December 2015

How Long Should You Save Before Buying?

When it comes time to decide whether or not to buy, having enough money saved for a down payment can be among the largest obstacles preventing a potential home buyer from actually purchasing a house. This is especially true for younger Americans, who are just entering the workforce and haven’t had time to build up much savings and may be trying to pay down student-loan debt at the same time. In order to get a feel for how long each age group should expect to have to save in order to have a 10 percent down payment on a home, Hanley Wood Data Studio looked at median household incomes and median home prices for each age group and broke down their findings. According to the results, 18-to-24 year olds, not surprisingly, will have to save the longest. That age group should expect to have to save for 8.77 years before they’d have enough saved to put 10 percent down on a median priced home for their age. Seniors were the next longest demographic, taking 7.37 years to save for a down payment. At 3.54 years, Americans between the ages of 45 and 54 took the least amount of time to gather money for a down payment. More here.

Fed To Decide On Interest Rates This Week

The Federal Reserve has kept interest rates low for the past seven years in order to encourage businesses and consumers to borrow money and take risks. But, as the economy has rebounded, the likelihood that the Fed will raise rates has increased. Now Federal Reserve chairwoman, Janet L. Yellen, is hinting that the decision to raise rates could come as soon as this week, when the Fed’s policy-making committee meets December 15 and 16. Yellen said recently that the move would be “a testament, also, to how far our economy has come in recovering from the effects of the financial crisis and the Great Recession.” Recent economic data, including a positive November jobs report, make the decision even more likely. The report showed that the economy added 211,000 jobs in November and that the unemployment rate is now at 5 percent. Despite the likely rate hike, however, analysts expect that the increase will be gradual and shouldn’t have a negative effect on home buyers, who will still be able to secure favorable mortgage rates that should remain low by historical standards. More here.

Gov’t Report Highlights Housing Success

By most measures, 2015 has been a good year for the housing market. An improved employment picture and still-low mortgage rates boosted home sales and led to real estate’s best performance since the recovery began. Typically, however, things begin to slow down as the end of the year approaches and much of the country is affected by winter weather. This year, on the other hand, the progress has continued into October, according to the U.S. Department of Housing and Urban Development’s most recent Housing Scorecard – which tracks key market data and the federal government’s recovery efforts. The report highlights a 10.7 percent increase in the number of new homes sold in October, as well as the fact that sales of previously owned homes have risen year-over-year for 13 straight months and are now 3.9 percent higher than at the same point one year ago. Those successes add to an improved picture overall. For example, newly initiated foreclosures have been below the pre-crisis monthly average for the past seven months and home prices, though still increasing, have settled somewhat. Despite the encouraging statistics, however, the report also cautions that conditions vary from market to market and there is still work to be done to reduce mortgage delinquency rates, help underwater homeowners, and foster home sales. More here.

Demand For Home Purchase Applications Up 29%

According to the Mortgage Bankers Association’s Weekly Applications Survey, home purchase application demand is now 29% higher than at the same time last year. And, because purchase application demand is considered a good indicator of future home sales, it could be a sign that there will be a sales bump coming in the months ahead. The encouraging news came during a week when demand for loans to buy homes was relatively flat from the week before and mortgage rates rose. In fact, average mortgage rates were up across all loan categories, including 30-year fixed-rate mortgages with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Despite the slight increase, however, refinance demand was up from a week earlier and drove total mortgage application demand 1.2 percent higher than the week before. Analysts expect that the increase in refinance demand was due to expectations that the Fed may raise interest rates this month for the first time in nine years. The possibility of a rate increase has helped spur demand in recent weeks. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Home Prices Hit All-Time Highs In Many Markets

A new study released by RealtyTrac analyzed 94 major metro areas and found that 35 percent of them reached all-time home price peaks this year. The cities that saw new home price highs include Detroit, Dallas, Houston, Atlanta, Denver, Pittsburgh, Portland, San Antonio, and Columbus, Ohio. Daren Blomquist, RealtyTrac’s vice president, said home price appreciation hasn’t slowed so far this fall. “Home price appreciation did not go into hibernation in October, even as the housing market entered the typically slower fall season,” Blomquist said. “More than one-third of the nation’s major housing markets have now reached new home price peaks this year, and nearly 90 percent of markets posted an annual increase in home prices in October.” Blomquist added that home sellers are making a 16 percent average profit over their original purchase price, which is the highest it’s been since 2007. Also in the report, the median sales price of U.S. single family homes and condos in October was $207,500. That’s a 10 percent increase over one year ago. More here.

