February 2016

Money Keeps Middle Aged Buyers At Bay

A recent survey found that nearly 30 percent of all non-homeowners say they can’t afford a down payment. Conducted by Princeton Survey Research Associates International on behalf of Bankrate, the survey also revealed that 16 percent of respondents felt their credit wasn’t good enough to qualify for a mortgage. These are persistent concerns for Americans who don’t own or have never owned a home. Worries about money and financial qualifications can keep prospective buyers on the sidelines despite the fact that there are many programs and financing options available that are aimed at helping buyers with these exact issues. For example, depending on the type of loan, a potential home buyer may be be able to put as little as 3.5 percent down when buying a house. And surprisingly, money worries aren’t just the problem of young Americans looking to save up for their first home. In fact, the survey found more than 4-in-10 middle aged Americans don’t own a home and, among them, 31 percent cited not being able to afford a down payment as the reason. Holden Lewis, Bankrate’s senior mortgage analyst, says – for middle-aged Americans who aren’t buying – the issues are a bit more difficult than those affecting young Americans. “For people in the prime child-rearing years of 30 to 49, it’s more complicated,” Lewis says. “A lot of them have income and credit issues that might have roots in the recession.” More here.

Mortgage Rate Drop Spurs Demand

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell again last week. 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 loans. The sharp drop brought rates for conforming and FHA loans to their lowest level since last spring and caused a spike in refinance activity. In fact, the Refinance Index increased 16 percent last week and pushed total mortgage application demand 9.3 percent above week-before levels. Michael Fratantoni, the MBA’s chief economist, told CNBC that much of the demand was generated by jumbo borrowers, which are those with loan balances greater than $417,000. “Jumbo borrowers are benefiting from fierce competition for these loans,” Fratantoni said. “The 30-year fixed rate for jumbo loans dropped to its lowest level since April 2013 and is now 15 basis points below the rate for conforming loans.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Home Sellers See Big Gains On Purchase Price

In 2015, the average home seller was able to sell their house for $20,378 more than they paid for it, according to new numbers from RealtyTrac’s Year-End U.S. Home Sales Report. That represents an 11 percent increase and the largest average price gain since 2007. Daren Blomquist, vice president at RealtyTrac, says homeowners can once again count on real estate to be a good investment. “With some local market exceptions, the 2015 home sales data paints the picture of a properly functioning U.S. housing market where homeowners can once again count on real estate as an appreciating asset – a long-touted axiom soundly debunked as ironclad truth between 2008 and 2013,” Blomquist said. “This return to consistent home price gains for sellers should reinforce confidence in real estate in 2016 and produce another year of solid sales volume as homeowners cash out their equity gains.” But the news should be encouraging, not just to move-up buyers looking to capitalize on their home’s rising value, but to anyone considering buying a home in the near future. Because the improvement marks two consecutive years of steady price gains – following six where the average home seller saw losses – prospective buyers can feel more confident that their home purchase will be a sound financial decision. More here.

Income Growth Key To Housing Sentiment

Fannie Mae’s Home Purchase Sentiment Index looks at consumers’ attitudes toward buying and selling a home, mortgage rates, household income, prices, employment and more in an effort to measure Americans’ feelings about the residential real estate market. According to the most recent release, housing optimism slipped slightly in January, falling 1.7 points from the month before. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says income growth isn’t keeping up with home price increases and it’s causing affordability concerns among potential buyers. “Housing affordability is being constrained because the pace of growth in real income has not kept up with gains in real home prices as demand has grown faster than supply,” Duncan said. “On the bright side, consumers have been increasingly positive about their ability to get a mortgage, suggesting that credit tightness is not the main issue limiting housing market activity today, a feeling that we also see conveyed by lenders in our Mortgage Lender Sentiment Survey.” Duncan expects that consumers’ attitudes toward buying a house will likely remain flat until income growth picks up or there is an increase in the number of lower-priced homes available for sale. More here.

Baby Boomer Buyers Are On The Move

There’s been plenty of talk about the fact that there are fewer young Americans buying homes over the past few years. On the flip side, however, the market for new homes among buyers 55 and older has remained strong and continues to improve. In fact, the National Association of Home Builders 55+ Housing Market Index – which measures builders’ perceptions of the market among older buyers – has now seen seven consecutive quarters of positive readings. David Crowe, NAHB’s chief economist, says those gains will likely continue. “This quarter’s 55+ HMI is in line with our forecast for the overall housing market, which shows a gradual, steady recovery,” Crowe said. “In addition, the 55+ housing market is benefitting from growing home equity on the balance sheets of 55+ households, an improving economic outlook, historically low mortgage rates and a growing population as baby boomers age.” In other words, there are an increasing number of baby boomer households that have seen their current home’s value rise and are looking to capitalize on the equity they’ve gained by shopping for a new house that fits better with their needs and lifestyle. With affordability conditions still favorable across much of the country, builders expect to see many older buyers active in the market in the coming months. More here.

