who purchases a median-priced home and stays there for at least seven years would likely come out ahead by about $9,000 than if they chose to rent for those seven years. Diggle’s calculations factor in rents continuing to rise 3 percent a year, and housing prices staying flat for the next two years before rising in 2014.
But while more Americans may be motivated to buy, many still can’t, Diggle notes. Home owners who lost their home to foreclosure may be forced to wait on the sidelines before owning again, other Americans may not have a 20 percent down payment that more lenders are wanting, lack a high credit score to qualify for the best financing, or have steady employment.
Source: “Home Buying Could Soon Beat Renting,” MSNBC.com (Jan. 23, 2012)
on January 23rd, 2012
Fallen home prices and record-low mortgage rates have pushed housing affordability to a 40-year high. Meanwhile, rental prices are continuing to rise at a fast pace, according to a new report released by Hotpads.com, a rental listing service.
Rental prices in 20 of the largest metro areas increased 3.75 percent in 2011, and prices are expected to continue to rise in 2012. Meanwhile, home prices fell by 1.83 percent in 2011, according to the report.
“In a lot of cases it’s getting to a point where it makes more sense for people to buy because rent has been going up significantly faster, while home prices have been falling,” Paul Gleger, author of the report, told AOL Real Estate.
According to the report, New York has the highest rental prices, with a two-bedroom apartment’s median rent at $2,653. Other cities posting some of the highest median rents in the country: Boston ($1,929), Miami ($1,748), San Francisco ($1,607), Los Angeles ($1,717) and Chicago ($1,552).
Source: “U.S. Rental Market Stays Hot in 2011,” Hotpads.com (January 2012) and “Rental Prices Climb, Buying Remains More Affordable,” AOL Real Estate News (Jan. 18, 2012)
on January 22nd, 2012
Up to 1 million at-risk, underwater borrowers may be eligible for a reduction on their mortgage principal, if a settlement between big banks and government officials gets the final approval.
The mortgage aid is reportedly on the table as big banks and federal and state government officials are nearing an end to months of settlement talks stemming from foreclosure abuses allegedly made by banks that caused many home owners to lose their home.
“We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” Shaun Donovan, U.S. Housing and Urban Development Secretary, said during a recent forum at the Winter Meeting of the U.S. Conference of Mayors in Washington.
Under the proposed settlement, major lenders J.P. Morgan Chase, Bank of America, Wells Fargo, Citigroup, and Ally Financial would pay between $20 billion to $25 billion to settle alleged foreclosure abuses.
Donovan also said banks also would reduce the mortgage principal of up to 1 million borrowers by about $20,000 each. Furthermore, he noted that some families who were wrongly foreclosed upon may get compensated as a result of the settlement.
Source: “Foreclosure Deal With Banks Is ‘Very Close,’ HUD’s Chief Says,” Reuters (Jan. 18, 2012)
on January 20th, 2012
Builder confidence is at its highest level since June 2007, yet another sign that things are finally perking up in the new-home market, which has faced some of its darkest days on record this past year.
For the fourth consecutive month, builder sentiment for newly built, single-family homes was on the rise, according to the National Association of Home Builders and Wells Fargo Housing Market Index. The index measures builder sentiment on current and future sales conditions and buyer traffic.
The latest increase in the January index is “universally represented across every index component and region,” said Bob Nielsen, NAHB chairman.
“This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide,” Nielsen said.
Coming Off a Dismal 2011
The Commerce Department reported Thursday that for the third straight month, single-family home construction rose 4.5 percent in December. However, overall housing starts for the month dropped 4.1 percent, with gains in the single-family sector offset by a nearly 28 percent drop in apartment construction in December.
The latest news wraps up a dismal year for new-home building, with 2011 marking the fewest number of single-family homes built in half-century. In all, builders started about 606,900 homes in 2011 — that’s half the 1.2 million economists consider healthy for the sector.
Nevertheless, despite the mostly sluggish year for the sector, building did start to pick up in the last part of 2011 and housing analysts are upbeat that will continue. “We expect further sustained gains in starts and permits over the next few months; a real recovery is getting started,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, told the Associated Press.
