Whether or not the Federal Reserve will raise interest rates has been a topic of interest among industry analysts for a while now. Speculation has risen before each meeting of the Federal Open Market Committee, which is the branch of the Federal Reserve Board that determines monetary policy. Mostly, this is because real estate analysts fear the affect higher mortgage rates would have on affordability conditions might scare potential home buyers away. Lower-than-normal mortgage rates have, after all, played a significant role in fueling the housing market’s rebound over the past few years. But, according to Trulia chief economist Selma Hepp, this fear is unrealistic. Hepp writes, “When the Feds decide to raise rates, any increase will be nominal and gradual. The anticipation is that the initial increase will be only 25 basis points (e.g. from 3.75% to 4.00%).” In other words, Hepp believes an increase of that size wouldn’t affect home sales due to the fact that rates would still be historically low and favorable to home buyers. But, though this may be true, it likely won’t calm speculation when the next chance for the Fed to raise rates comes during the committee’s final meeting of the year in December. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were mostly unchanged last week from the week before. In fact, rates for 30-year fixed-rate mortgages with both conforming and jumbo balances were flat, while 15-year fixed-rate loans saw a slight decrease and loans backed by the Federal Housing Administration moved up. Despite favorable rates, however, application demand fell sharply due to new mortgage disclosures rules. “Application volume plummeted last week in the wake of the implementation of the new TILA-RESPA integrated disclosures, which caused lenders to significantly revamp their business processes, and as a result dramatically slowed the pace of activity,” Mike Fratantoni, MBA’s chief economist, said. “The prior week’s results evidently pulled forward much of the volume that would have more naturally taken place this week.” A closer look at the numbers reveals that the previous week did, in fact, see a 25.5 percent increase in overall mortgage demand – which includes both refinance and purchase activity. Last week, on the other hand, total demand for mortgage applications fell 27.6 percent. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
Distressed home sales, which include bank-owned properties and short sales, skyrocketed following the financial crisis. In fact, they accounted for 32.4 percent of all sales in January 2009 – a staggering amount when considering distressed sales typically only account for about 2 percent of home sales. Caused by plummeting home prices, these sales featured large discounts and spurred real-estate investors who were looking to capitalize on the down market. Since then, however, home prices have largely rebounded from their post-crash lows. This price rebound has led to an ever-decreasing number of distressed home sales and an increasing number of traditional home buyers active in the market. In short, over the past few years, the housing market has been recovering, homes have regained value, and Americans have, once again, begun buying and selling homes. A new report from CoreLogic offers further proof of this. According to the report, distressed sales accounted for just 9.4 percent of total home sales nationally in July. That’s a 2.1 percent drop from the year before and a 0.4 percent decline from the previous month. Though still higher than historical norms, the improvement has been dramatic and means, at the current pace, distressed sales would return to normal levels within the next few years. More here.
Now that the heating season is upon us let’s discuss the importance of preparing for the heating season and having your buildings boiler operating at peak efficiency during the winter. As most landlords and property managers already know (or should know), the heating season in NYC begins on October 1st of every year and runs through May 31st. NYC Law requires that landlords provide hot water 365 days a year and heat throughout the entire heating season. With your boiler machinery operating at peak performance for 8 months out of the year it’s important to know that you are starting the season with a clean slate for the year to come. That’s why it’s so important to schedule your boiler overhauls before the heating season starts.
A complete boiler overhaul at the start of the season will assure that your boiler is burning cleaner, combusting properly, operating safely, maximizing efficiency, reducing fuel consumption and, most importantly, saving you money. The annual overhaul will assure that you are minimizing the possibility of costly repairs during peak winter months and avoiding the possibility of a shutdown of essential services. The last thing a residential landlord wants is to have a building with no heat and hot water during the peak season when boiler service technicians are at full demand. Nothing in property management will draw more anger, anxiety and frustration from tenants than a boiler outage in the dead of winter. Complaints of this nature called into HPD (Housing Preservation and Development) are taken very seriously in NYC and require a quick response. In the case where a landlord or property manager fails to react to a boiler outage in a timely manner, HPD will engage a contractor on the building’s behalf which will then bill the owner at triple the ordinary amounts.