Strong January Heats Up Spring Forecast

Early indications are that economic uncertainty and turmoil in the financial markets didn’t curb consumers’ interest in buying a home at the beginning of this year. In fact, according to Realtor.com’s chief economist, Jonathan Smoke, an initial look at the data shows buyer interest increased in January. “Our initial readings on January affirm the positive growth we expect to see in the residential real estate market in 2016,” Smoke said. “Our traffic, searches and listing views exhibited the January ‘pop’ we saw last year, which made for a strong spring.” Additionally Smoke says there have been large numbers of prospective buyers who have indicated that they intend to buy a home in the spring or summer of 2016. This is encouraging news for the housing market, especially since mortgage rates have declined rather than increased since the Fed’s decision to raise interest rates. That leaves low inventory and tight credit standards as the two major obstacles for home buyers this year. Fortunately, credit availability has been easing recently and increasing new-home construction should help alleviate some of the upward pressure on home prices that comes from a lower-than-usual number of homes available for sale. According to Smoke, the best advice for buyers hoping to buy a house in 2016 is to start early. More here.

East Coast Snow Slows Mortgage Demand

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell again last week. Rates dropped 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 lowest rates in months, however, demand for mortgages was down from the week before – mostly due to a 7 percent decline in the number of requests for applications to purchase homes. Michael Fratantoni, MBA’s chief economist, told CNBC blizzard conditions on the East Coast may be behind the decline in mortgage demand. “Mortgage rates fell below 4 percent in our survey for the first time since October 2015. The jumbo rate also decreased and was at its lowest level since April 2015,” Fratantoni said. “Despite the fall in rates, mortgage application activity was likely muted by the major East Coast snowstorm, although refinance activity increased very slightly.” Even though purchase application demand was down from the week before, it remains 17 percent higher than at the same time last year. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

The Most Desired Home Features Of 2016

An end-of-the-year, nationwide survey asked builders to rank a series of home features in order of likelihood they’d be included in the typical single-family home they’d be building this year. On a scale from one to five the builders – surveyed by the National Association of Home Builders – ranked everything from great rooms to media rooms. Naturally, because builders have to be aware of consumers’ preferences and needs in order to be successful, they are a good gauge of the popularity of certain home features. The results show energy efficiency and storage spaces are still the most coveted features among prospective home buyers. In fact, builders ranked master bedroom, walk-in closets the most likely feature to be included in new homes this year, with an average rating of 4.9. Laundry rooms, great rooms, low-e windows, and energy-star rated appliances rounded out the top five. Other highly rated features included programmable thermostats, central islands in the kitchen, and granite countertops. On the other hand, some of the lowest rated features included cork flooring on the main level, a pet washing station, outdoor kitchens and fireplaces, laminate countertops, and two-story family rooms and foyers. More here.

Local Markets Stable In Majority Of Metros

The housing market has come a long way since hitting its bottom in 2010. To prove it, Freddie Mac’s Multi-Indicator Market Index tracks just how far individual states and metropolitan areas have progressed since then. The index takes a look at home purchase applications, payment-to-income ratios, proportion of on-time mortgage payments, and the local employment picture in each market and determines how it compares to their long-term averages. According to the most recent release, 57 of the 100 metro areas included in the survey are within their stable range. At the same time last year, only 28 metros had values in stable range. Len Kiefer, Freddie Mac’s deputy chief economist, says the latest results show a strong year-over-year improvement, though there’s a lot of variation from market to market. “The regional variation of housing activity continues to become more pronounced,” Kiefer said. “For example, we’re still seeing declines in oil-dependent housing markets, whereas the hardest hit metros from the Great Recession continue to see some of the best improvement as they recover. And at the same time, other markets are seeing even stronger improvement because of robust home sales fueled by strong local economies that remain largely affordable for the typical home buyer. In the short term, we expect home buyer affordability to remain strong with mortgage rates continuing to look very attractive to prospective home buyers.” Among the metro areas that were most improved from last month, Orlando, Denver, Portland, Albany, and Phoenix led the way. More here.

Contract Signings Unchanged In December

When a prospective home buyer signs a contract to buy a home, the closing process begins. At that point, the home sale is listed as pending. Each month, the National Association of Realtors tracks the number of contract signings because, among other things, it provides a good indicator of what future sales of existing homes might look like. In December, the Pending Home Sales Index was virtually flat, increasing just 0.1 percent. Lawrence Yun, NAR’s chief economist, says contract activity lost some momentum at the end of the year, though an increase in the Northeast helped stabilize December’s results. “Warmer than average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month,” Yun said. “Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job creating areas.” Despite those challenges, however, pending sales ended the year 4.2 percent above year-before levels. More here.