Threats to Recovery Remain
NAHB Chief Economist David Crowe warns that “caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market.”
Source: National Association of Home Builders and “December Ends Worst Year for Single-Family Home Construction,” Associated Press (Jan. 19, 2012)
on January 18th, 2012
Several recent indicators for the real estate industry are pointing to a market that is on the mend and entering recovery mode.
Housing experts’ predictions for the new year tend to center around a market stabilizing before entering a gradual, albeit very slow, recovery. However, the tone is more upbeat than it has been in years for the housing market.
Here are a few of the signs that are showing the market moving in a more positive direction:
Home sales: Existing home sales are expected to increase 12 percent this year, following a 2 percent jump last year, Moody’s Analytics predicts. The signs are already showing: In November, pending home sales — a gauge for future home buying — reached its highest level in 19 months, the National Association of REALTORS® reported. (Read more.)
New-home market: Coming off of what could be considered the worst year for new-home building ever recorded, the sector is expected to bounce back this year. New-home sales and starts were already showing a rebound in the last few months of 2011. Moody’s is predicting that single-family housing starts will increase 37 percent this year, and new-home sales will soar 74 percent.
Housing stocks: Investors are starting to get optimistic about the possibility of a rebound too, and are turning to home builder stocks. These equities have recently outperformed the broader stock market and the S&P 1500 homebuilding index has increased 38 percent since mid-October, USA Today reports.
Consumer confidence: With mortgage rates at record lows and housing affordability high, about 71 percent of Americans say now is a good time to purchase a home. Also, more Americans are optimistic that home prices will rise over the next year — about 26 percent say prices will rise in 2012, an increase of 4 percent over the last survey, according to Fannie Mae’s December National Housing Survey
Source: “Housing Outlook Is More Upbeat,” USA Today (Jan. 15, 2012) and “Consumers More Confident, Survey Says,” Deseret News (Utah) (Jan. 16, 2012)
on January 15th, 2012
Home affordability is at 1971 levels, due to falling home prices and record low mortgage rates, pushing home ownership in reach to more families, according to the U.S. Department of Housing and Urban Development (HUD).
Home owners are bringing in nearly double the median income they need to cover the cost of an average home, HousingPredictor reports.
“With interest rates at historically low levels and markets across the country beginning to improve, home ownership is within reach of more households,” Bob Nielsen, chairman of the National Association of Home Builders, said in a statement.
Home sales have been ticking up, according to recent reports by the National Association of REALTORS®, the National Association of Home Builders, as well as the Obama administration’s December Housing Scorecard.
However, some consumers are finding more stringent lending standards for getting a mortgage a roadblock to home ownership, and some housing experts have blamed tighter underwriting standards in recent years for continuing to hold back the housing market.
Source: “Home Affordability Reaches 1971 Level,” HousingPredictor (Jan. 11, 2012)
on January 13th, 2012
Borrowers who have a history of paying rent on time may see a boost to their credit score.
Experian, a leading credit report company, added a section to its credit reports last year that reflected on-time rent payments, which helped give a boost in the credit scores to some on-time rent payers. Now the two other major credit reporting companies are following suit.
CoreLogic and FICO recently announced they are also adding a score that reflects payment histories from landlords, The New York Times reports.
“Evidence of positive rental payments could be a plus for consumers,” Joanne Gaskin, FICO’s director of product management global scoring, told The New York Times.
Nearly half of high-risk consumers saw an increase of 100 points or more after their rental history was added to their credit report, says Brannan Johnston, the managing director of Experian’s rent bureau. Consumers with average or higher credit scores, on the other hand, did not see any major difference to their scores.
For former home owners who lost their homes to foreclosure, they may be able to rebuild their credit histories more quickly now by showing they are “very responsible renters,” Tim Grace, senior vice president of CoreLogic, told The New York Times.
Source: “A Good Rental History Can Help Borrowers,” The New York Times (Jan. 5, 2012)
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