A proper boiler overhaul will require that the boiler is brushed and vacuumed of all black soot and residue from the previous year’s operation. The technician will make sure that all nozzles are cleaned and all oil filters are replaced. The tech will check to see if any defects in the unit’s operation are detected. They will inspect all moving components and make sure they are greased and operating properly. All electrical components will be tested for malfunctions, the boiler will be tuned up and final adjustments will be made to assure that the boiler is firing properly. A combustion analysis will then be conducted to make sure that everything is operating as it should.
The importance of including a preventive maintenance routine during — or before — the heating season cannot be overstated. The absence of simple routine maintenance can lead to a major malfunction and the loss of thousands of dollars. for example, a regular flushing of your boiler can prevent the low water cut off from clogging and malfunctioning. A malfunction of this important piece of equipment can cause the boiler to dry fire and physically crack requiring a complete boiler replacement in the dead of winter. Regular cleaning of the filters can prevent sediment from collecting and causing a boiler shutdown. Preventing your oil tank from running on empty will also prevent your boiler from taking in thick sludge at the bottom of your tank and clogging your filters, causing a burner shutdown that will require a complete cleaning of the oil tank. Because of this, it’s a good idea to always keep your tank at least half full and call for deliveries when it reaches that level. Your building’s Super should be monitoring water levels and pressure, and performing these duties regularly to assure that issues can be addressed quickly.
With the proper annual maintenance and testing, building managers and owners can avoid preventable outages during the colder months. Although this doesn’t guarantee that there will not be problems throughout the year it can mitigate some of the most common costly issues that require emergency service. It’s important to know that emergency repairs are typically billed at a higher rate than non-emergency service calls. For this very reason you will want to make sure that you keep emergency service calls at your building to a minimum. If you haven’t already scheduled your annual boiler overhauls, do it now! It’s not too late to avoid the more costly repair that will most certainly occur as the mercury really starts to plummet.
Fannie Mae’s Home Purchase Sentiment Index measures Americans’ perceptions of the housing market, including whether they feel it’s a good time to buy or sell a house and their expectations for home prices and mortgage rates over the next year. In September, the Index found consumers are more secure in their jobs and more likely to feel now is a good time to enter the market. “The HPSI returned near its record high this month, driven primarily by improvement in attitudes about selling a home and strengthening home prices,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said. “With consumers’ expectations for rental price increases continuing to outpace their expectations for home price growth, many consumers may view homeownership as a more attractive option.” In fact, 64 percent of respondents said they felt like it was a good time to buy a house. Also in the report, the vast majority of Americans say they don’t fear losing their job and nearly a third reported that their household income has gone up significantly over the past year. The combination of increasing financial security and an attractive environment for potential home buyers and sellers indicates that the housing market should see continuing gains in the months ahead. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates dropped last week to their lowest level since May. Rates were down 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 mortgages. Demand for mortgage applications surged in response to the drop. In fact, refinance activity was up 24 percent from one week earlier and purchase application demand – which is a good indicator of future home sales – rose 27 percent. Purchase applications are now 49 percent higher than they were during the same week one year ago – which is a positive sign after recent data seemed to show home sales beginning to slow following a strong summer. Lynn Fisher, MBA’s vice president of research and economics, said there were multiple factors that led to the surge in demand. “The number of applications for purchase and refinance mortgages soared last week due both to renewed rate volatility and as many applications were filed prior to the TILA-RESPA regulatory change,” Fisher said. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
Since the late 1990s, the median size of newly built single-family homes has been growing. In fact, new homes have grown from 2,100 square feet in 1999 to nearly 2,600 square feet by the end of last year. That’s a 24 percent increase. But having a bigger house near a city center comes at a price. In this case, Americans have sacrificed having a large yard in order to have more indoor space. According to new data from Zillow, the median lot size has shrunk about 10 percent, from 9,600 square feet in 1999 to about 8,600 square feet today. “The idea that Americans increasingly prefer smaller homes is simply not supported by the most recent construction data,” Svenja Gudell, Zillow’s chief economist, said. “We still want our big homes with ample bedrooms and bathrooms, but increasingly, we’re having to make a tradeoff to keep those kinds of homes accessible – namely, smaller lots.” According to Gudell, the trend toward larger homes on smaller lots is a compromise between what builders can profitably build and what consumers will actually buy. More here.
