CEO Archives

Home Price Climb Means Buyers Need To Prepare

It isn’t news that home prices have been headed upward for awhile now. And, according to the latest S&P Case-Shiller Home Price Indices, they are continuing to climb at around the same pace as they have been in recent months. Which is to say, the price increases haven’t yet slowed. Of course, how quickly prices are increasing depends on where you’re looking to buy. Large metropolitan areas – and especially those in the West – are seeing the sharpest increases, while the price gains are more muted in the Midwest. But, no matter where you are, the best way to prepare for higher prices is to know what you want, what you can afford, and where your limits are. In competitive and higher priced markets, having a firm idea of what you can spend and where you’ll compromise will make it less likely that you’ll end up going over budget because of a bidding war or buying more house than you can comfortably afford. Making sure you’re prepared before heading out to look at homes also means securing financing in advance, so you’ll be ready to make an offer when you find a home you love. More here.

Post Election Bump Has Rates Up Again

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates rose again last week. In fact, mortgage rates were up across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. David H. Stevens, CMB, president and CEO of the Mortgage Bankers Association, says this is the biggest week-over-week increase in years. “Following the election, mortgage rates saw their biggest week over week increase since the taper tantrum in June 2013, and reached their highest level since January of this year,” Stevens said. “Investors expectations of faster growth and higher inflation are driving the jump in rates, and rates have now increased for five of the past six weeks, spurring a commensurate drop in refinance activity.” And, though it’s true that mortgage application demand fell last week as rates rose, interest rates are still well below historical norms. In fact, Stevens told CNBC that the decline was likely just “potential buyers waiting to see whether rates will stay at these higher levels.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Are First-Time Home Buyers Ready To Buy?

Results from a recent survey conducted by Genworth Mortgage Insurance at the 2016 Mortgage Bankers Association Secondary Conference in New York found that the vast majority of mortgage professionals are expecting the number of first-time home buyers to grow in the near future. In fact, nearly 80 percent said the share of first timers active in the market will either continue at current levels or increase by at least three percentage points. That would be an encouraging sign for the housing market, as the percentage of first-time buyers has lagged in recent years. However, with affordability conditions still favorable in many markets and an increasing number of millennials reaching average home-buying age, industry insiders expect to see climbing demand among younger Americans. Rohit Gupta, Genworth’s president and CEO, said the mortgage industry has to be prepared to support these buyers. “To support this demand, we must stay true to the great strides we have made in improving underwriting quality, making private capital available, and expanding the availability of prudent and affordable low down payment mortgages,” Gupta said. “Under these circumstances, it is important that all industry participants continue to work to ensure we have an accessible, efficient, and innovative environment for new mortgage originations.” More here.

Foreclosure Inventory Lowest Since 2007

In February, the foreclosure inventory rate was the lowest for any month since November 2007, according to new numbers released by CoreLogic. Their February 2016 National Foreclosure Report shows foreclosure inventory was down 24 percent from one year earlier and now represents just 1.1 percent of all homes with a mortgage. Anand Nallathambi, president and CEO of CoreLogic, says home price increases are among the leading causes behind the improvement. “Home price gains have clearly been a driving force in building positive equity for homeowners,” Nallathambi said. “Longer term, we anticipate a better balance of supply with demand in many markets which will help sustain healthy and affordable home values into the future.” Also in the report, the serious delinquency rate – which refers to mortgages that are 90 days or more past due – fell 19.9 percent over the past year and is also at its lowest point since 2007. Just as foreclosure inventory has been helped by rising home prices, delinquency rates have dropped as job creation and household income have improved. More here.

Home Equity Continues To Improve

When homeownership is discussed as a way to build wealth, what is really being talked about is equity. Equity refers to the value of a property minus the amount still owed on the mortgage. A homeowner will gain equity when home prices increase and also as they pay off their mortgage. In other words, equity is the part of a property’s value that belongs to the owner. If they sell that house, that money is their’s. Naturally, increasing equity is a good thing for current homeowners and among the main motivating arguments for homeownership. After all, when you pay rent, that money’s gone forever. In recent years, rebounding home prices have led to significant gains in home equity. For example, CoreLogic’s Q4 2015 Equity Report found home equity up 11.5 percent over the same period the year before. It was the 13th consecutive quarter of double-digit improvement. Anand Nallathambi, CoreLogic’s president and CEO, said the number of homeowners with more than 20 percent equity is rising rapidly. “Higher prices driven largely by tight supply are certainly a big reason for the rise, but continued population growth, household formation, and ultra-low interest rates are also factors,” Nallathambi said. “Looking ahead in 2016, we expect home equity levels to continue to build, which is a good thing for the long-term health of the U.S. economy.” More here.

Rising Equity Benefits Buyers And Sellers

Equity refers to the value of a property minus the amount owed on the mortgage. In short, having positive equity means your home is worth more than you paid for it. In other words, it’s good news. That’s why CoreLogic’s second quarter equity report is an encouraging sign for both current homeowners and potential buyers. According to the report, 759,000 properties regained equity in the second quarter, raising the number of mortgages that are now lower than their property’s value to nearly 46 million, or 91 percent of all mortgaged properties. That is a big improvement over where things were following the housing crash, when millions of homeowners saw their homes lose value and were plunged into negative equity. CoreLogic’s CEO and president, Anand Nallathambi, says the negative equity epidemic is lifting for much of the country. “The biggest reason for this improvement has been the relentless rise in home prices over the past three years which reflects increasing money flows into housing and a lack of housing stock in many markets.” But, though the number of homes available for sale has been low in some markets, a rising number of current homeowners with positive equity could mean more homes put up for sale, giving prospective buyers more choices and reducing the rate of price gains. More here.