Income Worries May Keep Buyers Cautious

The housing market is set to have its best year since 2007, largely due to an improved economy and labor market. But, despite the gains, home price increases are outpacing income growth and causing prospective buyers to remain cautious, according to the latest Home Purchase Sentiment Index from Fannie Mae. The Index – which measures Americans’ attitudes toward buying and selling a home – fell slightly in November, though it remains at a high level. Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the results are not a surprise. “The latest reading of the Home Purchase Sentiment Index remains near the survey’s high witnessed in June, exemplifying the theme we laid out at the beginning of the year: the economy drags housing upward,” Duncan said. “While aggregate income growth has gradually picked up with a continually improving labor market, consumers’ assessment of their income over the past year has not yet shown sustained improvement, partially weighing on overall sentiment.” Duncan feels that, until Americans feel more financially confident, they may be hesitant to buy. More here.

Real Estate Pros Say Buyer Traffic Is Strong

The National Association of Realtors surveys its members each month with a poll that asks for their expectations and perceptions of the overall market, buyer and seller traffic, prices, and home sales. According to the most recent release, real estate professionals are reporting that buyer traffic has been moderate to strong across much of the country. In fact, aside from the Northeast, only a few states reported weak traffic and, in Oregon, responding agents said buyer traffic was “very strong.” The report credits continuing demand from prospective home buyers to “sustained job creation, the low interest rate environment, the offering of three percent down-payment conventional mortgages, and lower mortgage insurance premiums for FHA loans.” Still – though it’s encouraging that buyer demand is strong as we enter the winter months – the latest survey wasn’t entirely positive. Realtors also said there were fewer home sellers and a lack of “properties in the lower price range and for those that are move-in ready.” That’s a concern because lower than normal for-sale inventory offer buyers fewer choices and puts upward pressure on home prices. More here.

Number Of Stable Housing Markets Doubles

Over the last year, the number of states and metro areas whose housing markets have returned to their stable range of activity has doubled, according to new data released by Freddie Mac. The Multi-Indicator Market Index measures U.S. real estate markets against their long-term average to determine how quickly they have recovered. According to the most recent release, the national housing market is on its outer range of stable activity, though it is still well below its all-time high. Len Kiefer, Freddie Mac’s deputy chief economist, says individual markets are moving at their own pace. “When we observe MiMi’s annual improvement, it’s clear housing markets continue to recover with some markets firing on all cylinders, others inching along, and the vast majority still working to get back to their long-term benchmark normal range,” Kiefer said. “Regardless, nearly twice as many states and metro areas have entered their stable range of housing activity compared to a year ago. Western markets show little signs of slowing down with their local employment pictures continuing to improve and with applications to purchase a home still showing double-digit growth on an annual basis. In many Southern metro areas, home sales are improving, which is good news, but their levels still remain depressed.” Thirty of 50 states plus Washington D.C. are now in stable range. More here.

Mortgage Rates Hold Steady From Last Week

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were virtually unchanged last week from the week before. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances was down slightly, while jumbo loans remained unchanged from the previous week. Rates on loans backed by the Federal Housing Administration saw a minor increase and 15-year fixed-rate loans fell. Overall, mortgage rates have seen little movement over the past three weeks. But, because rates have plateaued at a higher level, refinance demand is slowing. In fact, last week’s Refinance Index was down 6 percent from the week before. Michael Fratantoni, MBA’s chief economist, told CNBC, refinance activity was down, even for a holiday week. “Volume always drops significantly during Thanksgiving week,” Fratantoni said. “However, even after adjusting for the holiday, with rates little changed last week, refinance volume slipped to its lowest level since late July.” On the other hand, demand for home purchase loans was up 8 percent. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Green Homes Grow In Popularity

A growing percentage of home builders say they are currently building green homes and expect to build more in the future. A study, conducted in partnership with the National Association of Home Builders, surveyed 232 builders and remodelers and found that 54 percent of home builders are currently constructing at least 16 percent of their new homes green and over half expect to be doing 60 percent or more of their homes by 2020. Tom Woods, NAHB’s chairman, says there’s a growing demand for green homes. “Builders and remodelers have long recognized that green is the future of home building,” Woods said. “Since we first began partnering on this study, we’ve seen that commitment grow. The study’s recent findings reinforce this continued growth, with new homeowner feedback showing a desire and expectation that new homes be high-performing, particularly when it comes to energy conservation.” In addition to the money that can be saved through energy efficiency, builders believe home buyers associate green homes with healthier living and will pay more for homes that are healthier. More here.