Since 2004, the homeownership rate has declined from its all-time high of 69.2 percent to 63.4 percent as of the second quarter of this year. And, though the percentage of Americans who own their own home has declined among all age groups, the number of Millennial homeowners is particularly low. Millennials – typically defined as those between the ages of 18 and 34 – have been slow to enter the housing market and many analysts believe it is one of the chief reasons residential real estate has been slow to recover since the housing crash. And though there has been a spike in home sales this year and an increasing number of first-time buyers active in the market, their numbers remain low compared to historical averages. Sean Becketti, Freddie Mac’s chief economist, says student loan debt plays a role but isn’t solely responsible for the lower-than-normal number of young Americans buying homes. “The low homeownership rate among Millennials is still something of a puzzle,” Becketti said. “However, student debt plays a role – higher balances are associated with a lower probability of homeownership at every level of college and graduate education.” But while student loan debt has tripled over the past 10 years, the rate of homeownership among Americans with student loans was just one percent lower than the rate of those without student loans, indicating debt isn’t the only thing holding young buyers back. More here.
Fannie Mae’s quarterly Mortgage Lender Sentiment Survey polls senior executives to assess their views and outlook on a number of topics related to the mortgage market. The results provide an insider’s perspective on credit standards, demand, the economy, and more. According to the most recent survey, when asked whether their lending organization’s credit standards have eased, tightened, or remained unchanged over the past three months, the gap between those saying they’ve eased and those reporting stricter standards increased to 20 percent, a new survey high. Doug Duncan, senior vice president and chief economist at Fannie Mae, said it was the first time in seven quarters that there was a pronounced increase in the share of lenders reporting on net an easing of credit standards. “This is a significant result in light of public discourse on credit availability and standards,” Duncan said. “Overall, we expect that lenders’ tendency toward easing credit standards, together with relatively low mortgage rates and a strengthening labor market, will continue to support the housing market expansion.” More here.
Continuing home price increases and rumors of mortgage rate hikes have the combined effect of convincing many potential home buyers that affordability conditions have worsened this year. But, according to a new analysis from RealtyTrac and Clear Capital, buying a home was actually at its most affordable level in two years during the first quarter of 2015. The analysis looked at weekly wage data from the Bureau of Labor Statistics, average prices for single-family homes and condos, and average interest rates on 30-year fixed-rate mortgages. The results show that – though home price appreciation outpaced average wage growth between the first quarter of 2014 and the first quarter of 2015 in 68 percent of the analyzed counties – average interest rates dropped at the same time. Because of this, buying a home required a smaller share of the average wage compared to a year earlier in 339 of the 582 counties included in the analysis. Daren Blomquist, RealtyTrac’s vice president, says the results were surprising. “Although home prices continue to outpace wage growth in the majority of local markets, this analysis somewhat surprisingly shows that affordability is actually improving in most markets thanks to falling interest rates and slowing home price growth, which is allowing wage growth to catch up in some markets,” Blomquist said. “At the national level, buying an average-priced home in the first quarter of 2015 was the most affordable it’s been in two years and nearly twice as affordable as it was in the second quarter of 2006 – when affordability was its worst in the past 10 years.” More here.